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Raute Oyj Annual Report 2020
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Annual Report
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Financial Statements
RAUTE
CONTENTS
REPORT OF THE BOARD OF DIRECTORS
FINANCIAL STATEMENTS
10 Consolidated financial statements 2019
11 General information and Insider management
12 Consolidated statement of income
13 Consolidated statement of comprehensive income
14 Consolidated balance sheet
15 Consolidated statement of cash flows
16 Consolidated statement of changes in shareholders' equity, comparison year
17 Consolidated statement of changes in shareholders' equity, comparison year
18 Accounting principles of the consolidated financial statements
19 Changes in accounting standards
20 New and revised standards
21 Financing risks - Critical accounting judgments of the management
22 Notes to the consolidated financial statements
23 Net sales
24 Performance obligations to be satisfied over time
25 Performance obligations to be satisfied over time - Basis of preparation
26 Accounts receivables - Current customer contract assets
27 Account receivables - Current customer contract assets - Basis of preparation
28 Accounts receivables and other receivables
29 Materials and services - Provisions
30 Personnel and personnel costs
31 Personnel costs - Basis of preparation
31 Share-based incentive programs
33 Management's employee benefits
34 Other operating income and expenses
35 Income taxes
36 Deferred tax assets and liabilities
37 Business combination
38 Group goodwill
39 Other intangible assets
41 Research and development costs
42 Property, plant and equipment
43 Property, plant and equipment - Basis of preparation
44 Right-of-use assets
45 Depreciation and amortization
46 Inventories
47 Current payables
48 Exchange rate gains and losses
49 Derivatives
50 Risk management - Currency risks
51 Equity
52 Other comprehensive income items
53 Shares and share capital
54 Earnings per share
55 Financial liabilities
56 Maturities of financial liabilities
57 Financial assets
58 Impairment of financial assets
59 Cash and cash equivalents
60 Liquidity risk - Covenants
61 Financial income and expenses
62 Pledged assets and contingent liabilities
63 Segment information
64 Parent company's financial statements, FAS
65 Parent company's income statement, FAS
66 Parent company's balance sheet, FAS
67 Paren company's cash flow statement, FAS
68 Notes ot the Parent company's financial statements
76 List of the Parent company's common accounting document types, voucher groups and means of storaging
77 The Board of Directors' proposal and the Auditor's note
78 Auditor's Report (Translation of the Finnish original)
82 DEVELOPMENT OF GROUP RESULT AND KEY RATIOS
83 Development of quarterly results
84 Key ratios describing the Group's financial development
85 Calculation of key ratios
86 Share-related data and calculation
87 SHARES AND SHAREHOLDERS
88 Market capitalization and shareholders
89 Distribution of ownership
91 Largest shareholders
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
REPORT OF THE BOARD OF DIRECTORS
The Group's net sales for 2020 totaled EUR 115.0 million (MEUR 151.3), down 24 percent from the previous year. The Group's operating profit fell 121 percent from the previous year and stood at EUR -1.9 million (MEUR 8.5). The Group's financial income and expenses totaled EUR 0.3 million positive (MEUR 0.8). The Group's profit before taxes was EUR 1.5 million negative (MEUR 9.3) and profit for the financial year was EUR -0.9 million (MEUR 7.7). The Group's comprehensive income was EUR 2.7 million negative (MEUR 9.3). Undiluted earnings per share were EUR -0.21 (EUR 1.80) and diluted earnings per share were EUR -0.21 (EUR 1.79). Return on equity was -2.0 percent (16.0%).
In this report, figures in parentheses refer to corresponding figures for the previous financial years 2019 and 2018.
BUSINESS ENVIRONMENT
Raute's customers in the veneer, plywood and LVL (Laminated Veneer Lumber) industries are engaged in the manufacture of wood products used in investment projects and are thus highly affected by fluctuations in construction, housing-related consumption, international trade, and transportation. We expect that the trend-like growth in wood construction will create demand for our customers and indirectly for Raute, strengthening our long-term growth opportunities.
In the fourth quarter, the situation and outlook in the global economy and the financial markets remained weak. Before the start of the pandemic, we had estimated that the market situation had improved slightly. Soon after the pandemic broke out, the situation took a clear turn for the worse and, so far, it has not taken a turn for the better. We do not expect the situation to improve significantly before the pandemic is under control. The start of vaccinations has created positive expectations, but it is still difficult to assess the realization of those expectations.
Many of Raute's established and traditional customers have invested heavily in recent years. During the past year, this traditional customer base has mostly returned to lower investment volumes. The measures to contain the coronavirus crisis have
further slowed down the implementation and decision-making involved in the investments of this traditional customer base in particular. As a result, demand for our technology continued to shift towards new customers, although a major transaction that took place in the Russian market also indicated a pick-up in investments by our more traditional customer base.
Overall, investment activity among Raute's customers weakened from what it has been in recent years, and the weakening was intensified by the spread of the coronavirus pandemic and its countermeasures. In the reporting period, the number of new transactions was adequate at best, even in view of the situation.
In Russia, demand remained active. However, forecasting the realization and timing of projects is more difficult than before. The coronavirus pandemic had a particularly strong impact on the emerging markets of Asia and South America, and the markets practically came to a halt. China was the only exception. Following the break caused by the coronavirus countermeasures, demand in China has recovered rapidly and projects already being planned have been picked up again. Project planning was active in Europe and North America, but decision-making was slow and uncertain.
Demand for maintenance and spare parts services remained good, which is an indication of the generally good capacity utilization rates of Raute's customers' production plants. In Finland, the industrial actions at our customers' plants caused a temporary lull in demand for spare parts and maintenance services at the start of the year. After this, the travel restrictions resulting from the coronavirus pandemic have prevented us from carrying out the majority of our maintenance services as planned.
ORDER INTAKE AND ORDER BOOK
Raute serves the wood products industry with a full-service concept that is based on technology solutions covering the customer's entire production process and services throughout their life cycle. Raute's business consists of project deliveries and technology services. Project deliveries encompass projects from
individual machine or production line deliveries to deliveries of all the machines and equipment belonging to a mill's production process. Additionally, Raute's full-service concept includes comprehensive technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations, as well as consulting, training, reconditioned machinery and digital services.
The uncertainty and weakening of the market situation are reflected in the volume of new orders Raute has received. The order intake in 2020 was at a passable level and amounted to EUR 119 million (MEUR 148). One of our biggest successes in 2020 was the booking of a contract with the Russian company Plitwood for the production machinery for their plywood mill in the making. The value of the order was some EUR 55 million, making it one of the biggest single orders in Raute's history. In the emerging markets, we closed a deal with Guoxu-Springwood Wood Panel Company on the first modern technology delivery for China's plywood industry.
Of new orders, 62 percent came from Russia (60%), 19 percent from Europe (14%), 10 percent from North America (12%), 5 percent from Asia-Pacific (6%) and 4 percent from South America (8%). Sometimes even strong fluctuations in the distribution of new orders between the various market areas are typical for project-focused business.
