Quarterly report 1/2005 Fire-resistant birch panelling from Finnforest and Moelven in the Danish-Jewish Museum in Copenhagen.
Profit and Loss Account Operating revenues 1,411.2 1,407.0 1,143.4 5,773.2 4,864.1 Depreciation 46.3 42.5 36.1 177.5 146.1 Cost of goods sold 893.1 885.1 670.1 3,667.3 3,020.7 Operating expenses 469.1 474.0 406.7 1,858.1 1,596.7 Operating profit 2.7 5.4 30.6 70.3 100.6 Income from associates -1.2-1.7-1.3-3.7-5.9 Interest and other financial income 1.2 3.6 5.2 10.6 14.7 Interest and other financial expenses -13.5-14.9-9.5-60.6-44.9 Operating result before tax -10.8-7.6 25.0 16.6 64.5 Estimated tax cost -2.5-6.6 7.0 19.0 32.3 Minority interests 0.6 0.0 0.4 0.7-0.3 Net profit -7.8-1.0 18.4-1.8 31.9 Proforma, incl. Are-Group 2003 Operating revenues 1,411 1,407 1,333 5,773 5,564 Depreciation 46 43 44 178 177 Operating profit 3 5 38 70 128 Net Operating margin (in %) 0.2 0.4 2.9 1.2 2.3 assets 3,015 3,170 3,031 2,884 2,829 Equity (in %) 34.6 32.9 34.9 36.5 35.0 No. of employees 3,174 3,105 3,307 3,191 3,150 Balance Sheet Per 31.03. Per 31.12. Intangible assets 12.4 34.8 25.5 9.6 29.2 Tangible assets 1,113.7 1,117.2 820.4 1,137.6 860.9 Financial assets 110.9 127.2 155.9 116.6 125.4 fixed assets 1,237.0 1,279.2 1,001.8 1,263.8 1,015.5 Stocks 1,017.2 1,016.2 731.1 908.3 708.2 Receivables and deposits 761.1 874.1 729.6 712.1 639.8 current assets 1,778.3 1,890.3 1,460.7 1,620.4 1,348.0 assets 3,015.3 3,169.5 2,462.5 2,884.2 2,363.5 Share capital* 647.7 633.5 579.8 647.7 579.8 Other equity and capital 396.3 410.4 361.0 425.1 343.7 equity 1,044.0 1,043.9 940.8 1,053.4 923.5 Long-term liabilities 1,117.5 1,180.8 777.4 1,012.3 738.6 Current liabilities 853.8 944.8 744.3 818.5 701.4 liabilities 1,971.3 2,125.6 1,521.7 1,811.4 1,440.0 equity and liabilities 3,015.3 3,169.5 2,462.5 2,884.2 2,363.5 Net interest bearing debt 1,049.8 1,116 720 872.3 624 Capital employed 2,075.8 2,202 1,661 1,943.7 1,594 Net working capital 1,319.5 1,383 1,023 1,128.7 895 Changes in total equity for the Group Opening balance 1,053.4 923.5 918.5 923.5 918.5 Profit/loss -8.4-1.0 18.4-2.5 31.9 from share issue before minority 0.0 118.1 0.0 117.9 0.0 Foreign currency translation -1.6 1.8 4.0-5.0 13.0 Provisions for dividend 0.0-1.1 0.0-20.5-17.9 Puchase/sale - Own shares 0.0 2.7 0.0 38.3 0.0 Change in reclassified assets 0.0 0.0 0.0 1.0-22.2 Minority interests 0.6-0.1-0.1 0.7 0.2 Changes for year/period -9.4 120.4 22.3 129.9 5.0 equity 1,044.0 1,043.9 940.8 1,053.4 923.5 *129,542,384 shares at NOK 5.-, adjusted to account for 1,100 own shares. The quarterly report has been prepared using the same accounting principles as those used in the annual accounts and according to NGAAP. 2 MOELVEN INDUSTRIER ASA QUARTERLY REPORT 1/2005
Cash Flow Statement Net cash flow from operations -132.9-218.4-164.2 66.5 116.5 Cash from operating result 40.3 34.9 66.1 178.3 227.7 Cash flow from working capital -173.2-253.3-230.3-111.8-111.2 Cash flow from/to investments -29.5-20.1-29.4-180.8-176.7 Cash flow from/to financing 150.2 234.3 186.5 86.0 68.6 Net cash flow for the period -12.2-4.1-5.3-28.3 8.4 Liquid funds 5.3 41.7 32.1 16.6 45.4 Unutilised credit facilities 664.1 623.6 466.1 889.8 630.8 Available liquid funds 669.4 665.3 498.2 906.4 676.2 Net. investments from acquisitions and sales: Fixed assets 0.4 294.8 0.0 294.8 20.0 Current assets 8.6 274.0 0.0 274.0 36.7 Liquid funds 5.3 32.5 0.0 32.5 0.6 assets 14.3 601.3 0.0 601.3 57.3 Equity 0.0 186.4 0.0 186.4-0.3 Interest bearing debt 2.2 248.0 0.0 248.0 44.3 Interest free debt 12.1 166.9 0.0 166.9 13.3 capital 14.3 601.3 0.0 601.3 57.3 2005: Aquisition of Mesna Installasjon AS. 2004: Aquisition of Are-Group and Mobilarum AB. 2003: Aquisition of Finnforest Danmark A/S, Plyfa Göteborg AB and Woodpaint in Karlstad AB. Deconsolidation of Aicher GMBH as associated company. Operating revenues Operating profit Quarterly in 2003-2005 Quarterly in 2003-2005 Key figures Net operating margin (in %) 0.2 0.4 2.7 1.2 2.1 Gross operating margin (in %) 3.5 3.4 5.8 4.3 5.1 Return on capital employed (in %) 0.1 0.9 7.4 3.7 6.8 Earnings per share (in NOK) -0.06-0.01 0.16-0.02 0.28 Cash flow per share (in NOK) 1.38 0.28 0.57 1.41 1.96 Inv. in fixed assets, excl. acquisition (NOK mill.) 28.5 33 24 199 189 Equity ratio (in%) 34.6 32.9 38.2 36.5 39.1 oper. revenue outside Scandinavia (in %) 21 23 23 21 22 Number of employees 3,174 3,255 3,007 3,191 2,853 Number of shareholders 989 995 999 989 996 Average number of shares 129 541 284 123 110 584 115 953 313 126 778 028 115 954 584 3 MOELVEN INDUSTRIER ASA QUARTERLY REPORT 1/2005
