raute 2007 tapani kiiski, president and ceo · entire life-cycle • strong investment in r&d...
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Raute 2007Tapani Kiiski, President and CEO
Raute Corporation’s Annual General Meeting 20082 April 2008
Congress Center Fellmanni, Lahti, Finland
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Raute’s business operations, strategy and operating environment
Strategic targets:Controlled growth and improvement of profitability
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Technology and services
• Veneer-based wood products:– Complete mills, production lines, machinery
and equipment– Automation, machine vision applications and
measuring technology• Overlaying and panel handling technology
for all wood products industries• Multi-layer parquet technology• Decorative veneer processing technology• Technology services:
– Maintenance, spare parts and modernization services
– Consulting and business support services
Technology synergiesCustomer synergies
Project synergies
Competence synergies:
Plywood and veneer industryLVL industry
Particleboard and MDF industryParquet industry
Decorative veneer industry
Customer industries:
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Extensive offering
Technology services- Maintenance, modernizations and spare parts- Re-conditioned machinery- Consulting, business development and training
Full-scope service offeringProject deliveries- Complete mills, production lines and single machines- Automation, machine vision and measuring technology
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Extensive knowledge
• Clearly leading position in mill-scale deliveries
• Extensive technology and service offering enables diversified service to customers throughout the products’entire life-cycle
• Strong investment in R&D– Technological innovations that create
added value for customers also influence sales volumes and raise product value
– Creating environmentally sound solutions important, e.g. technologies that save wood raw-material, energy and clue
• Investments in personnel development– Important to secure future competence
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Strategy
• Raute’s goal is to be the world’s leading supplier of technology and services in its field.– Products and services that improve the earning potential of the customers– Services throughout the entire life-cycle of the investment– Wide technology offering - strong product development– Development of technology services– Cost efficiency– Leading competence in project implementation
• Raute’s three strategic goals are:– Controlled growth– Continuous improvement of profitability– Better adaptation to cyclical fluctuations of economics
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Achievements vs. strategic targets in 2007
• Growth– We fell short of our targets. Sales grew by 4.3%, growth was strongest in
Russia. Technology services grew by 33%, according to the strategy• Profitability
– Clearly improved profitability due to better project and product risk management, reorganization of quality operations, development of the procurement and partner network, and the improved profitability of the North American operations
• Adaptation to cyclical fluctuations– Development and expansion of the partner network has increased the
readiness to react to cyclical fluctuations
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Strategical focus areas in 2008
• Special focus on Russian and Asian markets• Efforts to improve competitiveness continues• Product development• Increasing of the production capacity• Adaptation to the weak market situation in North America
• Raute’s strategic competitive advantages– Customer orientation– Full-service concept– Commitment to R&D– Quality– Superior competence
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Raute’s markets*
Particleboard and MDF further processing
8%
Decorative veneer industry8%
Plywood and veneer industry70%
LVL industry6%
Parquet industry8%
New machinery investment marketsabout 800 MEUR
* Wood product markets related to Raute’s business operations
Technology services offer almost unlimited markets
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Market development
Growth estimate* %Plywood and veneer industry 2
LVL industry 6Particleboard and MDF industry 5
Parquet industry 8Decorative veneer industry 4
Outlook• Production capacity grows• Product life cycles shorten• Services offer potential
* Average annual market growth 2008-2010
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Production capacity grows
• High construction activity and rising trend in decorating continue
• Growth of global trade– Growth of transportation
• Global change in plywood production:– New production capacity to new
areas and raw materials: plantation forests in the southern hemisphere and Russia
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Product life cycles shorten
• Customers enhance their operations and strive to better productivity and end product quality
• Intense competition and the high quality requirements of the products direct new demands on technology
• The development of new technology creates demand as the competitiveness of old equipment weakens
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Services offer potential
• The customers’ efforts to enhance their operations also raises the demand for technology services
• Outsourcing of services has only begun
• By modernizing their existing equipment and machinery by using latest technology and automation the customers can surpass their earlier production levels, improve quality and reduce labor costs without heavy investments in new equipment
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Raute matches up to market potential
• Plywood production grows slowly - Raute has possibilities to grow its market share– New capacity to new areas and plantation forest resources. Raute has strong
references in the processing of plantation species– New demands emerge and technologies grow old– Wide clientele and close co-operation with the customers in the development
of technolgies results in good know how of emerging needs– Potential in technology services, wide installed base creates growth
opportunities– Services for the entire life cycle of the customers’ investment– Wide potential clientele, extensive market knowledge and local presence– Strong references in mill-scale deliveries
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Raute matches up to market potential
• Raute has a strong position in the deliveries to the fast growing LVL industry
• Particleboard and MDF industry grows, especially the share of overlaying. Raute has possibilities to increase its market share
• Also the parquet industry and the decorative veneer industry aregrowing and Raute has possibilities to increase its market share
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Financial statements for 2007
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A year of strong profit development
• The customer industries’ good market situation in the main market areas continued, with the exception of North America– The uncertainty in the North American housing
market has influenced the demand for wood products used in construction
• The investments in the plywood industry on a good level
• Low investment demand in the LVL industry, where North America is the biggest market
• Good demand was realized in orders during the last quarter.
