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NACON Earnings Release 2011
1539_rns_2012-02-02_4da58b4c-e513-4eb7-9411-2b874fb60bac.pdf
Earnings Release
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VAGON
DRIVEN BY DRIVES
FINANCIAL STATEMENT BULLETIN
1 JANUARY - 31 DECEMBER 2011
VACON DRIVEN BY DRIVES
Vacon Plc, Stock Exchange Release, 2 February 2012 at 9.30 am
Vacon Plc Financial Statement Bulletin 1 January – 31 December 2011
In this stock exchange release Vacon is publishing information that has a significant impact on securities included in the financial statements. The full financial statements are in the appendix to this release and can be downloaded from the company's website in English at www.vacon.com and in Finnish at www.vacon.fi.
October-December summary:
- Order intake totalled MEUR 76.9 million, a decline of 6.7 % from the corresponding period in the previous year (MEUR 82.4).
- Revenues totalled MEUR 87.6, which was 15.1 % down on the previous year (MEUR 103.2).
- Operating profit was MEUR -3.9, or -4.4 % of revenues, a decline of 142.5 % (MEUR 9.1 and 8.8 %).
- Operating profit excluding one-time items was MEUR 5.7 and 6.5 % of revenues (MEUR 12.6 and 12.2 %). One-time items totalling MEUR 9.6 comprise an overdue receivable from one of Vacon's solar energy customers and compensation that the court sentenced Vacon's company in China to pay.
- Net cash flow from operating activities was MEUR 6.2 (MEUR 1.6).
- Earnings per share were EUR -0.18 (EUR 0.46), a decline of 139.7 %.
January-December summary:
- Order intake totalled MEUR 365.3, growth of 2.0 % from the corresponding period in the previous year (MEUR 358.2).
- Revenues totalled MEUR 380.9, an increase of 12.7 % (MEUR 338.0).
- Operating profit was MEUR 24.7, or 6.5 % of revenues, a decline of 13.4 % (MEUR 28.6 and 8.5 %).
- Operating profit excluding one-time items was MEUR 34.8, or 9.1 % of revenues (MEUR 32.4 and 9.6 %). One-time items totalling MEUR 10.1 comprise an overdue receivable from one of Vacon's solar energy customers and compensation that the court sentenced Vacon's company in China to pay.
- Net cash flow from operating activities was MEUR 26.8 (MEUR 15.9).
- Earnings per share were EUR 1.10 (EUR 1.22), a decline of 9.3 %.
- The Board of Directors proposes to the Annual General Meeting of Shareholders that a dividend of EUR 0.90 per share be paid from the profit in 2011.
VACON DRIVEN BY DRIVES
Key indicators
| MEUR | 10-12/2011 | 10-12/2010 | Change, % |
|---|---|---|---|
| Order intake | 76.9 | 82.4 | -6.7 % |
| Revenues | 87.6 | 103.2 | -15.1 % |
| Operating profit | -3.9 | 9.1 | -142.5 % |
| % of revenues | -4.4 % | 8.8 % | |
| Operating profit excluding one-time items | 5.7 | 12.6 | -54.7 |
| % of revenues | 6.5 % | 12.2 % | |
| Profit before taxes | -1.4 | 9.5 | |
| MEUR | 1-12/2011 | 1-12/2010 | Change, % |
| --- | --- | --- | --- |
| Order intake | 365.3 | 358.2 | 2.0 % |
| Order book | 36.6 | 52.1 | -29.9 % |
| Revenues | 380.9 | 338.0 | 12.7 % |
| Operating profit | 24.7 | 28.6 | -13.4 % |
| % of revenues | 6.5 % | 8.5 % | |
| Operating profit excluding one-time items | 34.8 | 32.4 | |
| % of revenues | 9.1 % | 9.6 % | |
| Profit before taxes | 27.0 | 27.5 | |
| Net cash flow from operating activities | 26.8 | 15.9 | |
| Earnings per share, EUR | 1.10 | 1.22 | |
| Return on equity, % | 18.7 % | 22.1 % | |
| Interest-bearing net liabilities | 12.4 | 9.8 | |
| Gearing, % | 12.7 % | 10.7 % | |
| Gross capital expenditure | 18.7 | 15.9 | 17.5 % |
General review
According to Vacon's assessment, growth in the global AC drive market slowed down especially in Europe in the fourth quarter of 2011 compared to the strong first half of the year and the corresponding period in the previous year. Looked at as a whole, for Vacon 2011 had two very distinct phases. In the first half of the year demand was strong in all market areas and almost all industrial sectors. In the second half of the year demand weakened especially for wind power products. During the final quarter it could also be clearly seen that demand for products for controlling electric motors declined in Europe from its level early in the year in consequence of the debt crisis. However, the order intake for these products increased from the level in the final quarter of 2010.
Vacon's revenues declined 15.1% in the October-December period to EUR 87.6 million (EUR 103.2 million in October-December 2010). In January-December revenues increased 12.7% to EUR 380.9 million (EUR 338.0 million in 2010). In 2011 13% of Vacon's revenues came from products for renewable energy generation (18% in 2010).
VACON DRIVEN BY DRIVES
Factors contributing to the slow down in the growth in revenues were the poor order intake for products for renewable energy generation in the second half of the year and the weakening in demand in Europe in the final quarter for Vacon's products for controlling electric motors from the level in the first quarter. In China new regulations imposed on wind power have temporarily reduced wind power investments in that country. One positive aspect, however, is that Vacon's European clients who sell wind power solutions to China are able to comply with the new official regulations. This ensures Vacon's customers a strong competitive position when wind power investments in China pick up.
The operating profit declined in October-December to EUR -3.9 million, or -4.4 % of revenues (EUR 9.1 million and 8.8 %). Operating profit excluding one-time items in October -December was EUR 5.7 million, or 6.5 % of revenues (EUR 12.6 million and 12.2 %). The operating profit declined in January-December to EUR 24.7 million, or 6.5 % of revenues (EUR 28.6 million and 8.5 %). The operating profit excluding one-time items in January-December was EUR 34.8 million, or 9.1 % of revenues (EUR 32.4 million and 9.6 %).