Directors report Stable level of activity, with operating revenues unchanged at NOK 1 411.1 million Operating profit at NOK 2.7 million - a decrease from NOK 5.4 million in 2004 Ole Salvén new President & CEO from February 2005; Bo B. Borgstrøm retires New production line for modular buildings opened in Moelv Office market in Norway slowly improving Main Points In February 2005, Mr. Ole Salvén took over as President and CEO of Moelven after Bo B. Borgstrøm, who retired. No changes in the Group's strategy have been made as a result of the new leadership, and the Board is committed to continuing the work to develop the Group as one of Scandinavia's leading suppliers of wood-based building products and associated services. Scandinavia is considered the Group's home market, and except for seasonal variations, no significant changes to demand have been registered for the Group's products and services. The Moelven Timber Group posted a lower profit in the first quarter 2005 compared to the same period last year. Market prices for sawn pine timber fell even further and had a further negative impact on the relationship between raw material costs and finished products prices. This in turn resulted in lower profitability for the sawmills compared to the same period last year. The planning mills have developed positively, while the result for the laminated timber factories was almost unchanged compared to 2004. The Moelven Building Group improved its profit figures the first quarter 2005 compared to the same period last year. The professional construction market is still very slow, and the improvement in profit is due in large part to internal measures that have been implemented to sustain profitability in a weak market. The electric/engineering company Mesna Installasjon AS in Lillehammer became part of the Moelven Group as of 1 January. Mesna Installasjon AS will contribute to strengthening Moelven's market position in Eastern Norway. Operating revenues and year-end result The Group's operating revenues the first quarter totalled NOK 1 411.2 million, compared to NOK 1 407.0 million in 2004. Operating profit was NOK 2.7 million, which is a drop from NOK 5.4 million the year before. Moelven Timber Group was responsible for the weaker result, which to a certain degree was offset by an improvement in figures for the Moelven Building Group. Net financial costs increased from NOK 11.3 million in 2004 to NOK 12.3 million in 2005. The increase is primarily due to higher average interest-bearing debt during the period. At the end of the first quarter, net interest-bearing debt totalled NOK 1 049.8 million in 2005 and NOK 1 116.0 million in 2004. The result before taxes totalled NOK -10.8 million (-7.6), while the result after taxes was NOK -7.8 million (-1.0), corresponding to NOK - 0.06 per share (-0.01). The major reason for the difference in tax cost compared to 2004 is that the tax cost for 2004 contained an adjusting entry regarding the possibility of utilising losses carried forward in Sweden. Business Areas Moelven has organised its overall business activities into two business areas, the Moelven Timber Group and the Moelven Building Group, containing 3 and 2 divisions respectively. Moelven Timber Group The Moelven Timber Group operates sawmills (Timber), planning mills (Wood) and glulam production (Moelven Laminated Timber) based on spruce and pine harvested in Norway and Sweden. In all, the Group has 2047 employees in plants and businesses throughout