Order intake in technology services amounted to EUR 38 million (MEUR 50), down 24 percent from the comparison period, due to the low number of large modernization orders.
At the end of 2020, the order book, EUR 94 million (MEUR 88), remained strong. The majority of the order book has already been scheduled for 2021 and a small portion for 2022.
COMPETITIVE POSITION
Raute's competitive position has remained unchanged and is strong. Raute's solutions help customers in securing their delivery and service capabilities throughout the life cycle of the production process or a part thereof. In such investments, the
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
supplier's overall expertise and extensive and diverse technology offering play a key role. The competitive edge provided by Raute plays a major role when customers select their cooperation partners. Raute's strong financial position and long-term dedication to serving selected customer industries also enhance its credibility and improve its competitive position as a company that carries out long-term investment projects.
NET SALES
The Group's net sales (IFRS) totaled EUR 115.0 million (2019: MEUR 151.3; 2018: MEUR 181.0). Net sales declined by 24 percent on 2019. The dramatic decline in net sales was expected and caused by a low order intake, the planned timing of the order book and the impacts of the coronavirus epidemic.
Net sales were generated by project deliveries related to the wood products technology business and by technology services.
Net sales for project deliveries totaled EUR 75 million (MEUR 86), down 13 percent from the previous year. Project deliveries accounted for 65 percent (57%) of total net sales. The plywood industry's share of the net sales of project deliveries was 99.7 percent (85%), while the LVL industry's share was 0.3 percent (15%).
Net sales for technology services totaled EUR 40 million (MEUR 66), a decrease of 39 percent from the previous year. Technology services' share of the total net sales fell to 35 percent (43%) due to the delivery challenges caused by the pandemic.
Of the total net sales for 2020, Russia accounted for 55 percent (31%), Europe for 22 percent (34%), North America for 11 percent (18%), South America for 7 percent (9%), and Asia-Pacific for 5 percent (8%). Finland accounted for 6 percent (12%) of the Group's net sales.
In 2020, net sales (FAS) of the parent company Raute Corporation totaled EUR 96.3 million (2019: MEUR 120.4; 2018: MEUR 152.7).
RESULT AND PROFITABILITY
In 2020, the Group's operating profit (IFRS) totaled EUR 1.9 million negative (2019: MEUR 8.5; 2018: MEUR 14.9) and -1.6 percent of net sales (2019: 5.6%; 2018: 8.2%). Operating profit fell 121 percent largely due to a decline in net sales. The restrictions that were introduced on travel and our Chinese and North American plants' operations due to the Covid-19 pandemic also caused our result to fall more than expected as the pandemic persisted. In addition, previously reported investments in product development, marketing and digitalization also lowered our result.
The Group's financial income and expenses totaled EUR +0.3 million (MEUR +0.8). The result before taxes was EUR 1.5 million negative (MEUR 9.3) and the result for the reporting period was EUR 0.9 million negative (MEUR 7.7). The Group's comprehensive income was EUR 2.7 million negative (MEUR 9.3).
Undiluted earnings per share were EUR -0.21 (EUR 1.80) and diluted earnings per share were EUR -0.21 (EUR 1.79). The return on investment was -2.5 percent (18.1%) and return on equity -2.0 percent (16.0%).
The operating profit (FAS) of the parent company Raute Corporation was EUR 3.5 million negative (2019: MEUR 5.0; 2018: MEUR 10.9). The operating profit was 3.6 percent of net sales (2019: 4.2%; 2018: 7.1%). Profit for the financial year (FAS) was EUR 2.7 million negative (2019: MEUR 4.5; 2018: MEUR 19.7).
CASH FLOW AND BALANCE SHEET
The Group's cash flow and balance sheet vary considerably, which is typical for the project business.
The Group's financial position remained good throughout the year. At the end of the financial year, the Group's cash and cash equivalents exceeded interest-bearing liabilities by EUR 3.9 million (MEUR 12.3). At the end of the financial year, gearing was -10 percent (-28%), and the equity ratio was 59 percent (63%).
The Group's cash and cash equivalents amounted to EUR 11.6 million (MEUR 22.4) at the end of 2020. The change in cash and cash equivalents in the financial year was EUR 10.0 million negative. Operating cash flow was EUR 2.0 million positive (MEUR 18.6 positive). Cash flow from investment activities was EUR 4.8 million negative (MEUR 3.2 negative). Cash flow from financing activities was EUR 7.2 million negative (MEUR 6.5 negative), including dividend payments of EUR 6.2 million.
The Group's balance sheet total at the end of 2020 stood at EUR 86.3 million (2019: MEUR 90.7; 2018: MEUR 96.4).
Interest-bearing liabilities amounted to EUR 7.7 million (MEUR 8.4) at the end of 2020.
The parent company Raute Corporation has a EUR 10 million commercial paper program, which allows the company to issue commercial papers maturing in less than one year.
The parent company Raute Corporation is prepared for future working capital needs and has long-term credit facility agreements with four Nordic banks totaling EUR 23.0 million. The main covenants of the credit facilities are an equity ratio of >30% and gearing of <100%. Of the credit facilities, EUR 23.0 million remained unused at the end of the financial year.
At the end of the financial year, the equity ratio (FAS) of the parent company Raute Corporation was 63 percent (2019: 72%; 2018: 68%).
LOANS TO RELATED PARTIES AND OTHER LIABILITIES
Liabilities are described in the notes to the financial statements.
RESEARCH AND DEVELOPMENT
Raute is a leading technology supplier for the plywood and LVL industries and focuses strongly on the development of increasingly efficient, productive, safe and environmentally friendly manufacturing technology and supporting measurement and machine vision applications. Opportunities provided by digitalization are also an essential part of R&D activities.
In 2020, the Group's research and development costs totaled EUR 4.6 million (2019: MEUR 4.4; 2018: MEUR 3.7) and 4.0 percent of net sales (2019: 2.9%; 2018: 2.1%).
During the financial year, the research and development costs (FAS) of the parent company Raute Corporation were EUR 4.8 million, representing 5.0 percent of net sales (2019: MEUR 4.1/3.4% of net sales; 2018: MEUR 3.6/2.4% of net sales).
Investments
The Group's investments in 2020 totaled EUR 5.2 million (2019: MEUR 3.0; 2018: MEUR 4.4). The investments include EUR 0.4 million in capitalized development costs (2019: MEUR 0.2; 2018: MEUR 0.3). The most important investments in 2020 were targeted to our digitalization efforts, in line with our strategy. We acquired a majority share of Hiottu Oy in June, and we launched an IT project covering the renewal of nearly all of our operative systems.
The investments of the parent company Raute Corporation totaled EUR 4.0 million (2019: MEUR 2.6; 2018: MEUR 3.5).
Development of Operations
Our management model that was revamped in 2019 was successfully launched during the year under review. The main objective of the renewal is to respond to our customers' new expectations, while enhancing the implementation of our strategy and helping us to achieve our growth targets. After the renewal, our business was divided into four areas based on different customer needs: Power market, Growth market, Basic services and Metrix. The contents of these business areas are presented in more detail on our website www.raute.com. The implemented organizational change and the designation of business areas do not impact Raute's segment reporting. Raute's entire business still consists of a single segment serving the wood products industry.
