Aspo Group interim report, January 1 to March 31, 2017
(Thomson Reuters ONE) -
ASPO PLC STOCK EXCHANGE RELEASE May 9, 2017, at 10:00 a.m.
ASPO GROUP INTERIM REPORT, JANUARY 1 TO MARCH 31, 2017
Aspo: Operating profit and net sales increased significantly
(Figures from the corresponding period in 2016 are presented in brackets.)
January-March 2017
- Aspo's net sales amounted to EUR 119.0 (98.5) million
- Operating profit stood at EUR 4.4 (3.3) million.
- The operating profit of ESL Shipping stood at EUR 3.0 (2.2) million, the
operating profit of Leipurin was EUR 0.4 (0.5) million, the operating profit of
Telko amounted to EUR 2.3 (2.3) million, and the operating profit of Kauko stood
at EUR -0.5 (-0.3) million. The operating profit of other activities stood at
EUR -0.8 (-1.4) million.
- Profit for the period stood at EUR 3.9 (2.3) million.
- Earnings per share were EUR 0.13 (0.07).
- All businesses increased their net sales, and Aspo's net sales increased by
21%.
- Net sales in Russia, Ukraine and other CIS countries increased by 48% from the
comparative period to EUR 39.3 (26.6) million.
- ESL Shipping increased its operating profit to EUR 3.0 (2.2) million after
successful operations and the improved profitability of its Supramax vessels.
- Aspo's relative profitability improved, and its operating profit rate was
3.7% (3.4).
Guidance for 2017
Aspo's operating profit will be EUR 22-27 (20.4) million in 2017.
KEY FIGURES
1-3/2017 1-3/2016 Change,% 1-12/2016
Net sales, MEUR 119.0 98.5 20.8 457.4
Operating profit, MEUR 4.4 3.3 33.3 20.4
Operating profit, % 3.7 3.4 4.5
Profit before taxes, MEUR 4.2 2.6 61.5 17.4
Profit for the period, MEUR 3.9 2.3 69.6 15.9
Earnings per share, EUR 0.13 0.07 85.7 0.49
Net cash from operating activities,
MEUR -3.2 -7.0 54.3 16.2
Equity per share, EUR 3.90 3.36 3.75
Return on equity, % (ROE) 13.4 8.9 14.6
Equity ratio, % 38.3 34.9 37.4
Gearing, % 94.0 108.7 89.8
ESL Shipping, operating profit, MEUR 3.0 2.2 36.4 12.6
Leipurin, operating profit, MEUR 0.4 0.5 -20.0 2.0
Telko, operating profit, MEUR 2.3 2.3 0.0 10.1
Kauko, operating profit, MEUR -0.5 -0.3 -66.7 -0.1
General outlook for 2017
General uncertainty in the markets has decreased. Industrial production is
expected to increase in the main market areas of Aspo's business operations
during 2017. Raw material prices are expected to remain low. In Russia, the
national economy and industrial production are expected to turn into growth.
However, political risks have increased, which may have a rapid impact on the
operating environment or reduce free trade in the long term.
AKI OJANEN, CEO OF ASPO GROUP:
"Aspo's net sales and operating profit increased strongly. We have had the
courage to invest in growth during periods of uncertainty and decrease. Growth
of 48% in our net sales in eastern markets and the total increase of more than
20% in our consolidated net sales indicate that we were ready for rapid growth
as the markets recovered.
The market environment has rapidly changed in a positive direction in market
areas and sectors important to Aspo, and our hard long-term work is also
starting to show in our result.
Telko and Leipurin have invested in growth by increasing the number of units and
especially by recruiting skilled employees. These investments have increased
operating expenses. I am happy that, despite our significant growth, the
operating profit rate increased. Improving the operating profit rate is one of
the Group's key targets in our attempts to reach our financial targets by 2020.
We succeeded on a broad front. Our most significant successes were the new
customer accounts acquired for ESL Shipping's Supramax vessels and, therefore,
the notably improved profitability of the shipping company. Telko's previous
investments in an operating strategy for eastern markets and stronger prices in
industrial chemicals and plastics enable Telko to increase its net sales by as
much as 29%. Even though Leipurin has not yet improved its results, its
investments will start to show during 2017.
The operating profit is usually the lowest of the year during the first quarter.
We have started this year strongly and were able to increase our profit for the
period by 70%. Our outlook is looking brighter than for a long time," says Aki
Ojanen, CEO of Aspo Group.
ASPO GROUP
NET SALES
Net sales by segment
1-3/2017 1-3/2016 Change 1-12/2016
MEUR MEUR % MEUR
ESL Shipping 18.9 16.2 16.7 71.4
Leipurin 29.4 26.2 12.2 112.7
Telko 63.6 49.4 28.7 240.3
Kauko 7.1 6.7 6.0 33.0
Other operations 0.0 0.0 - 0.0
Total 119.0 98.5 20.8 457.4
There is no considerable inter-segment net sales.
Net sales by market area
1-3/2017 1-3/2016 Change 1-12/2016
MEUR MEUR % MEUR
Finland 40.2 34.1 17.9 149.4
Scandinavia 13.0 10.8 20.4 47.5
Baltic countries 12.8 12.0 6.7 50.4
Russia, Ukraine + other CIS countries 39.3 26.6 47.7 145.6
Other countries 13.7 15.0 -8.7 64.5
Total 119.0 98.5 20.8 457.4
The growth in the market prices of plastics and chemicals and the significant
increase in Telko's volumes increased net sales in all of Aspo's market areas,
apart from the Other countries area. The growth in transportation volumes of ESL
Shipping's Supramax vessels from Russia and the increase in the value of the
Russian ruble also increased net sales in the Russia, Ukraine and other CIS
countries market area.