• Demand for Technology services on a good level, with the execption of North America
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Financial development• Net sales up by 4.3%
– Net sales of Technology services up by 33 %
• Operating profit nearly doubled (+90.7%)
• The amount of new orders dropped due to slow sales in the first half of 2007
• Order book on a good level• Demand spread evenly over various
sized projects• Clearly improved profitability:
– Even loading – Management of project and product risks – Reorganization of quality operations,– Development of procurement
MEUR 2007 2006 Net sales 110.8 106.2Operating profit 8.6 4.5
New orders:• Project deliveries• Technology services
61
29
105
27
Order book 56 77
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Income statement and key figures
MEUR 2007 2006Net sales 110.8 106.2Operating profit 8.6 4.5
Financial income and expenses 0.4 0.4Profit before taxes 9.0 4.9
Income tax -2.4 -1.3Profit for the period 6.6 3.6Earnings per share, EUR 1.65 0.94Operating cash flow -10.2 15.0Return on investment, % (ROI) 29.2 18.6Gearing, % -32.5 -80.3Equity ratio, % 70.3 60.1Personnel (in books) 570 540
191919
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Balance sheet
MEUR 31.12.2007 31.12.2006 Intangible 2.6 2.9Tangible 11.0 12.6Other non-current assets 0.7 0.9Inventories 4.5 4.9Receivables 24.7 23.2Cash 11.3 24.0Assets 54.8 68.5Equity 33.2 29.3Non-current liabilities 1.2 1.7Customer deposits 7.6 19.7Current assets 12.8 17.8Equity and liabilities 54.8 68.5
2020
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IFRS cash flow statement
MEUR 2007 2006 Cash flow from operating activities -10.2 15.0Cash flow from investing activities -0.7 -1.5Cash flow from financing activities -1.8 -0.8Net change in cash and cash equivalents -12.7 12.6
Cash and cash equivalents at the beginning of the year 24.0 11.4
Cash and cash equivalents at the end of the year 11.3 24.0
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Net sales
0
20
40
60
80
100
120
2003 2004 2005 2006 2007
MEUR Q1 Q2 Q3 Q4
Figures 2003 FAS, figures 2004-2007 IFRS, continuing operations222222
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Year 2007 by market area
Others2%
North America
22%
Europe31 %
South America
10%
Russia35%
Asia1%
Russia39%
Europe53%
Others8%
Net salesNew project orders
2323
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Net sales by market area
0
20
40
60
80
100
120
2003 2004 2005 2006 2007
Asia OthersRussia North AmericaEuropeMEUR
2424
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Operating profit
-4,0
-2,0
0,0
2,0
4,0
6,0
8,0
10,0
2003 2004 2005 2006 2007
1-3 1-6 1-9 1-12MEUR
252525
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Operating cash flow1-3 1-6 1-9 1-12MEUR
-20,0
-15,0
-10,0
-5,0
0,0
5,0
10,0
15,0
20,0
2003 2004 2005 2006 2007
262626
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Order book
0
10
20
30
40
50
60
70
80
90
2003 2004 2005 2006 2007
Q1 Q2 Q3 Q4MEUR
Figures 2003 FAS, figures 2004-2007 IFRS
272727
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New orders
0
20
40
60
80
100
120
140
2003 2004 2005 2006 2007
Q1 Q2 Q3 Q4
Figures 2003 FAS, figures 2004-2007 IFRS
MEUR
282828
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Capital expenditure
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
2003 2004 2005 2006 20070,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%Capital expenditure, MEUR % net sales
Figures 2003 FAS, figures 2004-2007 IFRS
MEUR
2929
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R&D expenditure
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
2003 2004 2005 2006 20070,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
5,0%Product development, MEUR % net sales
Figures 2003 FAS, figures 2004-2007 IFRS
MEUR
3030
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Return on investment (ROI)Return on equity (ROE)
-15 %
-10 %
-5 %
0 %
5 %
10 %
15 %
20 %
25 %
30 %
35 %
2003 2004 2005 2006 2007
ROI ROE
Total of continuing and discontinuing operations, figures 2003 FAS, figures 2004-2007 IFRS3131
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Gearing
-90 %
-80 %
-70 %
-60 %
-50 %
-40 %
-30 %
-20 %
-10 %
0 %
2003 2004 2005 2006 2007
Figures 2003 FAS, figures 2004-2007 IFRS
3232
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Equity ratio
0 %
10 %
20 %
30 %
40 %
50 %
60 %
70 %
80 %
2003 2004 2005 2006 2007
Figures 2003 FAS, figures 2004-2007 IFRS
3333
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Personnel
Personnel* 2007 2006 2005 Number of personnel 548 522 536Net sales/employee, EUR 1000 202 204 203
Average age 47 45 44
Women, % 12 12 11
Years of experience at Raute 14 14 14
Number of new employment contracts 71 44 39
Total turnover of employees, % 13 8 10
Training days/employee 3 2 2
510
520
530
540
550
560
570
580
2003 2004 2005 2006 2007
Number of personnel, continuing operations
*Current employment contracts at Dec. 31.