Our goal is to become the preferred supplier for a growing number of customers in more and more market areas, as well as in the emerging markets, and to maintain our strong position in the developed markets.
Raute is the leading technology supplier in the wood products sector, and digital solutions play a crucial role in our strategy. We continuously develop new digital solutions such as machine vision and other analyzers, as well as systems to enable remote monitoring and control in order to add value to our customers' processes and to enable them to thrive. By digitalizing our own processes, we can increase the efficiency of our operations and improve quality.
Human Resources
The Group's headcount at the end of 2020 was 751 (778). Finnish Group companies accounted for 66 percent (67%) of employees, North American companies for 16 percent (17%), Chinese companies for 11 percent (10%), and other sales and maintenance companies for 7 percent (6%).
Converted to full‐time employees (“effective headcount”), the average number of employees was 743 (761) during the financial year. Salaries and remunerations paid by the Group totaled EUR 34.0 million (MEUR 38.4). This figure does not include expenses resulting from the share incentive plans.
In 2020, Raute Group received direct financial aid in the amount of EUR 1.3 million aimed at mitigating the impacts of the Covid‐19 pandemic; EUR 0.8 million of the support was granted by Canada, and EUR 0.5 by Finland. Thanks to this financial support, we were able to avoid extensive adjustment measures, retain our skilled employees and continue with our planned development projects in order to secure our future competitiveness.
The Group continued to develop the competence of its personnel and increase their commitment to the company. Three percent (3%) of the payroll was invested in personnel training. In 2020, our key focal areas in HR development were the improvement of leadership and the organization‐wide strengthening of our highly responsible operating culture that strives for first‐class quality. Competence‐development activities were implemented through, among other things, a systematic mentor program and training organized based on identified needs. Use of the RauteACADEMY online learning environment was expanded further.
Converted to full‐time employees, the average number of personnel employed by the parent company Raute Corporation in 2020 was 501 (2019: 502; 2018: 489). Salaries and remunerations paid by the parent company totaled EUR 24.9 million (2019: MEUR 26.8; 2018: MEUR 28.0).
Remuneration
The Annual General Meeting approved, on March 31, 2020, the Remuneration Policy for Governing Bodies proposed by the Board of Directors.
The Group has remuneration systems in place that cover the entire personnel.
Share‐Based Incentive Plans
The impact of the share‐based incentive plans on the result for the financial year was EUR 118 thousand positive (EUR 211 thousand negative). During the financial year, the estimate of earned shares changed, and the conditions of two of the programs were not met. The amount entered in previous financial periods as a cost has been adjusted in the income statement for the current financial period. EUR 85 thousand (EUR 331 thousand) was allocated to the equity item “Other reserves” from the share‐based incentive plans in force at the end of the financial year.
Share‐based incentive plan 2017--2022
In February 2017, the Board of Directors of Raute Corporation resolved to implement a new performance‐based, share‐value‐based, long‐term incentive plan for the Group's senior management. The purpose of the plan is to align the objectives of the owners and management in order to develop the company's value, and to commit management to achieving the company's strategic goals by offering a competitive long‐term incentive plan.
The Performance Share Plan is made up of three three‐year plans that begin every year. A single plan may consist of either a three‐year earnings period or a one‐year earnings period and
REPORT OF THE BOARD OF DIRECTORS
the subsequent two-year vesting period. The possible bonus earned by virtue of a single plan shall be paid at the end of the three-year plan in question. The earnings opportunity is limited such that the value of the bonus, at the time of payment, to be paid to a participant based on a single three-year plan can be no more than double the value of the maximum earnings opportunity allocated to him/her when the plan commenced.
The company's Board of Directors decides separately on when each plan commences, the length of its earnings period, the performance targets, the persons entitled to participate in the plan and the earnings opportunity.
LTI Plan 2018-2020 commenced at the start of 2018. The plan is made up of two parts. The first part consists of a three-year earnings period. Its weight is 80 per cent of the whole plan and the performance target is Total Shareholder Return (TSR) proportionate to the selected peer group. The second part consists of a one-year earnings period and the subsequent two-year vesting period. Its weight is 20 per cent of the whole plan and the performance target is Earnings Per Share (EPS). Any rewards based on both parts will be paid in the spring of 2021 if the performance targets set by the Board of Directors are achieved. Eight persons belonging to Raute Group's senior management, including the members of the Executive Board, were entitled to participate in the LTI 2018-2020 plan.
LTI Plan 2019-2021 commenced at the start of 2019. The plan consists of two parts. The first part consists of a three-year earnings period. Its weight is 50 per cent of the whole plan and the performance target is Total Shareholder Return (TSR) proportionate to the selected peer group. The second part consists of a one-year earnings period and the subsequent two-year vesting period. Its weight is 50 per cent of the whole plan and the performance target is Earnings Per Share (EPS). Any rewards based on both parts will be paid in the spring of 2022 if the performance targets set by the Board of Directors are achieved. Ten persons belonging to Raute Group's senior management, including the members of the Executive Board, are entitled to participate in the LTI 2019-2021 plan.
LTI Plan 2020-2022 commenced at the start of 2020. The plan consists of two parts. The first part consists of a three-year earnings period. Its weight is 50 per cent of the whole plan and the performance target is Total Shareholder Return (TSR) proportionate to the selected peer group. The second part consists of a one-year earnings period and the subsequent two-year vesting period. Its weight is 50 per cent of the whole plan and the performance target is Earnings Per Share (EPS). Any rewards based on both parts will be paid in the spring of 2023 if the performance targets set by the Board of Directors are achieved. Eleven persons belonging to Raute Group's senior management, including the members of the Executive Board, are entitled to participate in the LTI 2020-2022 plan.
SOCIETY AND THE ENVIRONMENT
Responsibility is one of the values that guide Raute's operations. Raute aims to systematically develop its products and services to be environmentally sound while also reducing the environmental impacts of its own operations. The Group abides by the principles of good corporate citizenship, taking into consideration nature and its protection, and how society as a whole operates, while respecting local cultures and valuing diversity. Raute's Board of Directors has presented to the company the Code of Conduct which guides the personnel to act responsibly in accordance with Raute's values.
We want to help our customers create value in forest assets through our resource-efficient technology and supporting services. Most of the products manufactured using our machinery are recyclable and the carbon stored in wood products has positive climate impacts. Increasing the use of sustainably produced wood in construction, for example, is among the most important means of achieving global climate targets.
Continuously improving work safety is one of the key points in our corporate responsibility agenda. In 2020, Raute's LTIF indicator (Lost Time Injury Frequency, i.e. lost-time injuries per million hours worked) developed positively, and we reached a figure of 7.9 (13.6).
RISKS AND RISK MANAGEMENT
The Group's identified key risk areas relate to the nature of the business, the business environment, financing, damage or loss and information security. The fluctuations in demand resulting from economic cycles and delivery and technology risks have been identified as the Group's most significant business risks.