EARNINGS
Operating profit by segment
1-3/2017 1-3/2016 Change 1-12/2016
MEUR MEUR % MEUR
ESL Shipping 3.0 2.2 36.4 12.6
Leipurin 0.4 0.5 -20.0 2.0
Telko 2.3 2.3 0.0 10.1
Kauko -0.5 -0.3 -66.7 -0.1
Other operations -0.8 -1.4 42.9 -4.2
Total 4.4 3.3 33.3 20.4
Earnings per share
Earnings per share were EUR 0.13 (0.07). Equity per share was EUR 3.90 (3.36).
Financial targets
Aspo's objective is to reach an average return on equity of over 20%, gearing of
up to 100% and an operating profit of 7% with the current structure by 2020.
The operating profit rate for the first quarter 2017 was 3.7% (3.4), return on
equity was 13.4% (8.9), and gearing was 94.0% (108.7).
OUTLOOK FOR 2017
The increase in the global economy is expected to speed up in 2017. The general
uncertainty and poor economic situation in eastern growth markets that are
important to Aspo have turned into growth. However, it is difficult to predict
future development in Russia, Ukraine and other CIS countries. The values of
foreign currencies are expected to continue to fluctuate heavily.
The price of oil has strengthened, but is likely to remain at a low level. In
general, the prices of production raw materials are expected to remain low. The
Group will continue to increase its market shares profitably in the
strategically important eastern growth markets. Industrial production is
expected to increase in the main market areas of Aspo's business operations
during 2017. While international dry cargo prices are expected to remain low,
the shipping company has secured its capacity utilization mainly through long-
term agreements. The operations of one of the two Supramax vessels in the Baltic
Sea area during 2017 have been secured, which will significantly reduce the
volume of spot traffic. The loss-producing machine operations of Leipurin will
turn to produce a profit, as a result of the record high order book.
ASPO'S BUSINESS OPERATIONS
ESL SHIPPING
ESL Shipping is the leading dry bulk cargo company in the Baltic Sea region. At
the end of the review period, the company's fleet consisted of 14 vessels, of
which the company owned 13 in full and one was leased.
1-3/2017 1-3/2016 Change, % 1-12/2016
Net sales, MEUR 18.9 16.2 16.7 71.4
Operating profit, MEUR 3.0 2.2 36.4 12.6
Operating profit, % 15.9 13.6 17.6
The general market prices of dry bulk cargo decreased briefly at the beginning
of the year, but turned towards notable growth during the review period. Freight
prices still remain at a low level when reviewed in the long term.
The service range of ESL Shipping is based on the company's ability to operate
effectively and reliably in the arctic ice regions and to load and unload
vessels at sea. During the first quarter, the company's vessels have mainly
operated in contract traffic in the Baltic Sea and in Northern Europe, and also
performed loading and unloading operations at sea. Transportation operations in
the Baltic Sea and the North Sea are based on long-term customer agreements and
established customer relationships.
During the first quarter, ESL Shipping's net sales amounted to EUR 18.9 (16.2)
million as a result of the more effective use of its vessel capacity, the
significantly improved agreement and market situation of its Supramax vessels,
and the increase in ship fuel prices from the comparative period. Changes in
fuel prices have an impact on the shipping company's net sales via fuel clauses
in long-term agreements. Profitability increased significantly from the
comparative period, and operating profit stood at EUR 3.0 (2.2) million.
Supramax vessels, in particular, increased their profitability.
The annual agreement on the transportation of iron pellets from Russia to the
European market signed by the shipping company during the previous quarter and
the improved demand enabled the Supramax vessels to operate effectively in their
ideal winter traffic area, and they started to produce significant profits after
losses produced during the comparative period. The profitability of other
vessels remained at the previous year's good level.
The transportation volume of renewable bioenergy continued to be higher than
estimated during the review period. However, due to the low nominal weight of
this cargo type, this cannot be seen as any notable change in the reported
transportation volumes. Transportation volumes for the steel industy and energy
coal were at the comparative period's level. The cargo volume carried by ESL
Shipping in January-March amounted to 2.5 (2.4) million tons. During the first
quarter, one vessel unit underwent scheduled dockage.
Loading and unloading operations for large ocean liners at sea was at the
previous year's level. Compared to the previous year, profitability was weakened
by lower general demand in the Gulf of Finland and difficult weather conditions
partly due to the irregularly mild winter, such as strong winds, leading to
dealys in operations. General demand in the Gulf of Bothnia was higher than in
the year before, and operations succeeded well in the region.
The shipping company's project to build the world's first two LNG-fueled handy-
size dry cargo vessels has proceeded as expected, and its cooperation with
Sinotrans & CSC Jinling shipyard has been productive. The new vessels will start
operations in the Baltic Sea during the first half of 2018. After the review
period, the main engine of the first vessel was tested successfully with
liquefied natural gas. The new vessels will operate in the northern Baltic Sea,
improving the efficiency of the transportation chain, and significantly reducing
the environmental load of operations. The EU supports energy-efficiency and
environmental investments in ships.
Outlook for ESL Shipping for 2017
Market cargo freights of large dry cargo vessels have increased at the end of
last year and at the beginning of 2017 from the historically low level of a year
ago. However, they are not at a normal level when reviewed in the long term.
Market forecasts regarding cargo freight development during the rest of the year
have become more optimistic, and it is also estimated that there will be
moderate economic growth in the shipping company's main market areas.
Not many new dry cargo vessels have been ordered, due to which the balance
between demand and supply is expected to improve in the coming years. This
change is also sped up by the tighter environmental regulations set for shipping
operations. These may reduce the range of the oldest tonnage in the future.
Most of the shipping company's transportation capacity utilization has been
secured in the Baltic Sea and Northern Europe through long-term agreements. The
profitable employment of one of the shipping company's Supramax vessels in the
Baltic Sea until the end of this year has already been secured through an annual
agreement. The employment of the other Supramax vessel has been secured at least
until late summer. Transportation volumes in the steel industry are expected to
develop positively or remain unchanged, but the timing of annual maintenance
requires that the capacity of the pusher system is adapted in May.
Transportation demand of the mining and metal industries may increase, partly as
a result of increased raw material prices.