south-eastern Norway and mid-sweden. As of 1 January 2005, the Board has implemented the strategy of having so-called combined units (units consisting of both a sawmill and a planning mill) transferred from Timber to Wood. The combined units produce for the most part construction wood that are sold through builders' merchants chains in Scandinavia, and will now be grouped together with other units that also serve this market. After the reorganisation, Moelven Timber's business will now focus on processing raw timber into industrial wood and chips. Moelven Timber Group Operating revenues Moelven Timber Group 1,060.3 1,117.3 805.1 4,559.9 3,554.3 Timber - sawmills 674.2 690.3 612.9 2,619.3 2,398.1 Wood - processing 429.6 471.9 254.3 2,063.9 1,404.0 Laminated Timber 80.3 83.0 98.9 387.2 386.1 Operating profit/loss Moelven Timber Group 7.0 13.9 35.0 78.2 93.2 Timber - sawmills 5.3 15.6 35.1 33.5 92.3 Wood - processing 0.4-3.2 1.6 29.1-0.6 Laminated Timber 1.3 1.5-1.7 15.6 1.5 4 MOELVEN INDUSTRIER ASA QUARTERLY REPORT 1/2005
Industrial wood is the most important raw material for producers of woodbased construction materials, while industrial chips are used in the production of paper, bio energy and particle boards. Moelven Wood processes industrial wood as it arrives from sawmills into construction materials such as planks, flooring, interior and exterior panelling and components for doors and windows. Most of the products are sold through builders' merchants chains. Moelven Laminated Timber processes industrial wood into loadbearing structures, both in standard dimensions and as contract deliveries. Most of the products are sold to the professional construction market in Scandinavia. Operating revenues the first quarter totalled NOK 1 060.3 mill (1 117.3), and operating profit was NOK 7.0 million (13.9). Most of the decrease in turnover was experienced in the Wood division, which at the same time improved its operating profit. In general, the continued imbalance between the costs of raw materials and the price of finished products is the main factor causing the weak result for Moelven Timber Group. In Timber, a number of cost-reducing measures have been implemented and have had an impact in the first quarter, while the market prices have fallen more than expected in several areas. The severe storms in Southern Sweden have had an impact both on the price of raw materials and the market. On the raw material side, measures have been implemented to ensure reliable delivery of raw materials to the Group's units the first six months of the year. Most of the forest that was damaged was spruce forest, and because of the resulting increase in supply, the Board anticipates that prices for lower qualities of spruce will fall. It is, however, not possible to implement measures to protect against the effects of such a fall in prices. Wood experienced a decrease in turnover compared to last year, but a higher profit. The improvement in profit is due to price increases that were put in place starting the second quarter 2004, combined with the implementation of internal efficiency measures. The decrease in turnover is primarily due to the fact that Easter last year was in the month of April and therefore did not influence the first quarter figures. In Norway, the demand for interior products such as panelling, flooring and moulding has been somewhat lower than in 2004. At the same time, the demand for construction materials has been higher than normal, which is due to the higher level of new-build activities. In Sweden, the normal seasonal increase in demand for wood-based construction materials has come about a bit later than usual. The financial figures for Laminated Timber are at about the same level as for last year. In the first quarter, the export share, particularly to Japan, in accordance with the Board's strategy, has been reduced further. In the last quarter of 2004, contracts for more major projects than normal were signed, which has ensured better capacity utilisation in the first quarter than