Risks in the near term continue to be driven by the uncertainty relating to the global economic situation and the development of the financial markets, as well as by international political instability. The most significant risks for Raute in the near term are related to the development of the market situation.
Restrictions resulting from the pandemic caused by the coronavirus will have a negative impact on Raute's outlook also in the future, but the extent and duration of the impact are still impossible to assess.
The Group has no ongoing legal proceedings or other disputes in progress that might materially affect the continuity of business operations, nor is the Board of Directors aware of any other legal risks related to the Group's operations that might have such an effect.
Business risks
Impact of economic cycles on business operations
Raute's business operations are characterized by the sensitivity of investment demand to fluctuations in the global economy and the financing markets, and the cyclical nature of investment commodities' project business. The impact of changes in demand on the Group's result is reduced by increasing the share of technology services, increasing operations in market areas with a small current market share, developing products for customer segments in which the Group has a weaker market position, and developing the partner network.
Deliveries and technology
The bulk of Raute's business operations consists of project deliveries, which expose the company to risks caused by customer-specific customized solutions related to each customer's end
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
REPORT OF THE BOARD OF DIRECTORS
product, production methods or raw materials. At the quotation and negotiation phase, the company has to take risks relating to the promised performance figures and make estimates of implementation costs.
Raute invests heavily in product development. The developmental phase for new technologies involves the risk that the project will not lead to a technologically or commercially acceptable solution. The functionality and capacity of new solutions produced as a result of development work cannot be fully verified until the solutions can be tested under production conditions in conjunction with the first customer deliveries.
Contract, product liability, implementation, cost and capacity risks are managed using project management procedures that comply with the company's ISO-certified quality system. Technology risks are reduced by the conditions of delivery contracts and by restricting the number of simultaneous first deliveries.
Emerging markets
Raute's objective is to increase its local business, for example, in China and Russia, where, besides opportunities, companies face risks typical to emerging markets.
The company's reputation
Raute is at risk of being part of a business chain that involves corruption, bribery or money laundering without its knowledge, even though it regularly inspects its business partners with respect to, for example, international sanction lists and export restrictions. The realization of these risks may result in legal consequences, and the company's reputation and financial position may suffer.
It is possible that players who do not respect Raute's principles related to human rights or the basic rights of employees operate in the international supply chain. Such cases may damage the company's reputation and interrupt the supply chain if the infraction is severe enough to warrant an end to the co-operation.
Payment fraud
Raute is repeatedly exposed to the risk of payment fraud. The company faces the risk of a fraud attempt bypassing the payment transaction control points and damaging the company financially.
Information security
Information security risks are managed according to a defined information security policy.
Human resources
Competence retention and development and ensuring the sufficiency of human resources are particularly important in cyclical business. Continuity is ensured by monitoring the development of the age structure, implementing systematic human resources management and investing in well-being at work.
Financing risks
The most significant financing risks in the Group's international business operations are default risks and currency risks related to counterparties. The Group is also exposed to liquidity, refinancing, interest rate and price risks.
The default risk relating to customers' solvency is managed through payment terms and by covering the unpaid sum with bank guarantees, letters of credit or other suitable securities. The Group's liquid assets are mainly held in banks in the Nordic countries. The credit losses recognized during the 2020 financial year amounted to EUR 13 thousand (EUR 0 thousand).
The Group's main currency is the euro. The most significant currency risks result from the following currencies: Chinese yuan (CNY), Russian ruble (RUB), Canadian dollar (CAD) and US dollar (USD). The main hedging instruments used are foreign currency forward contracts. Currency clauses are included in quotations to hedge against currency risks during the quotation period. Depending on the case, currency risks related to preliminary sales contracts are hedged with currency option contracts.
The Group has prepared for fluctuating working capital requirements and possible disturbances in the availability of money through long-term credit facility agreements with four Nordic banks.
The financing risks, as well as the risk management objectives and procedures, are described in more detail on page 50 of the notes to the financial statements.
Risks of damage or loss
Other risks of damage or loss include occupational safety risks, which are managed by means of active risk-prevention measures, such as continuous personnel training and investigation of all near-miss situations. Occupational safety and ergonomics are under continuous development.
Raute's most significant single risks concerning material damage and business interruption loss are a fire, a serious machine breakdown and an IT system breakdown or malfunction at the main production unit in Lahti, where the production, planning, financial, and ERP systems serving the Group's key technologies are centrally located. Precautions against such risks have been taken by means of back-up systems and insurance policies, but, despite precautions, the serious realization of such a risk would cause significant damage to Raute's operations.
Raute's production operations do not have significant direct environmental impacts. The main production unit in Lahti is situated in a groundwater zone. A chemical or fuel leak in a groundwater zone could cause environmental damage, financial costs and disturbances in production. The main unit in Lahti has an ISO-certified environmental system in place, and special attention has been paid to chemical safety. Other units also aim to adhere to the principles of the environmental system.
The Group hedges against risks of damage or loss by assessing its facilities and processes in terms of risk management and by maintaining emergency plans.
Global and local insurance programs are checked regularly as part of overall risk management. The objective is to use insurance policies to sufficiently hedge against all risks that are reasonable to handle through insurance due to economical or other reasons.
Organization of risk management
Raute's risk management policy is approved by the Board of Directors. The Board is responsible for organizing internal control and risk management, and for monitoring their efficiency.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
REPORT OF THE BOARD OF DIRECTORS
The Executive Board defines the Group's general risk management principles and operating policies and defines the boundaries of the organization's powers. The President and CEO and the CFO regularly report significant risks to the Board.
The Group's President and CEO controls the implementation of the risk management principles within the entire Group, while the Managing Directors of the Group companies are responsible for risk management in their respective companies. The members of the Group's Executive Board are responsible for their own areas of responsibility across company boundaries.
Raute has no separate internal auditing organization. The Controller function oversees the annual internal control plan, develops internal control and risk management procedures together with the operative leadership, and monitors compliance with risk management principles, operational policies and powers.
SHAREHOLDERS
The number of shareholders totaled 5,614 at the beginning of the year and 6,134 at the end of the reporting period. Series K shares were held by 54 private individuals (54) at the end of the financial year. Nominee-registered shares accounted for 2.2 percent (3.5%) of shares. The company did not receive any flagging notifications in 2020.
The Board of Directors, the President and CEO as well as the Executive Board held altogether 256,059 company shares, equaling 6.0 percent (6.1%) of all the company shares and 11.6 percent (11.6%) of the votes on December 31, 2020.
The distribution of ownership by sector and by size as well as the largest shareholders are presented in the financial statements under "Shares and shareholders".
AUDITORS
At Raute Corporation's Annual General Meeting on March 31, 2020, the authorized public accounting company PricewaterhouseCoopers was chosen as auditor, with Authorized Public Accountant Markku Launis as the principal auditor.
CORPORATE GOVERNANCE
In 2020, Raute Corporation complied with the Finnish Corporate Governance Code 2020 for listed companies issued by the Securities Market Association on September 19, 2019.