Total transportation volumes in the energy industry are expected to be higher
than during the previous year, mainly because of the increased demand for the
transportation of biofuels. The transportation volumes of coal are expected to
remain at the previous year's level, and the use of coal mainly focuses on the
joint production of power and heat. In Finland, the production of condensing
power by using coal has practically come to an end, due to its poor
profitability, apart from periods of extreme cold in the winter.
Demand for the loading and unloading services of large vessels at sea is
expected to be high. If required, the shipping company's capacity will also be
adapted according to the demand and the needs of any new customer groups by
chartering additional external capacity. The company aims to continue its
operations in arctic areas during the second half of the year, as in previous
years.
According to its strategy, the shipping company will continue to expand its
customer base, in particular, to customer transportation, where both the
company's range of different cargos and its operating area can be expanded. For
this purpose, the company has strengthened its resources in sales and ship
operations through recruitment, starting from the beginning of the second
quarter.
The shipping company has negotiated the manning of its new vessels and the
opportunity to have the vessels under the Finnish flag with shipping trade
unions. The parties have negotiated an agreement which enables, at least, the
first vessel to be registered in Finland. In order to secure competitiveness in
the long term and the availability of a competent crew, the company has also
agreed to expand the mixed crews of its current vessels through natural employee
turnover and the new job opportunities offered by the new vessels. The agreed
arrangement is expected to improve cost competitiveness in stages, already
during this year.
In 2017, three vessel units will be docked as planned, in addition to one
previously docked unit. The two largest dockages will be scheduled for the
second quarter, due to seasonal variation in demand.
LEIPURIN
Leipurin is a unique provider of solutions for bakery and confectionery
products, the food industry and the out of home (OOH) market. The solutions
offered by Leipurin range, for example, from product development, recipes, raw
materials, training and equipment all the way to the design of sales outlets. As
part of its full-range services, Leipurin designs, delivers and maintains
production lines for the baking industry, baking units and other machinery and
equipment required in the food industry. Leipurin uses leading international
manufacturers as its raw material and machinery supply partners. Leipurin
operates in Finland, Russia, the Baltic countries, Poland, Ukraine, Kazakhstan
and Belarus.
1-3/2017 1-3/2016 Change, % 1-12/2016
Net sales, MEUR 29.4 26.2 12.2 112.7
Operating profit, MEUR 0.4 0.5 -20.0 2.0
Operating profit, % 1.4 1.9 1.8
The prices of raw materials important to Leipurin have increased slightly from
the comparative period. The market of industrial packed bread continues to
decrease in the west, whereas the market of in-store bakeries and baking units
has continued to increase. The growth in imported frozen bakery products to
Finland has evened out.
Net sales of Leipurin for January-March increased from the comparative period to
EUR 29.4 (26.2) million. Operating profit lagged slightly behind the comparative
period, and stood at EUR 0.4 (0.5) million. The operating profit rate during the
quarter was 1.4% (1.9).
The net sales of Leipurin increased in eastern markets and machine operations.
The net sales of raw material operations increased in Russia, Ukraine and other
CIS countries by 33%, and the operating profit rate was approximately 6% (7).
The net sales of machine operations increased by 45%, with principal equipment
and Leipurin's own production and maintenance all showing growth.
Despite the challenging market situation in the fresh bread market, the net
sales of bakery raw materials increased in Finland, particularly thanks to
artisanal and OOH customers. Net sales decreased in Poland and the Baltic market
region, which also reduced the operating profit.
Leipurin invested to increase its market share in the OOH market, for example,
by performing sales and marketing measures in all market areas and by opening a
second test cafeteria in Finland. These investments in growth slowed down the
development of operating profit in January-March, due to increased costs. The
capacity utilization of Leipurin's own production increased significantly, while
operations continued to produce a small loss, as project revenue recognition and
customer deliveries will mainly take place in upcoming quarters.
During the first quarter, net sales in Russia, Ukraine and other CIS countries,
including machine sales, increased by approximately 36% to EUR 8.3 (6.1)
million, with the operating profit rate being approximately 6% (6).
Outlook for Leipurin for 2017
The market situation is expected to remain unchanged in key markets of Leipurin.
The market position is expected to remain strong in the industrial baking sector
in Finland, Russia and the Baltic region. The net sales and operating profit of
Leipurin are expected to increase in 2017.
In Russia, the decrease in the purchasing power of consumers is estimated to
turn towards growth and the purchasing power is expected to increase. The local
procurement of bakery raw materials has been increased in Russia to replace
imported raw materials. The purpose is to respond to the campaign to promote
local products in Russia and to changes in demand by developing a product range
with more competitive prices. The aim is to increase the proportion of local raw
materials even further. Local procurement has been decentralized and, currently,
there are already dozens of significant regional production partners. Leipurin
will maintain good profitability in the region, strengthen its market position,
and look for growth in the bread, pastry and OOH sectors.
The OOH market is a significant and growing operating area for Leipurin, and
Leipurin will continue to invest in the OOH market, particularly in Finland and
western markets.
In machine operations, equipment investments are expected to increase in Finland
and the Baltic region. In addition, a moderate increase in investments is
expected in Russia. Leipurin's machine operations will continue to strengthen
the agent network in Western Europe and the Middle East. As a result of the
improved competitiveness of machine operations and the redirection of sales, the
order book of machine operations for 2017 looks promising, and it is expected to
improve even further. The improved order book ensures that the profitability of
machine operations will improve during the next quarters.
TELKO
Telko is a leading expert and supplier of plastic raw materials and industrial
chemicals. Business is based on representation of the best international
principals and on the expertise of the personnel. Telko has subsidiaries in
Finland, the Baltic countries, Scandinavia, Poland, Russia, Belarus, Ukraine,
Kazakhstan, Azerbaijan and China.
1-3/2017 1-3/2016 Change, % 1-12/2016
Net sales, MEUR 63.6 49.4 28.7 240.3
Operating profit, MEUR 2.3 2.3 0.0 10.1
Operating profit, % 3.6 4.7 4.2
The prices of industrial chemicals continued to increase during the first
quarter, and they were significantly higher than during the comparative period.