There were three causes that contributed to the weakening in Vacon's profitability in 2011 and in particular in the final quarter of the year. Firstly, one of Vacon's solar energy clients is still arranging financing to pay a substantial overdue debt. Vacon is continuing with measures to safeguard its receivables, but has made provisions for a possible credit loss. Secondly, the court proceedings involving Vacon's subsidiary in China relating to the company's customs procedures ended in December. The court sentenced Vacon to pay compensation totalling EUR 5.5 million, consisting of unpaid customs dues and a fine. Vacon made a provision of EUR 3.2 million in its 2010 financial statements in connection with the court case in China. Three parties accused in the same court case have appealed against the court's ruling and it is possible that the sentence imposed on Vacon may also change in the higher court. So some uncertainty still remains in this matter.
In December 2011 Vacon made provisions totalling EUR 10 million in the income statement in connection with the receivable from the solar energy client and the court case in China as mentioned above.
The third factor weakening the company's profitability was the decline in sales in the second half of the year. Vacon has started measures to save costs and safeguard the profitability of its operations globally. As part of the company's broader, global cost cutting plan, in December Vacon began statutory personnel negotiations concerning white collar personnel working in Finland at the Group's parent company Vacon Plc. The goal is to achieve annual savings in 2012 - 2013 corresponding to 60 man-years in the parent company and 10 man-years at the subsidiaries.
The agreement made on 12 March 2011 between the shareholders of AMSC (American Superconductor Corporation) and of The Switch Engineering Oy for the purchase of the shares of The Switch Engineering Oy was terminated in October. According to AMSC, the agreement was terminated due to adverse market conditions for the financing required to fund the acquisition. The Switch Engineering Oy shareholders will retain the EUR 14.2 million advance payment paid by AMSC on 29 June 2011 as a break-up fee. Vacon's share of the break-up fee is EUR 2.6 million, which was included under financial items in the income statement.
VACON DRIVEN BY DRIVES
Vacon has continued to invest heavily in developing AC drive technology for use in controlling electric motors and in wind and solar power plants. Vacon's solar energy inverter Vacon 8000 Solar has obtained a wide range of grid code approvals that comply with the requirements for national grid operators. The company also launched three new products in the final quarter of 2011 designed for the needs of original equipment manufacturers (OEM). The Vacon 10, Vacon 20 and Vacon 20 Cold Plate products strengthen Vacon's foothold in this high-volume market.
Dividend proposal for 2011
The Board of Directors proposes to the Annual General Meeting of Shareholders that a dividend of EUR 0.90 per share be paid from the profit in 2011.
Prospects for 2012
Vacon considers that there are major uncertainties relating to general growth prospects in the economy, and these uncertainties may affect demand for AC drives especially in Europe and possibly globally as well. Vacon does not expect demand for products for wind power generation to recover significantly in the first part of 2012. Vacon is launching several new products in the first half of 2012, which enhances the company's competitive position even in a challenging market environment.
Market guidelines for 2012
The company's estimates of developments in revenues and operating profit contain many uncertainties, due to the prevailing state of the market where it is difficult to predict future developments. Vacon estimates that its revenues will increase and the operating profit percentage excluding one-time items will improve from 2011. In 2011 revenues were EUR 380.9 million and the operating profit percentage excluding one-time items was 9.1%.
Vacon's target is to achieve revenues of EUR 500 million in 2014. The profitability targets are an operating profit of 14% and a return on equity of more than 30%.
Financial reports in 2012
Vacon is publishing three interim reports in 2012 as follows:
- January-March: 25 April 2012
- January-June: 1 August 2012
- January-September: 24 October 2012
Formal statement
This release contains certain forward-looking statements that reflect the current views of the company's management. Due to the nature of these statements, they contain risks and uncertainties and are subject to changes in the general economic situation and in the company's business sector.
VACON DRIVEN BY DRIVES
Vacon in brief
Vacon is driven by a passion to develop, manufacture and sell the best AC drives and inverters in the world — and to provide efficient life-cycle services for its customers. Our AC drives offer optimum process control and energy efficiency for electric motors. Vacon inverters are a key component in producing energy from renewable sources. We have R&D and production units in Finland, the USA, China and Italy, and sales & service offices in 27 countries. In 2011, Vacon had revenues of EUR 380.9 million and globally employed 1,500 people. The shares of Vacon Plc (VAC1V) are quoted on the main list of the Helsinki stock exchange.
www.vacon.com
Vaasa, 2 February 2012
VACON PLC
Board of Directors
For more information please contact:
Mr Vesa Laisi, President and CEO, phone: +358 (0)40 8371 510
Ms Eriikka Söderström, CFO and Vice President, Finance & Control, phone: +358 (0)40 8371 445
Conference for media and analysts
Vacon will hold a briefing for analysts and the media at 11.30 am on 2 February 2012 at the Scandic Simonkenttä Hotel, Simonkatu 9, 00100 Helsinki. The briefing will be in Finnish.
Dial-in conference for investors and investment analysts
An international dial-in conference for investors and investment analysts will be held at 3.00 pm on 2 February 2012. President and CEO Vesa Laisi and Eriikka Söderström, CFO and Vice President, Finance and Control, will participate in the conference. Lines can be booked ten minutes before the conference by calling the service number +358 (0)9 6937 9543 (Finland) or +44 (0)20 3450 9987 (UK). The conference ID code is 4504749. To hear a recording of the conference, available for seven working days, call +358 (0)9 2310 1650 (Finland) or +44 (0)20 7111 1244 (UK), ID code #4504749.
- Conference link: http://www.media-server.com/m/p/pwq7ak9w
The presentation material will be available before the media briefing on Vacon's website at:
www.vacon.com > Investors
DISTRIBUTION:
NASDAQ OMX Helsinki
Financial Supervisory Authority
Main Media
VACON DRIVEN BY DRIVES
Vacon Plc, Financial Statements Bulletin 1 January – 31 December 2011
Business environment and business development
According to Vacon's assessment, growth in the global AC drive market slowed down especially in Europe in the fourth quarter of 2011 compared to the strong first half of the year and the corresponding period in the previous year. Looked at as a whole, for Vacon 2011 had two very distinct phases. In the first half of the year demand was strong in all market areas and almost all industrial sectors. In the second half of the year demand weakened especially for wind power products. During the final quarter it could also be clearly seen that demand for products for controlling electric motors declined in Europe from its level early in the year in consequence of the debt crisis. However, the order intake for these products increased from the level in the final quarter of 2010.