CORPORATE GOVERNANCE STATEMENT
Raute Corporation's Board of Directors has reviewed Raute Corporation's Corporate Governance Statement for 2020 drawn up in accordance with chapter 7, section 7 of the Finnish Securities Markets Act and the Finnish Corporate Governance Code 2020 for listed companies issued by the Securities Market Association on September 19, 2019. The statement has been drawn up separately from the Report of the Board of Directors.
NON-FINANCIAL STATEMENT
Raute Corporation's Board of Directors has addressed Raute Corporation's non-financial statement for 2020 (in accordance with Directive 2014/95/EU of the European Parliament and Council) as a statement separate from the Report of the Board of Directors.
REMUNERATION REPORT FOR GOVERNING BODIES
Raute Corporation's Board of Directors has addressed Raute Corporation's 2020 remuneration report for governing bodies, drawn up in accordance with chapter 7, section 7 of the Finnish Securities Markets Act and the Finnish Corporate Governance Code 2020 for listed companies issued by the Finnish Securities Market Association on September 19, 2019. The remuneration report is published in connection with the financial statements.
BOARD OF DIRECTORS AND PRESIDENT AND CEO
The Annual General Meeting elects the Chairman and Vice-Chairman for the Board of Directors, and 3-5 Board members.
Ms. Laura Raitio was elected Chair of Raute Corporation's Board at the Annual General Meeting held on March 31, 2020, while Mr. Mika Mustakallio was elected Vice-Chair, and Mr. Joni Bask,
Mr. Ari Harmaala, Mr. Pekka Suominen, and Mr. Patrick von Essen were elected as Board members.
The Board of Directors appoints the President and CEO and confirms the terms of his or her employment, including fringe benefits.
Mr. Tapani Kiiski, Licentiate in Technology, continued as Raute Corporation's President and CEO. He was appointed as Raute Corporation's President and CEO on March 16, 2004. As agreed in the executive contract, the term of notice is six months, and the severance pay equals twelve months' salary.
Raute Corporation's Articles of Association do not grant any unusual authorizations to the Board of Directors, or to the President and CEO.
Any decisions on changes to the Articles of Association or an increase in share capital are made in compliance with the regulations of the effective Companies Act.
EXECUTIVE BOARD
Raute Group's Executive Board and the members' areas of responsibility are:
- Tapani Kiiski, President and CEO, Chairman – Sales
- Kurt Bossuyt, Executive Vice President, Basic Services – Basic Services market
- Marko Hjelt, Executive Vice President, CHRO – People excellence, safety
- Mika Hyysti, Executive Vice President, CTO – Innovations, products and services, and R&D
- Tarja Järvinen, Executive Vice President, CFO – Finance, ICT and other business support, sustainability
- Timo Kangas, Executive Vice President, Power – Power market
- Jani Roivainen, Executive Vice President, Metrix – Metrix market
- Jukka Siiräinen, Executive Vice President, Grow – Grow market
- Petri Strengell, Executive Vice President, COO – Supply chain and quality.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
REPORT OF THE BOARD OF DIRECTORS
SHARES
The number of Raute Corporation's shares at the end of 2020 totaled 4,263,194 (4,263,194), of which 991,161 (991,161) were series K shares (ordinary share, 20 votes/share) and 3,272,033 (3,272,033) were series A shares (1 vote/share). Series K and A shares confer equal rights to dividends and company assets.
Series K shares can be converted to series A shares under the terms set out in Article 3 of the Articles of Association. If an ordinary share is transferred to a new owner who has not previously held series K shares, the new owner must notify the Board of Directors of this in writing and without delay. In this kind of situation other holders of series K shares have the right to redeem the series K share under the terms specified in Article 4 of the Articles of Association.
Raute Corporation's series A shares are listed on Nasdaq Helsinki Ltd. The trading code is RAUTE. In 2020, the number of shares traded was 680,073 (503,305), worth altogether EUR 14.0 million (MEUR 12.4). The number of shares traded represents 21 percent (15%) of all listed series A shares. The average price of a series A share was EUR 20.57 (EUR 24.71). The highest closing price of the year was EUR 27.40 and the lowest was EUR 17.40.
The company's market capitalization at the end of 2020 totaled EUR 96.8 million (MEUR 106.6), with series K shares valued at the closing price of series A shares, EUR 22.70 (EUR 25.00), on December 31, 2020.
DISTRIBUTION OF PROFIT FOR THE 2019 FINANCIAL YEAR
The Annual General Meeting held on March 31, 2020 decided to pay a dividend of EUR 1.45 per share for the financial year 2019. The total amount of dividends is EUR 6.2 million, with series A shares accounting for EUR 4,744,447.85 and series K shares for EUR 1,437,183.45. The dividend payment date was April 9, 2020.
AUTHORIZATION OF REPURCHASE AND DISPOSAL OF OWN SHARES
The Annual General Meeting held on March 31, 2020 authorized the company's Board of Directors to decide on the repurchase of Raute Corporation series A shares with assets from the company's non-restricted equity and to decide on a directed issue of a maximum of 400,000 shares. The Board of Directors did not exercise the authorization in 2020.
The company did not possess company shares at the end of the financial period or hold them as security.
ANNUAL GENERAL MEETING 2021
Raute Corporation's Annual General Meeting will be held in Lahti on Wednesday March 31, 2021.
BOARD OF DIRECTORS' PROPOSAL CONCERNING PROFIT DISTRIBUTION, DIVIDEND EUR 0.80 PER SHARE
On December 31, 2020, the Parent Company Raute Corporation's distributable assets total EUR 33,169 thousand, of which EUR 2,674 thousand stands for the loss for the financial year of January 1 – December 31, 2020.
The Board of Directors will propose to Raute Corporation's Annual General Meeting, to be held on March 31, 2021, that a dividend of EUR 0.80 per share be paid to holders of series A and K shares for the financial year 2020, and that the remainder of distributable assets be transferred to equity.
On the date of the profit distribution proposal, the number of shares entitling to a dividend is 4,263,194 shares, which would amount to total dividends of EUR 3,411 thousand. Shareholders who are registered in the shareholders' register maintained by Euroclear Finland Ltd on the record date for dividend distribution, April 6, 2021, are entitled to dividends. The dividend payment date would be April 13, 2021.
No essential changes have taken place in the company's financial position since the end of the financial year. The company has good liquidity, and in the Board of Directors' view, the proposed dividend does not pose a risk to solvency.
OUTLOOK FOR 2021
Due to the strong order book and presumed alleviated impacts of the Covid-19 pandemic, we expect that Raute's net sales will increase in 2021 compared to the level of the previous year. We expect the operating result to improve from the previous year due to growth in net sales.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
Consolidated Financial Statements
RAUTE CORPORATION
Consolidated Financial Statements
January 1 – December 31, 2020
Raute Corporation’s consolidated financial statements for January 1–December 31, 2020 have been prepared in accordance with the International Financial Reporting Standards (IFRS) and the interpretations released accepted for application in the EU. Preparations have complied with the IAS and IFRS standards, as well as SIC and IFRIC interpretations, effective on December 31, 2020. The notes to the consolidated financial statements also comply with Finnish accounting legislation.