normal. In addition to deliveries for several major wooden bridge projects, a number of load-bearing structures for multi-level wooden houses have been supplied to projects in downtown Trondheim. Moelven Building Group The Moelven Building Group covers the business divisions Modular Buildings and Modular System Interiors. The business concept is to be more efficient than traditional building processes by developing industrialised concepts that are supplied with associated services. The Moelven Building Group has a total of about 1090 employees in Norway and Sweden. The businesses in the Moelven Building Group are very different than other suppliers of building products because the products are for the most part already mounted and ready for use. Another clear difference compared to traditional contractor activity is that a large part of the production process takes place inside a factory and not at the building site. Both module-based construction (Modular Buildings) and module-based office interiors (Modular System Interiors) are industrialised construction concepts that are well-suited to the increase in demand for quick deliveries and high flexibility. Both of the two business areas, Modular Buildings and Modular System Interiors, work primarily towards the Scandinavian home market with professional customers, such as builders or contractors. The Modular Building division also supplies electrical/engineering services, either in connection with system interior deliveries or as independent contracts, primarily to the business market. Operating revenues the first quarter were NOK 355.8 million (295.2), and operating profit totalled NOK 5.3 million (0.4). For Modular Buildings in Norway, the activity and earnings have been as expected, with the exception of the electrical/engineering business that has experienced a tight market and low prices. In the first quarter, a new production line for modules opened in Moelv. The new production line has 30 new employees and is geared primarily to the production of modular buildings for plants and worksites. The backlog of orders is solid at the end of the quarter. For Modular Buildings in Sweden, continued internal problems at certain units has led to earnings falling overall, and particularly for contract projects. This has unfortunately resulted in the need to implement measures that have resulted in 55 employees losing their jobs. The staff reductions will be completed in the course of the first six months of the year. The activity level Moelven Building Group Operating revenues Moelven Building Group 355.8 295.2 344.7 1,253.5 1,340.7 Modular Buildings 231.7 166.9 196.5 736.5 762.9 Modular System Interiors 124.9 129.2 148.3 520.4 579.8 Operating profit/loss Moelven Building Group 5.3 0.4 7.0 29.8 37.0 Modular Buildings 0.4-2.0-0.2 7.6 15.7 Modular System Interiors 4.9 2.4 7.2 22.2 21.3 5 MOELVEN INDUSTRIER ASA QUARTERLY REPORT 1/2005
SENDER: Moelven Industrier ASA P.O. Box 134, NO-2391 Moelv Tel. +47 62 34 70 00 Fax. +47 62 36 92 80 Internett: http://www.moelven.com E-mail: post@moelven.com HUGIN Online: http://www.huginonline.no/moe/ in the project market sector is low in Sweden; however, the backlog of orders for standard modules was good at the end of the first quarter. For the companies in the Modular System Interiors division, the market both in Norway and Sweden has remained stable at a very low level. The low rate of new-build activity has necessitated an adaptation of concept and expense level. While the market in Sweden, particularly in the Stockhom area, is still very difficult, the market development in Norway is more positive. In Norway, vacant offices for rental were reduced in 2004, but it will take some time before this will have an effect on the price level. Other Businesses This business area includes the Group's parent companies, as well as joint services in Norway and Sweden, such as Information, Personnel, IT, R&D, Insurance and Finances. Some minor businesses and properties that do not belong to the Group's core business area are also included in this business area. The book value of assets that do not belong to the core business is approx. NOK 45 million. In all, operating revenues totalled NOK 17.4 million (15.7), with an operating loss of NOK 9.6 million (-8.9). Employees At the end of the first quarter, the Group had a total of 3 174 employees (3 255). 