Vacon's revenues declined 15.1% in the October-December period to EUR 87.6 million (EUR 103.2 million in October-December 2010). In January-December revenues increased 12.7% to EUR 380.9 million (EUR 338.0 million in 2010). In 2011 13% of Vacon's revenues came from products for renewable energy generation (18% in 2010).
Factors contributing to the slow down in the growth in revenues were the poor order intake for products for renewable energy generation in the second half of the year and the weakening in demand in Europe in the final quarter for Vacon's products for controlling electric motors from the level in the first quarter. In China new regulations imposed on wind power have temporarily reduced wind power investments in that country. One positive aspect, however, is that Vacon's European clients who sell wind power solutions to China are able to comply with the new official regulations. This ensures Vacon's customers a strong competitive position when wind power investments in China pick up.
The operating profit declined in October-December to EUR -3.9 million, or -4.4% of revenues (EUR 9.1 million and 8.8%). Operating profit excluding one-time items in October-December was EUR 5.7 million, or 6.5% of revenues (EUR 12.6 million and 12.2%) The operating profit declined in January-December to EUR 24.7 million, or 6.5% of revenues (EUR 28.6 million and 8.5%). The operating profit excluding one-time items in January-December was EUR 34.8 million, or 9.1% of revenues (EUR 32.4 million and 9.6%).
There were three causes that contributed to the weakening in Vacon's profitability in 2011 and in particular in the final quarter of the year. Firstly, one of Vacon's solar energy clients is still arranging financing to pay a substantial overdue debt. Vacon is continuing with measures to safeguard its receivables, but has made provisions for a possible credit loss. Secondly, the court proceedings involving Vacon's subsidiary in China relating to the company's customs procedures ended in December. The court sentenced Vacon to pay compensation totalling EUR 5.5 million, consisting of unpaid customs dues and a fine. Vacon made a provision of EUR 3.2 million in its 2010 financial statements in connection with the court case in China. Three parties accused in the same court case have appealed against the court's ruling and it is possible that the sentence imposed on Vacon may also change in the higher court. So some uncertainty still remains in this matter.
In December 2011 Vacon made provisions totalling EUR 10 million in the income statement in connection with the receivable from the solar energy client and the court case in China as mentioned above.
VACON DRIVEN BY DRIVES
The third factor weakening the company's profitability was the decline in sales in the second half of the year. Vacon has started measures to save costs and safeguard the profitability of its operations globally. As part of the company's broader, global cost cutting plan, in December Vacon began statutory personnel negotiations concerning white collar personnel working in Finland at the Group's parent company Vacon Plc. The goal is to achieve annual savings in 2012 – 2013 corresponding to 60 man-years in the parent company and 10 man-years at the subsidiaries.
The agreement made on 12 March 2011 between the shareholders of AMSC (American Superconductor Corporation) and of The Switch Engineering Oy for the purchase of the shares of The Switch Engineering Oy was terminated in October. According to AMSC, the agreement was terminated due to adverse market conditions for the financing required to fund the acquisition. The Switch Engineering Oy shareholders will retain the EUR 14.2 million advance payment paid by AMSC on 29 June 2011 as a break-up fee. Vacon's share of the break-up fee is EUR 2.6 million, which was included under financial items in the income statement.
Vacon has continued to invest heavily in developing AC drive technology for use in controlling electric motors and in wind and solar power plants. Vacon's solar energy inverter Vacon 8000 Solar has obtained a wide range of grid code approvals that comply with the requirements for national grid operators. The company also launched three new products in the final quarter of 2011 designed for the needs of original equipment manufacturers (OEM). The Vacon 10, Vacon 20 and Vacon 20 Cold Plate products strengthen Vacon's foothold in this high-volume market.
Order intake and order book
Orders received declined 6.7% during the final quarter of 2011 from the corresponding period in the previous year. The order intake totalled EUR 76.9 (82.4) million. During the fourth quarter the volume of orders increased 54.7% in the Asia and Pacific (APAC) region from the corresponding period in the previous year, but declined 20.1% in Europe, Middle East and Africa (EMEA) and 2.1% in North and South America. The order book declined EUR 15.6 million from the beginning of the year, standing at EUR 36.6 (52.1) million at the end of the year. Orders for products for renewable energy generation fell substantially compared to the final quarter in 2010, whereas orders for products controlling electric motors increased slightly from the fourth quarter in 2010.
The order intake totalled EUR 365.3 (358.2) million in 2011, growth of 2.0%. The volume of orders increased 35.5% in the APAC region in 2011, and declined 4.1% in the EMEA region and 2.1% in the Americas.
For the order intake the year had two distinct phases. In the first half of the year the volume of orders rose in all market areas and industrial sectors. In the second half of the year demand weakened, especially in the renewable energy sector.
Revenues
Vacon's revenues in the fourth quarter of 2011 totalled EUR 87.6 (103.2) million, a decline of 15.1% on the corresponding period in the previous year. Revenues in 2011 increased 12.7% to EUR 380.9 (338.0) million.
VACON DRIVEN BY DRIVES
One particular factor contributing to the slow down in growth in revenues in the fourth quarter was the weakening of demand for products for renewable energy generation. The figures for the final quarter in 2010 also include an exceptionally high volume of invoicing for equipment for solar energy generation.
Operating profit and result
The company's profitability weakened significantly in the final quarter of 2011. Operating profit in the October-December period was EUR -3.9 million, or -4.4 % of revenues (EUR 9.1 million and 8.8 %). The operating profit percentage in the previous quarter was 9.1 %. The operating profit excluding one-time items in October-December was EUR 5.7 million, or 6.5 % of revenues (EUR 12.6 million and 12.2 %).
The operating profit for the full year fell to EUR 24.7 million in 2011, or 6.5 % of revenues, compared to EUR 28.6 million and 8.5 % of revenues in the previous year. The operating profit excluding one-time items in January-December was EUR 34.8 million, or 9.1 % of revenues (EUR 32.4 million and 9.6 %).
Major factors in the weakening of profitability in the final quarter and for the full year were the provision for a credit loss on solar energy deliveries and for the compensation of EUR 5.5 million that the company was sentenced to pay in China in connection with the customs procedures at Vacon's company in China. Vacon made provisions in the income statement totalling EUR 10 million in December 2011 relating to the receivable from the solar energy customer and the court case in China mentioned above.