GENERAL INFORMATION AND INSIDER MANAGEMENT
General information
Adoption of the Consolidated Financial Statements
These consolidated financial statements for the period between January 1 and December 31, 2020 were authorized for issue by Raute Corporation's Board of Directors at its meeting on February 12, 2021. According to the Finnish Companies Act, shareholders may approve or reject the financial statements at the Annual General Meeting arranged after the statements have been issued. The Annual General Meeting also has the opportunity to make changes to the financial statements.
Business and operational segments
Raute Group ("the Group") is a globally operating technology and service company serving the wood products industry, with the core competence in selected wood products manufacturing processes. Raute's customers are companies operating in the wood products industry that manufacture veneer, plywood, LVL and sawn timber.
Raute's full-service concept is based on product life-cycle management and includes project deliveries and technology services. Raute's technology offering covers machinery and equipment for the customer's entire production process. In addition to a broad range of machines and equipment, Raute's solutions cover technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations as well as consulting, training, reconditioned machinery and digital services.
The operations of Raute Group belong to the wood products technology segment. Raute Corporation's Board of Directors is the chief operating decision maker that is responsible for assigning resources to the operating segment and assessing its result. The Board monitors profitability through the key figure Operating profit.
Raute's head office is located in Lahti (previously the municipality of Nastola), Finland. Its other production plants are in Kajaani, in the Vancouver area in Canada, in the Shanghai area in China, and in Pullman, Washington, USA. The company's sales network has a global reach.
Parent company
Raute Group's Parent company, Raute Corporation, is a Finnish public limited liability company established in accordance with Finnish law (Business ID FI01490726). Its series A shares are quoted on Nasdaq Helsinki Ltd, under Industrials. Raute Corporation is domiciled in Lahti. The address of its registered office is Rautetie 2, FI-15550 Nastola, and its postal address is P.O. Box 69, FI-15551 Nastola.
Insider management
Raute Corporation follows the Guidelines for Insiders issued by Nasdaq Helsinki Ltd, the Central Chamber of Commerce, and the Confederation of Finnish Industries EK. In addition, the company applies separate insider instructions approved by the Board of Directors. The Chief Financial Officer is in charge of insider issues in the company.
Raute maintains a list of persons working in the management functions and the persons in their immediate circles (so-called management under notification obligation). These persons are obliged to notify Raute and the Financial Supervisory Authority about all transactions made on their account using financial instruments of Raute Corporation. Raute's management under notification obligation includes the Board of Directors, President and CEO and Chief Financial Officer.
Raute maintains a Confidential Information Recipient (CIR) list of employees and other persons who have continuous access to the company's undisclosed financial information. The individuals in the CIR group are committed to abiding by the company's closed period. The CIR list is not public.
In addition to what is mentioned above, the company maintains a list of projects. A project means an identifiable set of measures or an arrangement that is to be confidentially prepared by Raute, which is, according to Raute, insider information and whose publication Raute has decided to delay.
The insider trading prohibition of persons under notification obligation and in the CIR group begins at the end of the reporting period, however at least 30 days before the publication of an interim report or financial statements and ends two hours after the publication of a corresponding stock exchange release. The company avoids investor communication meetings during the closed period.
Raute has an internal procedure through which persons employed by the company may report within the company a suspected abuse of regulations and provisions concerning the financial market (whistle blowing).
Preparation of consolidated financial statements
Raute Corporation's consolidated financial statements for January 1 – December 31, 2020 have been prepared in accordance with the International Financial Reporting Standards, IFRS, accepted for application in the European Union. Preparations have complied with the IAS and IFRS standards, as well as SIC and IFRIC interpretations, effective on December 31, 2020.
All figures are presented in thousand euro, unless otherwise stated. Due to the rounding of the figures in the financial statements tables, the sums of figures may deviate from the sum total presented in the table. Figures in parentheses refer to the corresponding figures in the comparison period.
Raute Corporation's consolidated financial statement information is available online at www.raute.com or at the head office of the Parent company, Rautetie 2, FI-15550 Nastola, Finland.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CONSOLIDATED STATEMENT OF INCOME
CONSOLIDATED STATEMENT OF INCOME
| EUR 1,000 | Page | 1.1.–31.12.2020 | 1.1.–31.12.2019 |
|---|---|---|---|
| NET SALES | 23, 24 | 114 994 | 151 297 |
| Change in inventories of finished goods and work in progress | 3 128 | -2 030 | |
| Other operating income | 34 | 201 | 343 |
| Materials and services | 29 | -64 102 | -76 081 |
| Employee benefits expense | 30 | -39 089 | -45 793 |
| Depreciation and amortization | 45 | -4 039 | -3 854 |
| Other operating expenses | 34 | -12 945 | -15 428 |
| Total operating expenses | -120 175 | -141 156 | |
| OPERATING RESULT | -1 852 | 8 454 | |
| Financial income | 61 | 736 | 1 099 |
| Financial expenses | 61 | -421 | -300 |
| Financial expenses, net | 315 | 799 | |
| RESULT BEFORE TAX | -1 537 | 9 253 | |
| Income taxes | 35 | 636 | -1 565 |
| RESULT FOR THE FINANCIAL YEAR | -901 | 7 687 | |
| Result for the financial year attributable to Equity holders of the Parent company | -901 | 7 687 | |
| Earnings per share for profit attributable to Equity holders of the Parent company, EUR | |||
| Undiluted earnings per share | 54 | -0,21 | 1,80 |
| Diluted earnings per share | 54 | -0,21 | 1,79 |
| Shares, 1 000 pcs | |||
| Adjusted average number of shares | 53, 54 | 4 263 | 4 263 |
| Adjusted average number of shares, diluted | 54 | 4 267 | 4 287 |
Basis of preparation