The prices of plastic raw materials increased from the beginning of the year.
This increase continued throughout the quarter, and prices were higher on
average than during the corresponding period in the previous year.
Net sales of Telko increased by 29% to EUR 63.6 (49.4) million. The increase in
net sales was affected by an increase in volumes and prices. It is estimated
that the increase in prices accounts for half of the increase in net sales.
Operating profit during the first quarter stood at EUR 2.3 (2.3) million.
Net sales increased clearly more in eastern markets than in western markets. The
outlook for economic growth in eastern markets strengthened during the review
period, which had an impact on the increase in demand and net sales. Net sales
in Russia, Ukraine, and other CIS countries increased by 49% during the first
quarter from the comparative period, being EUR 28.7 (19.3) million. In eastern
markets, operating profit decreased, and the operating profit rate was clearly
below the level of 5%. The rate of the Russian ruble increased by more than 20%
from the comparative period, which reduced the profitability of the Russian unit
during the review period, due to increased costs. Telko has previously opened
new units and recruited new employees. In addition, Telko's expenses increased,
due to the relocation of its Russian warehouse to a new location.
Outlook for Telko for 2017
The increase in the prices of oil and petrochemical products is expected to even
out, in accordance with oil prices.
The development of the Russian economy is expected to become positive, which
will be visible through higher procurement volumes in Telko's customer
companies. The market situation in western markets is expected to remain
unchanged. In 2017, the general market situation will be much better than in
previous years.
Telko has completed the first phase of its geographic expansion strategy in
Russia by establishing sales offices in all parts of the Russian Federation,
apart from Siberia. The establishment and start-up of these offices have
increased costs and, in the future, Telko aims to improve its relative
profitability in eastern markets through increased volumes and active pricing.
Telko is investigating its opportunities to start operations in new countries,
particularly in the growth markets of the Middle East and Eastern Europe.
KAUKO
Kauko is a specialist in demanding mobile knowledge work environments. It
supplies the best tools, solutions for improving productivity and services for
securing effective use for the needs of industries, logistics, healthcare sector
and the authorities. Kauko solutions combine customized applications, devices
and services. Its product range also includes products that improve energy
efficiency. Kauko has companies in Finland and Germany.
1-3/2017 1-3/2016 Change, % 1-12/2016
Net sales, MEUR 7.1 6.7 6.0 33.0
Operating profit, MEUR *) -0.5 -0.3 -66.7 -0.1
Operating profit, % -7.0 -4.5 -0.3
*) In 2017, including a EUR 0.3 million impairment loss of receivables related
to previously divested business operations
Net sales of Kauko increased by 6% in the first quarter, amounting to EUR 7.1
(6.7) million. The net sales of mobile knowledge work increased from the
comparative period, including IT deliveries to the healthcare sector. The net
sales of energy-efficiency equipment increased, even though winter is typically
a poor seasonal period during the annual cycle. No income was recognized from
the project deliveries to China during the first quarter, unlike during the
comparative period. The operating profit of Kauko stood at EUR -0.5 (-0.3)
million. The operating profit was reduced by the bankruptcy of a long-term
principal related to previously divested operations which caused a EUR 0.3
million impairment loss of commission receivables. This event is not related to
Kauko's current operations.
Key employees were recruited for the application business for mobile knowledge
work to strengthen the sale and development of efficiency solutions for field
work. Application operations and the functions of Kauko's German subsidiary are
at their start-up stage and produced a loss. The start-up of the sale of a
computer designed by Kauko for the healthcare sector was postponed from the
first quarter to the second quarter.
Outlook for Kauko for 2017
The net sales and profitability of total solutions for mobile knowledge work are
expected to improve. Kauko is a provider of effectively integrated and
customized total solutions, combining application, hardware and other services.
During the review period, a number of rugged computer models that strengthen the
product portfolio even further was released. Application operations, in
particular, are expected to improve profitability. Service operations will be
expanded by shifting focus more on total solutions. In the market of rugged
computers, sales of laptops are expected to decrease and those of tablets to
increase. Kauko provides the healthcare sector with various mobile IT solutions
to improve the efficiency of the nursing staff's work. The sale of Kauko's
computer made in Germany is expected to start during the second quarter. The new
computer designed for the healthcare sector also enables the start of sales to
other OEM channels outside Kauko's regular market area.
The market of decentralized energy production solutions is expected to grow,
especially regarding solar power. The order book is at an exceptionally high
level, and Kauko will also expand sales to the public sector.
OTHER OPERATIONS
Other operations include Aspo Group's administration, the financial and ICT
service center, and a small number of other functions not covered by business
units.
1-3/2017 1-3/2016 Change, % 1-12/2016
Net sales, MEUR 0.0 0.0 0.0 0.0
Operating profit, MEUR -0.8 -1.4 42.9 -4.2
The operating profit of other operations was negative and amounted to EUR -0.8
(-1.4) million. The expenses related to profit- and share-based rewards weakened
the operating profit of the comparative period. The increase in the cost
efficiency of other operations as well as the rearrangement of facilities
performed in 2016 increased the operating profit.
FINANCING
The Group's cash and cash equivalents amounted to EUR 16.6 million (12/2016: EUR
22.6 million). The consolidated balance sheet included a total of EUR 128.7
million in interest-bearing liabilities (12/2016: EUR 125.4 million). The
average rate of interest-bearing liabilities was 1.7% at the end of the review
period (12/2016: 1.8%). Non-interest-bearing liabilities totaled EUR 68.1
million (12/2016: EUR 69.8 million).
Aspo Group's gearing was 94.0% (12/2016: 89.8%) and its equity ratio was 38.3%
(12/2016: 37.4%). At the end of the first quarter of 2016, gearing was 108.7%
and the equity ratio was 34.9%.
The Group's net cash from operating activities during the review period stood at
EUR -3.2 (-7.0) million. During the review period, the change in net working
capital was EUR -8.4 (-12.1) million.