The company initiated measures in December 2011 to save costs.
The earnings per share in October-December was EUR -0.18 and for the whole of 2011 EUR 1.10 (EUR 0.46 and EUR 1.22). The earnings per share includes a one-time item of EUR 0.14 from the advance payment paid by AMSC (American Superconductor Corporation) to The Switch Engineering Oy shareholders, which these shareholders retained as a break-up fee.
Balance sheet and cash flow
The balance sheet remained strong and the cash flow from operating activities in the final quarter of the year was EUR 6.2 million, an increase of EUR 4.6 million from the corresponding period in the previous year.
The net cash flow from operating activities in 2011 was EUR 26.8 (15.9) million. Enhanced management of working capital has brought results and the company's net cash flow from operating activities has improved.
The balance sheet total stood at EUR 198.1 (203.3) million. The equity ratio was 50.0 % (46.0 %). The Group's equity structure and liquidity remained strong. Interest-bearing net debt at the end of 2011 totalled EUR 12.4 (9.8) million and gearing was 12.7 % (10.7 %). Return on equity was 18.7 % (22.1 %).
The Group reorganized its loans and credit limit reserves in 2011 with a syndicated loan scheme for a total of EUR 50 million agreed with its principal banks, comprising a loan of EUR 20 million that matures in 2016 and a EUR 30 million committed credit line that matures in 2014.
VACON DRIVEN BY DRIVES
Market position
Vacon Group revenues by market area were as follows:
| MEUR | 10-12/2011 | % | 10-12/2010 | % | 1-12/2011 | % | 1-12/2010 | % |
|---|---|---|---|---|---|---|---|---|
| Europe, Middle East, Africa | 52.8 | 60.3 | 72.3 | 70.0 | 252.6 | 66.3 | 227.3 | 67.2 |
| North and South America | 16.7 | 19.0 | 17.4 | 16.9 | 67.6 | 17.8 | 60.3 | 17.8 |
| Asia and Pacific | 18.2 | 20.7 | 13.5 | 13.1 | 60.7 | 15.9 | 50.5 | 14.9 |
| Total | 87.6 | 100.0 | 103.2 | 100.0 | 380.9 | 100.0 | 338.0 | 100.0 |
Developments in Vacon's revenues during the January-December period, compared to the corresponding period in the previous year, by market region were as follows: Europe, Middle East and Africa in total, growth of 11.1 %, North and South America, growth of 12.2 % and Asia and Pacific, growth of 20.1 %.
Growth was strong in all market regions during the first six months of the year, but slowed down in the second half of the year, especially due to weak demand for products for renewable energy generation.
Vacon reports its regional sales based on the invoicing addresses, not the final location of the products.
Vacon Group revenues by distribution channel:
| MEUR | 10-12/2011 | % | 10-12/2010 | % | 1-12/2011 | % | 1-12/2010 | % |
|---|---|---|---|---|---|---|---|---|
| Direct sales | 8.9 | 10.1 | 5.8 | 5.6 | 36.9 | 9.7 | 27.1 | 8.0 |
| Distributors | 13.6 | 15.5 | 18.1 | 17.6 | 57.8 | 15.2 | 50.4 | 14.9 |
| OEM | 25.1 | 28.7 | 27.2 | 26.4 | 98.0 | 25.7 | 87.7 | 26.0 |
| Brand label customers | 16.8 | 19.1 | 18.1 | 17.5 | 72.1 | 18.9 | 68.1 | 20.2 |
| System integrators | 23.3 | 26.6 | 34.0 | 33.0 | 116.0 | 30.5 | 104.7 | 31.0 |
| Total | 87.6 | 100.0 | 103.2 | 100.0 | 380.9 | 100.0 | 338.0 | 100.0 |
Sales to distributors, OEM and brand label customers and to system integrators declined in the final quarter of 2011 from the corresponding period in the previous year.
Vacon's sales by distribution channel rose in January-December from the corresponding period in the previous year as follows: direct sales 36.2 %, OEM 11.8 %, distributors 14.7 %, brand label customers 5.8 % and system integrators 10.9 %.
VACON DRIVEN BY DRIVES
Research and development
R&D expenditure during 2011 totalled EUR 25.1 (20.8) million, and EUR 7.0 (4.8) million of this was capitalized as development costs. R&D costs accounted for 6.6% (6.2%) of the Group's revenues.
Vacon continued to invest heavily in developing AC drive technology used to control electric motors and in wind and solar power plants. Vacon's solar energy inverter, the Vacon 8000 Solar, has obtained extensive grid code approvals that comply with the requirements of national grid operators. Vacon also launched three new products in the final quarter of 2011 designed for the needs of OEM manufacturers. The Vacon 10, Vacon 20 and Vacon 20 Cold Plate products strengthen Vacon's foothold in this high-volume market. Vacon is launching several new products in the first half of 2012.
Investments
Gross investments by the Group during the year totalled EUR 18.7 (15.9) million. Expenditure focused on increasing production capacity and on projects for developing new products. Vacon commissioned new factories in China and Italy during 2011.
Organization and personnel
The number of Vacon personnel increased by 129 since the beginning of the year. At the end of 2011 the Group employed 1,468 (1,339) people, and 730 (687) of these were in Finland and 738 (652) in other countries. Recruitment has been for all categories of personnel.
As part of the company's broader, global cost cutting plan, in December Vacon began statutory personnel negotiations concerning white collar personnel working in Finland at the Group's parent company Vacon Plc. The goal is to achieve annual savings in 2012 - 2013 corresponding to 60 man-years in the parent company and 10 man-years at the subsidiaries
The table below shows the average number of Vacon employees during the year:
| 1-12/2011 | 1-12/2010 | |
|---|---|---|
| Office personnel | 938 | 808 |
| Factory personnel | 532 | 493 |
| TOTAL | 1,470 | 1,301 |
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Major events after close of period
Vacon Plc reshaped its Management Team and re-allocated responsibilities. The main objectives of the changes are to streamline the Group's management model, clarify the roles and responsibilities within the global organization, and raise efficiency.