The Board of Directors monitors profitability through the key figure Operating profit. The Group has defined operating profit as follows: Operating profit is the net sum calculated by adding other operating income to net sales; deducting purchase expenses that have been adjusted by changes in inventories of finished goods and work in progress and by expenses from production for own use; and by deducting expenses from employee benefits, depreciation, amortization and possible impairment losses, as well as other operating expenses. All other income statement items are presented under operating profit before the profit for the financial year.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR 1,000 | Page | 1.1.–31.12.2020 | 1.1.–31.12.2019 |
|---|---|---|---|
| RESULT FOR THE FINANCIAL YEAR | -901 | 7 687 | |
| Other comprehensive income items | |||
| Items that will not be reclassified to profit or loss | |||
| Changes in the fair value of financial assets att fair value through other comprehensive income | 57 | -1 355 | 1 565 |
| Items that may be subsequently reclassified to profit or loss | |||
| Hedging reserve, hedge accounting | -117 | 283 | |
| Exchange differences on translating foreign operations | -596 | -66 | |
| Income taxes related to these items | 272 | -178 | |
| Comprehensive income items for the period, net of tax | -1 796 | 1 604 | |
| COMPREHENSIVE RESULT FOR THE FINANCIAL YEAR | -2 696 | 9 291 | |
| Comprehensive profit for the financial year attributable to Equity holders of the Parent company | -2 696 | 9 291 |
Net sales development
Operating result development
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET
| EUR 1,000 | Page | 31.12.2020 | 31.12.2019 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Goodwill | 38 | 1 714 | 1 035 |
| Other intangible assets | 39 | 4 213 | 2 655 |
| Property, plant and equipment | 42 | 10 903 | 10 854 |
| Right of use assets | 44 | 5 917 | 6 936 |
| Other financial assets | 57 | 1 435 | 2 741 |
| Accounts receivables | 28 | 640 | - |
| Deferred tax assets | 36 | 1 242 | 13 |
| Total non-current assets | 26 064 | 24 235 | |
| Current assets | |||
| Inventories | 46 | 15 041 | 12 360 |
| Accounts receivables and other receivables | 28 | 33 635 | 30 981 |
| Income tax receivable | 28 | 6 | 715 |
| Cash and cash equivalents | 59 | 11 601 | 22 360 |
| Total current assets | 60 282 | 66 417 | |
| TOTAL ASSETS | 86 346 | 90 651 |
Return on investment (ROI)
Return on equity
CONSOLIDATED BALANCE SHEET
| EUR 1,000 | Page | 31.12.2020 | 31.12.2019 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity attributable to Equity holders of the Parent company | |||
| Share capital | 51 | 8 256 | 8 256 |
| Fair value reserve and other reserves | 49, 51 | 7 188 | 8 505 |
| Exchange differences | 51 | 353 | 949 |
| Retained earnings | 51 | 25 613 | 24 106 |
| Result for the financial year | -901 | 7 687 | |
| Total equity | 40 506 | 49 502 | |
| Non-current liabilities | |||
| Lease liability | 44 | 4 496 | 5 495 |
| Deferred tax liability | 36 | - | 77 |
| Provisions | 29 | 363 | 543 |
| Total non-current liabilities | 4 859 | 6 115 | |
| Current liabilities | |||
| Provisions | 29 | 3 244 | 2 587 |
| Current interest-bearing liabilities | 55 | 1 857 | 1 502 |
| Lease liability | 44 | 1 385 | 1 441 |
| Current advance payments received | 24, 47 | 18 144 | 12 005 |
| Income tax liability | 47 | 412 | 903 |
| Trade payables and other liabilities | 47 | 15 940 | 16 597 |
| Total current liabilities | 40 982 | 35 034 | |
| Total liabilities | 45 840 | 41 149 | |
| TOTAL EQUITY AND LIABILITIES | 86 346 | 90 651 |
Equity ratio
Gearing
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CASH FLOWS
| EUR 1,000 | Page | 1.1.–31.12.2020 | 1.1.–31.12.2019 |
|---|---|---|---|
| CASH FLOW FROM OPERATING ACTIVITIES | |||
| Proceeds from customers | 117 538 | 167 561 | |
| Payments to suppliers and employees | -116 217 | -146 690 | |
| Cash flow before financial items and taxes | 1 320 | 20 872 | |
| Interest paid from operating activities | -98 | -67 | |
| Dividends received from operating activities | 61 | 640 | 814 |
| Interest received from operating activities | 22 | 22 | |
| Other financing items from operating activities | -274 | -194 | |
| Income taxes paid from operating activities | 434 | -2 846 | |
| Net cash flow from operating activities (A) | 2 044 | 18 602 | |
| CASH FLOW FROM INVESTING ACTIVITIES | |||
| Purchase of property, plant and equipment and intan- | -4 520 | -3 319 | |
| Proceeds from sale of property, plant and equipment and intangible assets | 193 | - | |
| Payment for the acquisition of a subsidiary, net of cash acquired | -512 | 68 | |
| Proceeds from sale of investments | - | 88 | |
| Net cash flow from investing activities (B) | -4 838 | -3 162 | |
| CASH FLOW FROM FINANCING ACTIVITIES | |||
| Proceeds from issue of share capital | 1 857 | 1 506 | |
| Proceeds from current borrowings | -1 502 | -931 | |
| Repayments of lease liability | -1 411 | - | |
| Dividends paid | 51 | -6 182 | -5 968 |
| Net cash flow from financing activities (C) | -7 238 | -6 480 | |
| Net change in cash and cash equivalents (A+B+C) | 59 | -10 032 | 8 960 |
| increase (+)/decrease (-) | |||
| Cash and cash equivalents at the beginning of the financial year | 59 | 22 361 | 13 375 |
| Net change in cash and cash equivalents | -10 032 | 8 960 | |
| Effects of exchange rate changes on cash | -728 | 26 | |
| Cash and cash equivalents at the end of the financial year | 11 601 | 22 360 |
Non-cash transactions in operating activities
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Depreciation, amortization and impairments | -4 039 | -3 854 |
| Employee benefits | 118 | -211 |
| Derivatives | -26 | 224 |
| Exchange rate differences | -323 | 120 |
| TOTAL | -4 270 | -3 721 |
Basis of preparation
The cash flow statement has been generated using the direct method. The cash flow from operating activities includes proceeds from customers, other operating income as well as payments of supplies and services acquired. Cash flow from operating activities also includes payments to employees as well as interest paid and interest received from financial assets held for cash management. The cash flow from operating activities does not include accounts payable related to the investments.
Cash flow from investing activities includes the purchase of intangible and tangible assets and expenses of other activated assets. The item also includes proceeds from sale of these assets on accrual basis.
Cash flow from financing activities includes the share capital changes in cash, dividends paid to shareholders during the period as well as proceeds and repayments of loans.
Cash and cash equivalents comprises cash and cash equivalents which will be due within the following three months' period.
Foreign Group companies' cash flow statements have been converted into euros according to the weighted average exchange rate of the financial year.
Raute Group has adopted the standard IFRS 16 Leases starting on January 1, 2019. Repayments of lease contracts are allocated to the cash flow from financing activities. The payment of the interest expense on the lease liability is allocated to the cash flow from operating activities. Payments and rents of the short-term lease contracts and low-value lease contracts are included in the cash flow of the operating activities. These contracts will not be taken into account when determining the lease liability.