Net cash from investing activities during the review period was negative at EUR
-6.7 (-0.6) million, i.e., the Group's free cash flow amounted to EUR -9.9 (-
7.6) million. Advance payments in the shipping company's new vessels amounted to
EUR 6.2 million.
The amount of committed revolving credit facilities signed between Aspo and its
main financing banks stood at EUR 40 million at the end of the review period.
The revolving credit facilities remained fully unused. Of the commercial paper
program of EUR 80 million, EUR 5 million were in use at the end of the review
period. In 2017, a financing agreement of EUR 20 million will fall due.
On May 27, 2016, Aspo issued a new hybrid bond of EUR 25 million. The fixed
coupon rate of the bond is 6.75% per annum. The bond has no specified maturity
date, but the company may exercise an early redemption option after four years
of its issuance date.
Aspo has hedged its interest rate risk by means of an interest rate swap. Its
fair value on March 31, 2017 was EUR -0.5 (-0.8) million. The financial
instrument is on level 2 of the fair value hierarchy.
Aspo Group has hedged its currency-denominated cash flows associated with the
acquisition of new vessels using currency forward agreements, to which hedge
accounting is applied. The nominal value of these currency forward agreements
was EUR 31.6 million, and their fair value was EUR 1.2 (-1.4) million on March
31, 2017. The financial instrument is on level 2 of the fair value hierarchy.
INVESTMENTS
The Group's investments stood at EUR 7.1 (0.6) million, consisting mainly of
advance payments for new vessels ordered by ESL Shipping.
Investments by segment, acquisitions excluded
1-3/2017 1-3/2016 Change 1-12/2016
MEUR MEUR % MEUR
ESL Shipping 6.6 0.4 1550.0 5.0
Leipurin 0.1 0.0 - 0.3
Telko 0.3 0.2 50.0 1.4
Kauko 0.1 0.0 - 0.0
Other operations 0.0 0.0 - 0.2
Total 7.1 0.6 1083.3 6.9
PERSONNEL
Personnel by segment, period-end
3/2017 3/2016 Change, % 12/2016
ESL Shipping 232 221 5,0 226
Leipurin 323 310 4,2 322
Telko 284 271 4,8 280
Kauko 43 45 -4,4 42
Other operations 25 22 13,6 25
Total 907 869 4,4 895
At the end of the review period, Aspo Group had 907 (869) employees. The number
of personnel has increased in Leipurin and Telko companies in Russia, Ukraine
and other CIS countries, and in Leipurin's test cafeteria in Finland. The number
of personnel in other operations has been increased, for example, to build
digitalization solutions.
Rewarding
In 2015, the Board of Directors of Aspo Plc approved a share-based incentive
plan for about 30 persons. The plan includes three earnings periods, the
calendar years 2015, 2016 and 2017. The Board of Directors will decide on the
plan's performance criteria and required performance levels for each criterion
at the beginning of each earnings period.
The reward from the earnings period 2015 was based on the Group's earnings per
share (EPS). In 2016, on the basis of the 2015 earnings period, employees
included in the plan received 88,970 treasury shares as a share-based reward, as
well as cash equaling the value of the shares, at most, in order to pay taxes.
In accordance with the rules of incentive plans a total of 5,275 treasury
shares, originally granted on the basis of share-based incentive plans, were
returned to Aspo due to ended contracts of employment in 2016.
The reward from the 2016 earnings period was based on the Group's earnings per
share (EPS). In March 2017, on the basis of the 2016 earnings period, employees
included in the plan received 25,740 treasury shares as a share-based reward, as
well as cash equaling the value of the shares, at most, in order to pay taxes.
The reward from the 2017 earnings period will be based on the Group's earnings
per share (EPS). The possible reward from the 2017 earnings period will be paid
in 2018, partly in treasury shares and partly in cash to cover any taxes and
tax-related costs arising from the reward. At most 112,000 treasury shares will
be granted, and the amount paid in cash will correspond, at most, to the value
of the shares on the payment date.
RISKS AND RISK MANAGEMENT
Operating conditions in Aspo's market areas have improved from the year before.
National economies in western countries are increasing, and the economy of
Finland, Aspo's important home market, has also turned towards growth. Eastern
economies have stopped their decline and, in Russia, the increase in oil prices
has supported economic recovery. In Russia, inflation has continued to slow
down, and consumption demand and investments have turned towards moderate
growth. Cargo prices increased slowly throughout the previous year and, after a
brief decline, have started to increase again.
The cautious turn for the better can soon be seen as lower risks in all of
Aspo's businesses. However, any rapid changes in international politics,
exchange rates or commodities markets may have an impact on the demand and
competitiveness of the products of Aspo's companies. Growth in eastern and
western markets was still strained by low demand for investment assets. However,
there are signs of an increase.
Strategic risks
In addition to western markets, Aspo operates in areas where economic
development may quickly become negative or positive, as a result of which there
may be significant changes in business preconditions.
In Russia, foreign trade has grown strongly during the first months of the year
and, in Ukraine, consumption demand has evened out after a steep decline. The
Russian economy has also stabilized and inflation has continued to decelerate.
According to estimates, the Russian economy will increase during this year. The
decreased consumption demand has had a general impact on trade, but the increase
in nominal salaries predicts that consumption will increase. No signs of
decrease were visible anymore in the financing market and payments in Russia and
Ukraine. Companies are more willing to make investments, even though the sale of
investment assets is still characterized by caution.
The promotion of local production has increased the volume of raw materials and
items produced in Russia in industrial production, despite the decrease in
quality. This may reduce the position of imported raw materials in the value
chain and the margin level, but, correspondingly, an increase in import volumes
may reduce related risks for Aspo.
Political risks have increased, which may have a rapid impact on Aspo's
operating environment or reduce free trade in the long term. The economic and
political situation in Aspo's market areas may have made it more difficult to
make structural changes as part of Aspo's strategy. The situation may continue
unchanged, but, as the economic and political pressure alleviates, it may change
completely and rapidly.