In the new model for allocating responsibility, Vacon's operations are divided into three main areas, namely Market Operations, Product Operations and Support Functions. Market Operations include sales, marketing, product marketing, customer care and maintenance services. Product Operations comprise research, product development and product management, as well as production, materials sourcing, logistics and product support. Support Functions comprise human resources management, treasury, finance and legal matters, ICT, communications and investor relations. Vacon will reorganize its global operations during the first quarter of 2012 to bring them in line with the new allocation of responsibilities within the Management Team.
As from 5 January 2012, the members of the Vacon Group Management Team are: President and CEO Vesa Laisi; Heikki Hiltunen, Executive Vice President, Market Operations; Jukka Kasi, Vice President, Product Operations; Tuula Hautamäki, Vice President, Human Resources; and CFO Eriikka Söderström. President and CEO Vesa Laisi is chairman of the Management Team and the secretary is Sebastian Linko, Director, Corporate Communications and Investor Relations. Heikki Hiltunen is deputy to the president and CEO.
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Shares and shareholders
Vacon had a market capitalization at the end of December of EUR 471.5 (593.4) million. The closing share price on 31 December 2011 was EUR 30.90. The lowest share price during the January-December period was EUR 27.21 and the highest EUR 48.73.
A total of 2,975,467 Vacon shares (19.5 % of the share stock) were traded on the stock exchange during 2011, in monetary terms EUR 114.7 million. According to the shareholder register updated on 31 December 2011, Vacon had 4,814 registered shareholders. Shares that were nominee registered and in foreign ownership amounted to 53.0 % (34.7 %) of the share stock.
Ahlström Capital Oy (company ID code 1670034-3) and its subsidiary Karhula Osakeyhtiö (company ID code 0135950-3) have sold their holdings in Vacon Plc shares to Ac Invest Three B.V. (previously known as DutchCo Gamma Holding B.V.), a fully owned subsidiary of Ahlström Capital Oy. Ac Invest Three B.V. has announced that its holding in the share capital and votes of Vacon Plc has exceeded 20 % (1/5) in consequence of this share transaction.
Ahlström Capital Oy has announced that its direct holding in the share capital and votes of Vacon Plc has fallen below 5 % (1/20) after the share transaction mentioned above.
Vacon's main shareholders on 31 December 2011:
| Number of shares | Holding, % | |
|---|---|---|
| Ac Invest Three B.V. | 3 064 844 | 20,0 % |
| Ilmarinen Mutual Pension Insurance Company | 868 968 | 5,7 % |
| Tapiola Mutual Pension Insurance Company | 584 500 | 3,8 % |
| Koskinen Jari | 365 411 | 2,4 % |
| Vaasa Engineering Oy | 359 514 | 2,4 % |
| Ehrnrooth Martti | 325 070 | 2,1 % |
| Holma Mauri | 290 288 | 1,9 % |
| OP-Suomi Pienyhtiöt investment fund | 206 316 | 1,3 % |
| Tapiola Group companies | 163 800 | 1,1 % |
| Autio Heikki | 137 060 | 0,9 % |
| Vacon Plc own shares | 35 008 | 0,2 % |
| Others | 8 894 221 | 58,2 % |
| Total | 15 295 000 | 100,0 % |
| Shares outstanding | 15 259 992 |
On 31 December 2011 members of Vacon's Board of Directors, the President and CEO, and the Deputy to the CEO held directly a total of 29,479 shares, or 0.2 % of Vacon's share stock.
Own shares
On 31 December 2011 Vacon Plc held a total of 35,008 of its own shares, which it had acquired at an average price of EUR 24.54. This is 0.2 % of the share capital and voting rights, so it has no significant impact on the distribution of ownership or voting rights in the company.
VACON DRIVEN BY DRIVES
Dividend proposal
At the end of the financial year the distributable equity of the parent company stands at EUR 65.2 million. The Board of Directors proposes to the Annual General Meeting of Shareholders to be held on 27 March 2012 that a dividend of EUR 0.90 per share be paid from the parent company's profit for the financial year 2011 of EUR 20.5 million and the remainder of the profit for the year be transferred to retained earnings. According to this proposal, a total of EUR 13.7 million would be paid in dividend.
Risks and uncertainties in the near future
The most substantial uncertainty facing the company in the near future relates to a trade receivable from a solar energy customer. The customer is arranging financing to pay a substantial overdue debt. Vacon is continuing with measures to safeguard its receivables, but has made provisions for a possible credit loss.
The court proceedings involving Vacon's subsidiary in China relating to the company's customs procedures ended in December. The court sentenced Vacon to pay compensation totalling EUR 5.5 million, consisting of unpaid customs dues and a fine. Vacon made a provision of EUR 3.2 million in its 2010 financial statements in connection with the court case in China. Three parties accused in the same court case have appealed against the court's ruling and it is possible that the sentence imposed on Vacon may also change in the higher court. So some uncertainty still remains in this matter.
In December 2011 Vacon made provisions totalling EUR 10 million in the income statement in connection with the receivable from the solar energy client and the court case in China as mentioned above.
The parent company has tax proceedings in progress relating to a tax inspection of its transfer pricing in 2006 - 2008.
Typical and common risks to which Vacon's business operations are exposed relate to uncertainty in demand and intensifying competition on price, and to losing customers, to goodwill, the availability of raw materials and components, and fluctuations in the values of foreign currencies.
The order book for Vacon's AC drives used to control electric motors has always been short term in nature, so there are no major risks connected with the timing of deliveries or their cancellation. Products supplied for renewable power generation accounted for $13\%$ of Vacon's revenues in 2011. This business typically has longer delivery and payment schedules, which increases the risks relating to customer credit rating and of orders being cancelled. Sales of equipment for renewable energy generation is for Vacon based on projects, so it causes greater seasonal fluctuations in business volumes than what the company is used to. Power generation using renewable energy sources depends largely on state funding, so this market segment also contains a political risk.
Vacon has thousands of customers worldwide. The ten largest customers account for just under half of Vacon's revenues. Vacon is continuously assessing the creditworthiness of its customers and their ability to pay their debts.
14
VACON DRIVEN BY DRIVES
Vacon is able to adjust its production capacity to market demand. The company estimates that its cash funds and available credit facilities are sufficient to ensure its liquidity. Vacon's balance sheet includes goodwill of EUR 9.2 million, most of which is related to the company acquisition at the beginning of 2008. The company tests goodwill for impairment annually.