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Outlook for 2008
• Good market situation in customer industries and investments continue, with the exeption of North America
• Both mill-scale and smaller projects in the planning phase
• LVL production decreased because of the recession of construction in North America
• Raute is well positioned to continue the positive development.– Good order book and brisk demand.– Stronger or more rapid than
anticipated decline in the global economy is a threat.
• Development of Technology services continues, demand on a good level.
• Investments in product development continue.
• Efficiency improvement continues in accordance with the strategy.
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100 years of Raute1908-2008
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Raute and its productsLahden Rauta- ja Metalliteollisuustehdas Oy 1908Lahden Rautateollisuus Oy 1911Raute Oy 1983Raute Oyj 1994
1908: production of iron beds, inland waterway vessels, steam boilers and machines and frame saws: the start of the production of wood processing machinery
1914: production of scales starts: Lahden Vaaka Oy -> RautePunnitus ja Automaatio ->Raute Precision Oy-> divested in 2004
1931: production of plywood machinery starts
1945: production of furniture starts: Sopenkorpi Oy andSopekaluste Oy ->Sope Interior Oy ->divested in 1994
Today: the production of single machines and equipment, production lines and compelete mills as well as versatile technology services to the plywood and veneer industries, LVL industry, MDF and particleboard industries, parquet industry, and decorative veneer industry3737
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Raute goes global • Export sales for instance to Russia and
North America from the beginning of the company’s history
• 1914-1915 supply of munitions to the Russian army
• 1944-1952 war reparation deliveries to the Soviet Union
• 1974 sales office established in the USA
• 1979 sales office established inEquador
• 1984 sales office established in Singapore, Durand-Raute Industries Ltd. in Canada and Durand-Raute Corp. in the USA
• 1988 Raute GmbH in Germany and Raute do Brasil in Brazil
• 1995 sales office established in Chile• 1997 sales office established in China• Today: global sales network, production
plants in Nastola, Jyväskylä and Kajaani(Finland), Vancouver, Canada and Shanghai, China
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From eastern trade into the world
• Trading with the Soviet Union continued after the war reparations.• In 1950’s the share of exports was 35-55%.• In 1960’s main part of the production was exported, almost the half of the sales
was sales to the Soviet Union, other export countries were for exampleTsekkoslovakia, DDR, Poland and Hungary.
• In 1960’s the deliveries were extended to production lines and complete mills instead of single machines and equipment.
• In 1970’s the share of Soviet Union trading was 85% of the export sales. At the same time sales was also expanded to North and South America.
• 1980’s were time of internationalization. Share of exports was over 80%. Soviet Union still the main trading partner. Other important markets were North and South America, South-East Asia and Europe.
• The beginning of 1990´s was difficult due to the recession and the ending of the Soviet Union trade. New growth was searched for in South-East Asia and North America.
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Raute’s technological innovations
• Rotary clipper• XY charger• The processing of small-diameter
logs and applicable peeling technology
• Continuous peeling-drying process• High humidity drying of veneer• Automatic veneer repairing• Veneer scarf-jointing
• Automatic layup• Thickness control of the press• Automatic panel repairing• Industrial production of large-sized
panels• 8 by 8 ft. concept• Overlaying technology based on
phenolic film• Machine vision technology and its
applications in different processes
4040
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Shareholder value
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Higher shareholder value
• Clearly defined strategy and regular review of it
• Reaction and adaptation to changing market conditions
• Solid and long term ownership• Impeccable corporate governance and
communication– Predictability
• Stock exchange quotation• Dividend policy and solvency
42
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Shareholders
43
0
200
400
600
800
1000
1200
1400
2003 2004 2005 2006 2007
Management5%
Companies6%
Institutions4%
Foreign shareholders
2%
Administratively registered
2%
Households81%
Development of the number of shareholders
Ownership at 31 Dec. 2007
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Market value
57,5
51,5054,30
29,4030,50
0
10
20
30
40
50
60
70
2003 2004 2005 2006 2007
Series K shares appreciated to the value of series A shares
Market value at Dec. 31, 2007, MEUR
8,00
14,24 14,3512,85
7,70
0,0
2,0
4,0
6,0
8,0
10,0
12,0
14,0
16,0
2003 2004 2005 2006 2007
Closing price at Dec. 31 Average price
Share price, EUR
44
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Earnings per share
-1,00
-0,50
0,00
0,50
1,00
1,50
2,00
2003 2004 2005 2006 2007
Earnings per share DividendEUR
*
* Board of Directors’ proposal to the AGMFigures 2003 FAS, figures 2004-2007 IFRS
454545
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Thank you for your interest!