Economic sanctions or other obstacles arising from the economic or political
situation in Russia may, in part, reduce transportation volumes originating from
Russia and the demand for unloading services for large ocean liners at sea. In
Finland and the rest of Europe, social pressures to reduce the use of coal in
energy production have increased, which will reduce coal transportation volumes
in the future. Correspondingly, the transportation volumes of replacement energy
products will increase. Due to this change, it is difficult to estimate future
transportation volumes. The low level of international freight indices and a
global increase in vessels, in particular, in large size categories have
increased uncertainty over the long-term profitability of shipping companies.
Nevertheless, there are signs of a slight increase in freight indices and of a
decrease in the number of vessels in the long term.
In addition to the internationally poor economic situation and the political
atmosphere, strategic risks are caused by the outlook and production solutions
of industrial customers. Decisions on energy production structures affected by
the environmental policy and other political choices may cause changes in
industry and energy production that may decrease the use of fossil fuels and
increase the use of alternative forms of energy. The flow of goods in the Baltic
Sea may change as a result of steel production, cost structures, changes in the
customer structure, such as centralization of ownership, or for other reasons.
These changes may have negative consequences on operations as the need for
transportation decreases, but they can also be seen as significant
opportunities. As a result of low cargo prices in international shipping,
competition over cargoes may also become fiercer in the Baltic Sea, and there
may also be more competition, due to milder and iceless winters. In order to
improve its competitive position, ESL Shipping is building new low-emission
vessels with a higher fuel economy for this region and customer base.
Strategic risks are affected by long-term changes in cargo prices, investment
trends, and changes in trade structures, especially in western markets. In
eastern markets, risks are increased by such factors as political instability,
social structures or their lack of reaction to the difficulties encountered by
business operations. The accumulation and discharge of investments may cause
long-term changes in the competitive situation and customer behavior. Trade in
eastern and western markets may suffer from restrictions on free trade, as a
result of which there may be a decrease in sales of goods and services.
Rapid changes in economic structures may cause risks due to changes in the
customer or principal structure or technologies, and due to unutilized
opportunities that require a quick response. Aspo's strategic risks are evened
out by the distribution of business operations over four segments, its
engagement in business operations in a broad geographical area, and its ability
to react quickly to changing situations.
Operational risks
Economic uncertainty in Aspo's operating environment has decreased during the
review period. However, operational risks have remained unchanged. These include
risks related to supply chains and persons.
The focus of Aspo's growth has for long been on emerging market areas, where
risks decelerating growth are affected by factors such as exchange and interest
rates, the level of and changes in the global market prices of raw materials,
industrial and commercial investments, customer liquidity, changes in
legislation and import regulations, and the inactivity, lack of neutrality or
corruption of public authorities.
Economic growth and, alternatively, any decrease in production may have an
impact on demand for raw materials in the eastern markets. Political and
economic instability is disturbing commercial activities and, if the situation
continues, the growth of Aspo's business operations may slow down. Consumer
behavior is also reflected in risks associated with B-to-B customers and their
risk levels. The growth opportunities presented by emerging markets are
encouraging interest among competitors in starting or expanding business
operations in these areas. The challenging emerging markets and the escalated
situation in Ukraine have also caused competitors to withdraw from the area,
which has created new potential for Aspo's businesses, increased their market
shares and, in some business areas, even improved profitability.
Hedging against exchange rate changes is not possible in all conditions and,
especially, at all times. Changes in exchange rates may reduce results and
equity on the balance sheet as a result of translation differences. Then again,
changes in exchange rates may also strengthen the result and balance sheet. As
changes in credit loss risks are diversified across businesses and customers,
Aspo's businesses have not been subjected to any significant credit losses
related to their customers, even though credit loss risks have increased.
Principal risks have materialized through unreceived commission returns.
The quantity and probability of the Group's loss risks are regularly assessed. A
bidding process was arranged for general insurance policies and the amounts
insured were updated in 2016. The amounts insured are sufficient in view of the
scope of Aspo's operations, but insurance companies may restrict the validity of
insurance policies as a result of risks increasing for various reasons, such as
military operations.
Internal control and risk management
One of the responsibilities of Aspo's Audit Committee is to monitor the
efficiency of the Group's internal supervision, internal audits, and risk
management systems. The Audit Committee monitors the risk management process and
carries out necessary measures to prevent strategic risks in particular. In
accordance with the internal control principles approved by the Board of
Directors, risk management is part of Aspo's internal control, and its task is
to ensure the implementation of the Group's strategy, development of financial
results, shareholder value, dividend payment ability, and continuity in business
operations. The operational management of the businesses is responsible for risk
management. The management is responsible for specifying sufficient measures and
their implementation, and for monitoring and ensuring that the measures are
implemented as part of day-to-day operational control. The risks of Telko and
ESL Shipping were updated during the final quarter of 2016, and those of other
businesses will be updated in 2017. Risk management is coordinated by Aspo's
CFO, who reports to the Group CEO.
Aspo Group's financing and financing risk management are centralized in the
parent company, in accordance with the financing policy approved by the Board of
Directors.
A more detailed account of the risk management policy and the most significant
risks has been published on the company's website. More detailed information on
financing risks can be found in the notes to the financial statements.
SHARE CAPITAL AND SHARES
Aspo Plc's share capital on March 31, 2017 was EUR 17,691,729.57 and the total
number of shares was 30,975,524 of which the company held 370,486 shares; that
is, 1.2% of the share capital. Aspo Plc has one share series. Each share
entitles the shareholder to one vote at the shareholders' meeting. Aspo's share
is quoted on Nasdaq Helsinki Oy's Mid Cap segment under industrial products and
services.
During January-March 2017, a total of 950,996 Aspo Plc shares with a market
value of EUR 8.3 million were traded on Nasdaq Helsinki, in other words, 3.1% of
the stock changed hands. During the review period, the share price reached a
high of EUR 9.16 and a low of EUR 8.20. The average price was EUR 8.73 and the
closing price at period-end was EUR 8.86. At the end of the review period, the
market value excluding treasury shares was EUR 271.2 million.