The availability and quality of raw materials and components and changes in their prices can affect the profitability and scale of the company's business. Purchase agreements for raw materials and components are mainly annual agreements, which contain price and exchange rate clauses for changes in the global market prices of raw and other materials.
Some of the most significant financial risks affecting the result are foreign exchange risks. Exchange rate fluctuations may have an impact on business, although the international expansion of business operations reduces the relative importance of individual currencies. The biggest exchange rate risks against the euro relate to the US dollar and the Chinese renminbi. The Group applies hedge accounting, in accordance with IAS 39, to hedge the operations currency position in its cash flow.
Prospects for 2012
Vacon considers that there are major uncertainties relating to general growth prospects in the economy, and these uncertainties may affect demand for AC drives especially in Europe and possibly globally as well. Vacon does not expect demand for products for wind power generation to recover significantly in the first part of 2012. Vacon is launching several new products in the first half of 2012, which enhances the company's competitive position even in a challenging market environment.
Market guidelines for 2012
The company's estimates of developments in revenues and operating profit contain many uncertainties, due to the prevailing state of the market where it is difficult to predict future developments. Vacon estimates that its revenues will increase and the operating profit percentage excluding one-time items will improve from 2011. In 2011 revenues were EUR 380.9 million and the operating profit percentage excluding one-time items was 9.1%.
Vacon's target is to achieve revenues of EUR 500 million in 2014. The profitability targets are an operating profit of 14% and a return on equity of more than 30%.
15
VACON DRIVEN BY DRIVES
Accounting principles
The 2011 financial statement bulletin has been prepared in accordance with IFRS recognition and measurement principles. Vacon has prepared this release applying the same IFRS accounting principles as in its 2010 consolidated financial statements, for the new standards have had no significant impact on them. The figures presented in the financial statement release for the full financial year are audited. The quarterly figures are unaudited.
Consolidated statement of income, IFRS, MEUR
| 10-12/2011 | 10-12/2010 | 1-12/2011 | 1-12/2010 | |
|---|---|---|---|---|
| Revenues | 87.6 | 103.2 | 380.9 | 338.0 |
| Other operating income | 0.0 | 0.2 | 0.3 | 0.4 |
| Change in inventories of finished goods and work in progress | -2.0 | 2.1 | -2.2 | 6.6 |
| Materials and services | -47.3 | -59.1 | -202.8 | -186.7 |
| Employee benefit related expenses | -16.0 | -18.1 | -68.8 | -64.9 |
| Other operating expenses | -23.0 | -16.5 | -70.4 | -53.9 |
| Depreciation | -1.5 | -1.3 | -5.4 | -5.0 |
| Amortization | -1.8 | -1.5 | -6.8 | -6.1 |
| Operating profit | -3.9 | 9.1 | 24.7 | 28.6 |
| Financial income and expenses | 2.5 | 0.4 | 2.2 | -1.1 |
| Profit before taxes | -1.4 | 9.5 | 27.0 | 27.5 |
| Income taxes | -1.2 | -2.4 | -9.3 | -8.5 |
| Profit for the period | -2.6 | 7.1 | 17.7 | 19.1 |
| Attributable to: | ||||
| Equity holders of the parent | -2.8 | 7.0 | 16.8 | 18.5 |
| Non-controlling interests | 0.1 | 0.1 | 0.8 | 0.5 |
| Earnings per share, euro | -0.18 | 0.46 | 1.10 | 1.22 |
| Diluted earnings per share, euro | -0.18 | 0.46 | 1.10 | 1.22 |
Consolidated statement of comprehensive income, MEUR
| 10-12/2011 | 10-12/2010 | 1-12/2011 | 1-12/2010 | |
|---|---|---|---|---|
| Profit for the period | -2.6 | 7.1 | 17.7 | 19.1 |
| Other comprehensive income | ||||
| Cash flow hedging | -0.2 | -0.1 | -0.1 | 0.0 |
| Available for sale financial assets | -24.7*† | 0.0 | 2.5*† | 0.0 |
| Translation differences | 0.7 | 0.5 | 1.0 | 1.5 |
| Total comprehensive income | -26.8 | 7.5 | 21.1 | 20.5 |
| Attributable to: | ||||
| Equity holders of the parent | -26.9 | 7.4 | 20.3 | 19.9 |
| Non-controlling interest | 0.1 | 0.1 | 0.8 | 0.5 |
*† Assessment at fair value relating to holding in The Switch.