1 653 (1 678) of these employees worked in Norwegian companies, 1 501 (1 558) in Swedish companies, 17 (16) in Danish and 3 (3) in other countries. Absenteeism due to illness in the first quarter totalled 6.49 per cent (6.72), or 12 270 (12 377) full workdays. The number of injuries resulting in absence totalled 21 (19), which corresponds to 20.4 (18.7) injuries (resulting in absenteeism) per million workhours. In all, the number of injuries was 31 (31). Investments, balance sheet and financing Investments totalling NOK 30 million (33) were made in the first quarter. The investments are primarily linked to maintenance and upgrade of certain equipment used in existing operations. At the end of the first quarter, the Group had total assets of NOK 3 015.3 million (3 169.5) and employed capital of NOK 2 075.8 million (2 202). The decrease compared to the previous year is as expected and is primarily due to the purchase of the Are Group in the first quarter, which is now an integrated part of the Group. shareholders' equity at the end of the first quarter was NOK 1 044.0 million (1 043.9), corresponding to an equity ratio of 34.6 per cent (32.9). The Board's goal is to increase the equity ratio gradually to around 40 per cent. Net interest-bearing debt totalled NOK 1049.8 million (1 116.0), and the liquidity reserve was NOK 669.4 million (665.3). IFRS Reporting in accordance with IFRS (International Financial Reporting Standards) would at the end of first quarter reduce the profit by NOK 10 million. This refers primarily to the market assessment of financial instruments. Equity according to IFRS totalled NOK 1 000 million. assets ended at NOK 3 010 million, which makes the equity ratio 33.2%. Outlook The Board expects the situation for industrial pine timber to remain low and that the price level for lower quality spruce products will fall as a result of the storms in Southern Sweden. For wood-based building products, normal seasonal improvements are expected. The sale of module-based concepts is expected to develop in a positive direction in both Norway and Sweden, while the increase in Sweden will be somewhat less than in Norway. Activities in the professional building market should increase in Norway due to the lower rate of vacant offices, while the activity level in Sweden is expected to remain stable at the current level. Overall, the Board expects the year-end result for the Group to be at the same level as for last year. Moelv, 26. april 2005 Board of Directors, Moelven Industrier ASA Moelven Industrier ASA is a Scandinavian industrial group that supplies products and associated services to the Scandinavian building market. The Group's businesses employ 3.200 persons and have a total annual turnover of some NOK 5.8 billion. The Group's close Finnforest is the largest wood products industry corporation in Europe. Its annual turnover is close to 2 billion euros and the number of employees is 8 000. Finnforest is a core business of its owner the Metsäliitto Group. Finnforest offers wood-based product and service solutions to its customers in the building and construction, industrial, distribution, DIY and retailing segments. Finnforest serves in over 20 to fortyfive business units are organised into two business areas: the Moelven Timber Group and the Moelven Building Group. Moelven is a member of Finnforest Corporation Oyj. countries. Main geographical markets are the UK, Germany, France, Scandinavia and Finland. In Scandinavia the operations are the responsibility of Moelven Industrier ASA, which is Finnforest s majority-owned Norwegian subsidiary. More information: www.finnforest.com and www.moelven.com. 6 MOELVEN INDUSTRIER ASA QUARTERLY REPORT 1/2005