The number of Aspo Plc shareholders was 9,145 at period-end. A total of 900,622
shares, or 2.9% of the share capital, were nominee registered or held by non-
domestic shareholders.
DECISIONS AT THE SHAREHOLDERS' MEETING
Dividend
The Annual Shareholders' Meeting of Aspo Plc on April 5, 2017, approved the
payment of a dividend totalling EUR 0.42 per share in accordance with the Board
of Directors' proposal.
The dividend will be paid in two installments. The record date for the first
installment of EUR 0.21 per share was April 7, 2017 and the payment date was
April 18, 2017.
The second installment of EUR 0.21 per share will be paid in November 2017 to
shareholders who are registered in the shareholders' register maintained by
Euroclear Finland Ltd on the record date. At its meeting to be held on October
26, 2017, the Board of Directors will decide on the record and payment dates of
the second installment, in accordance with the rules of the Finnish book-entry
securities system. According to the current system, the dividend record date
would be October 30, 2017 and the payment date would be November 6, 2017.
Board of Directors and Auditor
The Annual Shareholders' Meeting re-elected LL.M., MBA Mammu Kaario, M.Sc.
(Econ.) Mikael Laine, LL.M. Roberto Lencioni, B.Sc. (Econ.), eMBA Gustav Nyberg,
D.Sc. (Econ.) Salla Pöyry and M.Sc. (Tech.) Risto Salo to the Board of
Directors. At the Board's organizing meeting held after the Annual Shareholders'
Meeting, Gustav Nyberg was elected as Chairman of the Board and Roberto Lencioni
as Vice-Chairman. At the meeting the Board also decided to appoint Mammu Kaario
Chairman of the Audit Committee and Mikael Laine, Salla Pöyry and Risto Salo as
committee members.
The Authorized Public Accountant firm Ernst & Young Oy was elected as company
auditor.
Board authorizations
Authorization of the Board of Directors to decide on the acquisition of treasury
shares
The Annual Shareholders' Meeting on April 5, 2017 authorized the Board of
Directors to decide on the acquisition of no more than 500,000 of the treasury
shares using the unrestricted equity of the company representing about 1.6% of
all the shares in the company. The authorization includes the right to accept
treasury shares as a pledge.
The shares shall be acquired through public trading, for which reason the shares
are acquired otherwise than in proportion to the share ownership of the
shareholders and the consideration paid for the shares shall be the market price
of the Aspo's share in public trading at Nasdaq Helsinki Ltd at the time of the
acquisition. Shares may also be acquired outside public trading for a price
which at most corresponds to the market price in public trading at the time of
the acquisition. In connection with the acquisition of the treasury shares,
derivative, share lending, or other agreements that are normal within the
framework of capital markets may take place in accordance with legislative and
regulatory requirements.
The authorization includes the Board's right to resolve on a directed repurchase
or the acceptance of shares as a pledge, if there is a compelling financial
reason for the company to do so as provided for in Chapter 15, section 6 of the
Finnish Limited Liability Companies Act. The shares shall be acquired to be used
for the financing or execution of corporate acquisitions or other transactions,
for execution of the company's share-ownership programs or for other purposes
determined by the Board.
The decision to acquire or redeem treasury shares or to accept them as pledge
shall not be made so that the shares of the company in the possession of, or
held as pledges by the company and its subsidiaries would exceed 10% of all
shares. The authorization is proposed to be valid until the Annual Shareholders'
Meeting in 2018 but not more than 18 months from the approval at the
Shareholders' Meeting.
The Board of Directors shall decide on any other matters related to the
acquisition of treasury shares and/or accepting them as a pledge.
The authorization will supersede the authorization for the acquisition of
treasury shares and/or accepting them as a pledge which was granted to the Board
of Directors by the Annual Shareholders' Meeting on April 7, 2016.
Authorization of the Board of Directors to decide on a share issue of treasury
shares
The Annual Shareholders' Meeting on April 9, 2015 authorized the Board of
Directors to decide on a share issue, through one or several instalments, to be
executed by conveying treasury shares. An aggregate maximum amount of 900,000
shares may be conveyed based on the authorization. The authorization will remain
in force until September 30, 2018.
The Board of Directors has used the authorization in 2016 and granted 88,970
treasury shares to employees included in the earnings period 2015 of the share-
based incentive plan 2015-2017. On March 27, 2017 the Board of Directors granted
25,740 treasury shares to employees included in the earnings period 2016.
Authorization of the Board of Directors to decide on a rights issue
The Annual Shareholders' Meeting on April 9, 2015. authorized the Board of
Directors to decide on a rights issue for consideration. The authorization is
proposed to include the right of the Board of Directors to decide on all of the
other terms and conditions of the conveyance and thus also includes the right to
decide on a directed share issue, in deviation from the shareholders' pre-
emptive right, if a compelling financial reason exists for the company to do so.
The total number of new shares to be offered for subscription may not exceed
1,500,000. The authorization will remain in force until September 30, 2018. The
Board of Directors has not used the authorization.
LEGAL PROCEEDINGS
On February 27, 2015, the Helsinki District Court announced its judgement in the
case between ESL Shipping and the Finnish State regarding fairway dues levied
during the years 2001-2004. According to the judgement, the Finnish State will
be required to refund to ESL Shipping approximately EUR 3,0 million in
accordance with the company's claim, as well as legal expenses and interest. The
State lodged an appeal against the District Court's judgement and, in its ruling
issued on August 8, 2016, the Court of Appeal overruled the Helsinki District
Court's judgement and dismissed ESL Shipping's legal action as time-barred. The
company has applied for a leave to appeal from the Supreme Court.