VACON
DRIVEN BY DRIVES
Consolidated statement of financial position, IFRS, MEUR
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| ASSETS | ||
| Goodwill | 9.2 | 9.1 |
| Development costs | 17.4 | 12.6 |
| Other intangible assets | 9.3 | 11.1 |
| Property, plant and equipment | 25.1 | 20.7 |
| Available for sale financial assets | 3.7 | 0.0 |
| Deferred tax assets | 5.7 | 4.8 |
| Other financial assets | 2.3 | 3.8 |
| Total non-current assets | 72.7 | 62.2 |
| Inventories | 28.2 | 31.9 |
| Trade and other receivables | 80.9 | 90.8 |
| Cash and cash equivalents | 16.3 | 18.4 |
| Total current assets | 125.4 | 141.1 |
| Total assets | 198.1 | 203.3 |
| EQUITY AND LIABILITIES | ||
| Share capital | 3.1 | 3.1 |
| Share premium reserve | 5.0 | 5.0 |
| Other reserves | 0.1 | 0.1 |
| Own shares | -2.6 | -2.6 |
| Revaluation reserve | 2.3 | -0.1 |
| Retained earnings | 88.0 | 84.4 |
| Non-controlling interests | 1.9 | 1.6 |
| Total equity | 97.7 | 91.3 |
| Deferred tax liabilities | 6.0 | 5.3 |
| Employee benefits | 1.7 | 1.6 |
| Interest-bearing liabilities | 20.2 | 9.9 |
| Other liabilities | 0.0 | 0.2 |
| Total non-current liabilities | 27.9 | 17.0 |
| Trade and other payables | 53.1 | 62.4 |
| Income tax liabilities | 1.7 | 6.5 |
| Provisions | 9.3 | 7.9 |
| Interest-bearing liabilities | 8.5 | 18.3 |
| Total current liabilities | 72.5 | 95.1 |
| Total equity and liabilities | 198.1 | 203.3 |
VACON
DRIVEN BY DRIVES
2010 Consolidated statement of changes in equity, IFRS (MEUR)
Attributable to equity holders of the parent
| Share capital | Share premium reserve | Other reserves | Own shares | Re-valuation reserve | Retained earnings | Total | Non-controlling interests | Total equity | |
|---|---|---|---|---|---|---|---|---|---|
| Equity Jan 1, 2010 | 3.1 | 5.0 | 0.1 | -2.6 | 0.0 | 74.4 | 79.8 | 1.5 | 81.3 |
| Profit for the period | 18.5 | 18.5 | 0.5 | 19.1 | |||||
| Other total comprehensive income: | |||||||||
| Cash flow hedging | 0.0 | 0.0 | 0.0 | ||||||
| Translation differences | 1.5 | 1.5 | 1.5 | ||||||
| Total comprehensive income for the period | 0.0 | 20.0 | 19.9 | 0.5 | 20.5 | ||||
| Share bonuses | 0.6 | 0.6 | 0.6 | ||||||
| Dividends paid | -10.6 | -10.6 | -0.5 | -11.2 | |||||
| Equity Dec 31, 2010 | 3.1 | 5.0 | 0.1 | -2.6 | -0.1 | 84.4 | 89.7 | 1.6 | 91.3 |
2011 Consolidated statement of changes in equity, IFRS (MEUR)
Attributable to equity holders of the parent
| Share capital | Share premium reserve | Other reserves | Own shares | Re-valuation reserve* | Retained earnings | Total | Non-controlling interests | Total equity | |
|---|---|---|---|---|---|---|---|---|---|
| Equity Jan 1, 2011 | 3.1 | 5.0 | 0.1 | -2.6 | -0.1 | 84.4 | 89.7 | 1.6 | 91.3 |
| Profit for the period | 16.8 | 16.8 | 0.8 | 17.7 | |||||
| Other total comprehensive income: | |||||||||
| Cash flow hedging | -0.1 | -0.1 | -0.1 | ||||||
| Available for sale financial assets | 2.5 | 2.5 | 2.5 | ||||||
| Translation differences | 1.0 | 1.0 | 1.0 | ||||||
| Total comprehensive income for the period | 2.4 | 17.8 | 20.3 | 0.8 | 21.1 | ||||
| Share bonuses | 0.9 | 0.9 | 0.9 | ||||||
| Dividends paid | -15,2 | -15,2 | -0,5 | -15,7 | |||||
| Equity Dec 31, 2011 | 3.1 | 5.0 | 0.1 | -2.6 | 2.3 | 88.0 | 95.8 | 1.9 | 97.7 |
*) Assessment at fair value of EUR 2.5 million relating to holding in The Switch.
VACON
DRIVEN BY DRIVES
Consolidated statement of cash flow, IFRS, MEUR
| 10-12/2011 | 10-12/2010 | 1-12/2011 | 1-12/2010 | |
|---|---|---|---|---|
| Profit for the period | -2.6 | 7.1 | 17.7 | 19.1 |
| Depreciation | 3.2 | 2.8 | 12.2 | 11.1 |
| Financial income and expenses | -1.8 | 0.7 | -2.2 | 1.1 |
| Taxes | 1.2 | 2.4 | 9.3 | 8.5 |
| Other adjustments | 10.6 | 0.3 | 12.3 | -0.2 |
| Change in working capital | 1.3 | -10.9 | -6.5 | -17.2 |
| Net cash flow from financial items and tax | -5.8 | 0.4 | -15.9 | -6.3 |
| Net cash flow from operating activities | 6.2 | 1.6 | 26.8 | 15.9 |
| Acquisition of subsidiary | 0.0 | -0.7 | 0.0 | -0.7 |
| Investments in tangible and intangible assets | -5.0 | -3.3 | -18.7 | -13.7 |
| Other investments | 0.1 | -0.7 | 0.3 | 0.0 |
| Repayment of loans receivables | -0.1 | 0.8 | 2.0 | 0.8 |
| Proceeds from disposal of other investments | 0.0 | 0.3 | 2.6 | 0.3 |
| Dividends received | 0.0 | 0.0 | 0.7 | 0.0 |
| Net cash flow from investing activities | -5.0 | -3.6 | -13.1 | -13.4 |
| Proceeds from long-term borrowings | 20.0 | 0.2 | 20.2 | 0.2 |
| Repayment of long-term loans | -9.0 | -0.9 | -10.7 | -3.0 |
| Proceeds from short-term borrowings | 0.0 | 3.2 | 27.7 | 12.1 |
| Repayment of short-term loans | -23.1 | -0.2 | -37.8 | -0.2 |
| Dividends paid | -0.0 | 0.0 | -15.7 | -11.2 |
| Net cash flow from financing activities | -12.0 | 2.2 | -16.2 | -2.2 |
| Change in liquid funds | -10.8 | 0.3 | -2.5 | 0.4 |
| Liquid funds at start of period | 26.6 | 17.8 | 18.4 | 17.2 |
| Translation differences for liquid funds | 0.5 | 0.3 | 0.4 | 0.9 |
| Liquid funds at end of period | 16.3 | 18.4 | 16.3 | 18.4 |
VACON DRIVEN BY DRIVES
Segment information
Vacon has focused on one product, AC drives, and this is also Vacon's only business segment. The figures for the business segment are identical to the figures for the whole Group. Vacon's operations in 2011 were organized in the following functions: Products and Markets, Production, Research & Development, Finance and Administration, Human Resources, IT and Process Development, and Business Development. To ensure that the organisation is customer-oriented, operations are controlled by sales channels: distributors, systems integrators, direct sales, OEM customers and brand label customers.