The shipping company won legal proceedings against Indian ABG Shipyard
concerning the compensation payable for repairs made to m/s Alppila during the
warranty period. The vessel was delivered to ESL Shipping in 2011. According to
the ruling of the arbitration court, ABG Shipyard was required to refund the
repair expenses and interest to ESL Shipping according to the company's claims.
The impact of ruling will be taken into account during the financial year over
which the imposed payment is received.
Helsinki May 9, 2017
ASPO PLC
Board of Directors
ASPO GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1-3/2017 1-3/2016 1-12/2016
MEUR % MEUR % MEUR %
Net sales 119.0 100.0 98.5 100.0 457.4 100.0
Other operating income 0.3 0.3 0.1 0.1 1.2 0.3
Materials and services -88.1 -74.0 -70.3 -71.4 -334.7 -73.2
Employee benefit expenses -10.3 -8.7 -10.1 -10.3 -40.0 -8.7
Depreciation, amortiziation and impairment
losses -3.0 -2.5 -2.8 -2.8 -11.6 -2.5
Other operating expenses -13.5 -11.3 -12.1 -12.3 -51.9 -11.3
Operating profit 4.4 3.7 3.3 3.4 20.4 4.5
Financial income and expenses -0.2 -0.2 -0.7 -0.7 -3.0 -0.7
Profit before taxes 4.2 3.5 2.6 2.6 17.4 3.8
Income taxes -0.3 -0.3 -0.3 -0.3 -1.5 -0.3
Profit for the period 3.9 3.3 2.3 2.3 15.9 3.5
Other comprehensive income
Items that may be reclassified to profit
or loss in subsequent periods:
Translation differences 1.3 -0.3 3.2
Cash flow hedges -0.6 -1.7 1.4
Income tax on other comprehensive income 0.0 0.1 -0.1
Other comprehensive income for the period,
net of taxes 0.7 -1.9 4.5
Total comprehensive income 4.6 0.4 20.4
Profit attributable to shareholders 3.9 2.3 15.9
Total comprehensive income attributable to
shareholders 4.6 0.4 20.4
Earnings per share, EUR 0.13 0.07 0.49
Diluted earnings per share, EUR 0.13 0.07 0.49
ASPO GROUP CONSOLIDATED BALANCE SHEET
3/2017 3/2016 Change 12/2016
MEUR MEUR % MEUR
Assets
Intangible assets 9.2 10.5 -12.4 9.4
Goodwill 42.6 42.7 -0.2 42.6
Tangible assets 117.4 114.7 2.4 113.3
Available-for-sale financial assets 0.2 0.2 0.0 0.2
Receivables 4.2 3.6 16.7 4.9
Total non-current assets 173.6 171.7 1.1 170.4
Inventories 60.1 53.7 11.9 56.7
Accounts receivable and other receivables 65.8 58.5 12.5 60.0
Cash and cash equivalents 16.6 12.4 33.9 22.6
Total current assets 142.5 124.6 14.4 139.3
Total assets 316.1 296.3 6.7 309.7
Equity and liabilities
Share capital 17.7 17.7 0.0 17.7
Other equity 101.6 85.0 19.5 96.8
Total equity 119.3 102.7 16.2 114.5
Loans and overdraft facilities 114.7 114.6 0.1 116.6
Other liabilities 4.9 6.5 -24.6 4.6
Total non-current liabilities 119.6 121.1 -1.2 121.2
Loans and overdraft facilities 14.0 9.5 47.4 8.8
Accounts payable and other liabilities 63.2 63.0 0.3 65.2
Total current liabilities 77.2 72.5 6.5 74.0
Total equity and liabilities 316.1 296.3 6.7 309.7
ASPO GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
A = Share capital F = Translation differences
B = Share premium G = Retained earnings
C = Fair value reserve H = Total
D = Other reserves
E = Treasury shares
MEUR A B C D E F G H
Equity Jan. 1, 2017 17.7 4.3 1.0 37.0 -2.3 -18.6 75.4 114.5
Comprehensive income:
Profit for the period 3.9 3.9
Translation differences 1.3 1.3
Cash flow hedges* -0.6 -0.6
Total comprehensive income -0.6 1.3 3.9 4.6
Transactions with owners:
Share-based incentive plan 0.2 0.0 0.2
Total transactions
with owners 0.2 0.0 0.2
Equity March 31, 2017 17.7 4.3 0.4 37.0 -2.1 -17.3 79.3 119.3
Equity Jan. 1, 2016 17.7 4.3 -0.3 31.9 -2.7 -21.8 73.5 102.6
Comprehensive income:
Profit for the period 2.3 2.3
Translation differences -0.3 -0.3
Cash flow hedges* -1.6 -1.6
Total comprehensive income -1.6 -0.3 2.3 0.4
Transactions with owners:
Hybrid instrument, interests -0.4 -0.4
Share-based incentive plan 0.4 -0.3 0.1
Transfer of reserves 0.1 -0.1 0.0
Total transactions
with owners 0.1 0.4 -0.8 -0.3
Equity March 31, 2016 17.7 4.3 -1.9 32.0 -2.3 -22.1 75.0 102.7
* net of taxes
ASPO GROUP CONSOLIDATED CASH FLOW STATEMENT
1-3/2017 1-3/2016 1-12/2016
MEUR MEUR MEUR
CASH FLOWS FROM OPERATING ACTIVITIES
Operating profit 4.4 3.3 20.4
Adjustments to operating profit 3.5 2.9 11.6
Change in working capital -8.4 -12.1 -10.6
Interest paid -2.5 -0.9 -3.7
Interest received 0.3 0.1 0.4
Income taxes paid -0.5 -0.3 -1.9
Net cash from operating activities -3.2 -7.0 16.2
CASH FLOWS FROM INVESTING ACTIVITIES
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Unternehmensinformation / Kurzprofil:
Datum: 09.05.2017 - 09:01 Uhr
Sprache: Deutsch
News-ID 541092
Anzahl Zeichen: 65638
contact information:
Town:
Helsinki
Kategorie:
Business News
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"Aspo Group interim report, January 1 to March 31, 2017"
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