Key financial indicators
| Per share data | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Earnings per share, EUR | 1.10 | 1.22 | 1.01 | 1.51 | 1.37 |
| Equity per share, EUR | 6.28 | 5.90 | 5.25 | 4.88 | 4.13 |
| Dividend per share, EUR*) | 0.90 | 1.00 | 0.70 | 0.65 | 0.75 |
| Dividend payout ratio, %*) | 81.47 | 82.13 | 69.02 | 42.94 | 54.59 |
| Effective dividend yield, %*) | 2.9 | 2.6 | 2.6 | 3.5 | 2.7 |
| Price/earnings ratio | 28.0 | 32.0 | 26.3 | 12.1 | 20.4 |
| Lowest trading price, EUR | 27.21 | 24.90 | 15.30 | 17.00 | 24.60 |
| Highest trading price, EUR | 48.73 | 39.75 | 28.90 | 32.44 | 38.00 |
| Share price at year end, EUR | 30.90 | 39.00 | 26.70 | 18.30 | 28.00 |
| Average trading price, EUR | 38.50 | 32.49 | 21.51 | 26.65 | 30.01 |
| Market capitalization, MEUR | 471.5 | 593.4 | 406.1 | 278.0 | 426.5 |
| Trading volume, no. of shares | 2,975,467 | 2,670,146 | 4,493,871 | 4,915,722 | 8,241,357 |
| Trading volume, % | 19.5 | 17.6 | 29.6 | 32.3 | 54.1 |
| Adjusted average number of shares during financial year **) | 15,246,387 | 15,213,083 | 15,204,263 | 15,238,236 | 15,226,997 |
| Number of shares at year end **) | 15,259,992 | 15,214,435 | 15,209,989 | 15,193,188 | 15,232,188 |
| Own shares | 35,008 | 80,565 | 85,011 | 101,812 | 62,812 |
) The 2011 dividend is the Board of Directors' proposal to the Annual General Meeting.
*) 31.12.2011 average number of shares is 15,246,387. The number of shares outstanding is 15,259,992.
VACON
DRIVEN BY DRIVES
Key indicators showing the Group's financial performance
| 31.12.2011 | 31.12.2010 | 31.12.2009 | 31.12.2008 | 31.12.2007 | |
|---|---|---|---|---|---|
| Revenues, MEUR | 380.9 | 338.0 | 272.0 | 293.2 | 232.2 |
| Change in revenues, % | 12.7 | 24.3 | -7.2 | 26.3 | 24.6 |
| Operating profit, MEUR | 24.7 | 28.6 | 22.5 | 34.6 | 29.2 |
| Change in operating profit, % | -13.4 | 26.8 | -35.0 | 18.5 | 26.4 |
| Operating profit, % of revenues | 6.5 | 8.5 | 8.3 | 11.8 | 12.6 |
| Profit before tax, MEUR | 27.0 | 27.5 | 22.0 | 32.6 | 28.8 |
| Profit before tax, % of revenues | 7.1 | 8.1 | 8.1 | 11.1 | 12.4 |
| Return on equity, % | 18.7 | 22.1 | 20.5 | 34.3 | 36.5 |
| Return on investment, % | 26.9 | 27.0 | 23.1 | 37.0 | 41.2 |
| Interest-bearing net liabilities, MEUR | 12.4 | 9.8 | 1.6 | 12.3 | -11.0 |
| Gearing, % | 12.7 | 10.7 | 2.0 | 16.3 | -17.1 |
| Working capital, MEUR | 45.1 | 45.9 | 31.2 | 42.5 | 27.2 |
| Equity ratio, % | 50.0 | 46.0 | 56.5 | 51.1 | 52.9 |
| Gross capital expenditure, MEUR | 18.7 | 15.9 | 18.2 | 11.2 | 9.1 |
| Gross capital expenditure, % of revenues | 4.9 | 4.7 | 6.7 | 3.8 | 3.9 |
| R & D expenditure, MEUR | 25.1 | 20.8 | 17.6 | 17.0 | 14.3 |
| R & D expenditure, % of revenues | 6.6 | 6.2 | 6.5 | 5.8 | 6.2 |
| Number of personnel at end of period | 1,468 | 1,339 | 1,228 | 1,197 | 869 |
| Order book, MEUR | 36.6 | 52.1 | 32.0 | 48.0 | 34.8 |
Commitments and contingencies, MEUR
| 31.12.2011 | 31.12.2010 | |
|---|---|---|
| Commitments and contingencies | 17.2 | 11.8 |
| Financing commitments | 0.1 | 0.1 |
Group quarterly performance, MEUR
| 10-12/2011 | 7-9/2011 | 4-6/2011 | 1-3/2011 | 10-12/2010 | 7-9/2010 | 4-6/2010 | 1-3/2010 | |
|---|---|---|---|---|---|---|---|---|
| Revenues | 87.6 | 91.1 | 107.2 | 95.0 | 103.2 | 89.3 | 80.2 | 65.3 |
| Operating profit | -3.9 | 8.2 | 11.5 | 8.9 | 9.1 | 8.3 | 6.6 | 4.6 |
| Profit before tax | -1.4 | 7.8 | 12.0 | 8.5 | 9.5 | 7.3 | 6.4 | 4.4 |
VACON
DRIVEN BY DRIVES
Calculation of financial ratios
| Earnings per share = | Profit for the financial year attributable to equity holders of the parent company |
|---|---|
| Adjusted average number of shares | |
| Equity per share = | Total equity – non-controlling interests |
| Adjusted average number of shares at year end | |
| Dividend per share = | Dividend for financial year |
| Adjusted number of shares at year end | |
| Dividend payout ratio, % = | Dividend for the financial year x 100 |
| Profit for period attributable to equity holders of the parent company | |
| Effective dividend yield, % = | Dividend per share x 100 |
| Adjusted closing share price at year end | |
| Price/earnings ratio = | Adjusted closing share price at year end |
| Earnings per share | |
| Return on equity, % = | Profit for the financial year x 100 |
| Total equity, average of the beginning and end of the year | |
| Return on investment, % = | (Profit before taxes + interest and other financial expenses) x 100 |
| Balance sheet total – non-interest-bearing liabilities, average of the beginning and end of the year | |
| Equity ratio, % = | Total equity x 100 |
| Balance sheet total – advances received | |
| Gearing, % = | (Interest-bearing liabilities – cash, bank balances and financial assets) x 100 |
| Total equity | |
| Working capital = | Inventories + non-interest-bearing short-term receivables - Non-interest-bearing short-term liabilities |
| R & D costs = | Research and development costs recognized in income statement (incl. costs covered with subsidies) and capitalized development expenses |
| Market capitalization of share stock = | Number of shares outstanding at year end x closing share price |
| Share turnover % = | Number of shares traded during the year x 100 |
| Adjusted average number of shares |