Operating cash flow
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| EUR 1,000 | Page | Share capital | Invested non-restricted equity reserve | Other reserves | Exchange differences | Retained earnings | To the equity holders of the Parent company | TOTAL EQUITY |
|---|---|---|---|---|---|---|---|---|
| EQUITY AT JAN. 1, 2020 | 8 256 | 5 711 | 2 794 | 949 | 31 794 | 49 502 | 49 502 | |
| Comprehensive result for the financial year | ||||||||
| Result for the financial year | - | - | - | - | -901 | -901 | -901 | |
| Other comprehensive income items: | ||||||||
| Changes in the fair value of financial assets at fair value through other comprehensive income | 51 | - | - | -1 355 | - | - | -1 355 | -1 355 |
| Hedging reserve | 49, 51 | - | - | -117 | - | - | -117 | -117 |
| Exchange differences on translating foreign operations | 51 | - | - | - | -596 | - | -596 | -596 |
| Income taxes related to these items | 51 | - | - | 272 | - | - | 272 | 272 |
| Total comprehensive result for the financial year | - | - | -1 200 | -596 | -901 | -2 696 | -2 696 | |
| Transactions with owners | ||||||||
| Equity-settled share-based transactions | 51 | - | - | -118 | - | - | -118 | -118 |
| Dividends paid | 51 | - | - | - | - | -6 182 | -6 182 | -6 182 |
| Total transactions with owners | - | - | -118 | -6 182 | -6 299 | -6 299 | ||
| EQUITY at Dec. 31, 2020 | 8 256 | 5 711 | 1 477 | 353 | 24 712 | 40 506 | 40 506 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY, COMPARISON YEAR
COMPARISON YEAR
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| EUR 1,000 | Page | Share capital | Invested non-restricted equity reserve | Other reserves | Exchange differences | Retained earnings | To the equity holders of the Parent company | TOTAL EQUITY |
|---|---|---|---|---|---|---|---|---|
| EQUITY at Jan. 1, 2019 | 8 256 | 5 711 | 1 453 | 1 015 | 30 075 | 46 509 | 46 509 | |
| Comprehensive result for the financial year | ||||||||
| Result for the financial year | - | - | - | - | 7 687 | 7 687 | 7 687 | |
| Other comprehensive income items: | ||||||||
| Changes in the fair value of financial assets at fair value through other comprehensive income | 51 | - | - | 1 565 | - | - | 1 565 | 1 565 |
| Hedging reserve | 49, 51 | - | - | 283 | - | - | 283 | 283 |
| Exchange differences on translating foreign operations | 51 | - | - | - | -66 | - | -66 | -66 |
| Income taxes related to these items | 51 | - | - | -178 | - | - | -178 | -178 |
| Total comprehensive result for the financial year | - | - | 1 669 | -66 | 7 687 | 9 290 | 9 290 | |
| Transactions with owners | ||||||||
| Equity-settled share-based transactions | 51 | - | - | -329 | - | - | -329 | -329 |
| Dividends paid | 51 | - | - | - | - | -5 968 | -5 968 | -5 968 |
| Total transactions with owners | - | - | -329 | 0 | -5 968 | -6 298 | -6 298 | |
| EQUITY at Dec. 31, 2019 | 8 256 | 5 711 | 2 794 | 949 | 31 794 | 49 502 | 49 502 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
ACCOUNTING PRINCIPLES OF THE CONSOLIDATED FINANCIAL STATEMENTS
Amendments to accounting principles of consolidated financial statements and information to be presented
The consolidated financial statements are drawn up according to the same accounting principles as in 2019, except for the adoption of new and revised standards. The effects of changes in the accounting standards have been presented on page 19.
Preparation of consolidated financial statements
The consolidated financial statements include the financial statements of the Parent company Raute Corporation and the financial statements of those subsidiaries in which the Group has control. The Group controls an entity when the group is exposed to or has rights to variable returns from its involvement with the entity. And if the Group has the ability to affect the variable return through its power over entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has control in the other company. In Raute Group, control is usually based on share ownership that represents more than 50 percent of the voting rights. Subsidiaries are fully consolidated in the consolidated financial statements from the date on which control is transferred to the Group and de-consolidated from the date that control ceases.
Business combinations have been entered using the acquisition method. The consideration paid for the acquisition of a subsidiary is determined as the fair value of the transferred assets, liabilities incurred and equity interests issued by the Group. The consideration transferred contains the fair value of the asset or liability that results from the contingent consideration arrangement. Expenditure related to the acquisition is recognized as an expense when it is incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed by the business combination, have been measured at the acquisition-date fair value. Non-controlling interests have not been recognized in business combinations.
Business transactions, receivables and liabilities, and unrealized gains between Group companies have been eliminated. Unrealized losses have also been eliminated. Where necessary, the accounting principles of the subsidiaries have been changed to comply with the Group's accounting principles.
The allocation of the profit or loss for the financial year to the equity holders of the Parent company has been presented in connection with the statement of comprehensive income.
The consolidated financial statements have been presented in euro, which is the Parent company's functional and presentation currency. The figures concerning the profit or loss and financial position of the companies combined under the consolidated financial statements have been measured in the currency of the country in which that company operates (functional currency).
Financial statements in foreign currency
The income statements of foreign subsidiaries have been translated into euro using the weighted average exchange rates during the financial year and balance sheets have been translated at the average rate on the balance sheet date. Translation of income and comprehensive income at different exchange rates in the income statement and in the balance sheet results in translation differences which have been recognized in the balance sheet under equity, the difference of which has been recognized in the other comprehensive income items. The translation differences arising from the elimination of the acquisition cost of foreign subsidiaries and from the translation of equity items accumulated after the acquisition
| Group companies | Group's ownership interest and voting power, % | Parent company's ownership interest and voting power, % |
|---|---|---|
| Raute Oyj, Lahti (Parent company) | ||
| Raute Canada Ltd., Delta, B.C., Canada | 100 | 100 |
| Raute Inc., Delaware, USA | 100 | 100 |
| Raute US, Inc., Monroe, Louisiana, USA | 100 | - |
| RWS-Engineering Oy, Lahti, Finland | 100 | 100 |
| Raute Group Asia Pte Ltd., Singapore | 100 | 100 |
| Raute WPM Oy, Lahti, Finland | 100 | 100 |
| Raute Chile Ltda., Santiago, Chile | 100 | 50 |
| Raute Service LLC, St. Petersburg, Russia | 100 | - |
| Raute (Shanghai) Machinery Co., Ltd, Shanghai, China | 100 | 100 |
| Metriguard Technologies, Inc., Pullman, Washington, USA | 100 | - |
| Hiottu Oy, Oulu, Finland | 80 | 80 |
have been recognized in the other items of the comprehensive income. On partial or full disposal of a subsidiary, the accumulated translation differences have been recognized through profit or loss as part of the gains or losses from disposal.
The exchange rates used for the consolidation of subsidiaries has been presented in the table Exchange rates used in consolidation.
Related party transactions
Raute Group's related party consists of Group companies, Raute's sickness fund, members of the Group's Board of Directors, members of the Group's Executive Board, the Group's auditing firm, a family member or other close relative of one of the above-mentioned persons an entity or foundation under the control of one of the above-mentioned persons.
EXCHANGE RATES USED IN CONSOLIDATION OF SUBSIDIARIES
Income statement Jan. 1 - Dec. 31
| EUR | 2020 | 2019 |
|---|---|---|
| CNY | 7,8708 | 7,7339 |
| RUB | 82,6454 | 72,4593 |
| CAD | 1,5294 | 1,4857 |
| USD | 1,1413 | 1,1196 |
| SGD | 1,5736 | 1,5272 |
| CLP | 902,5383 | 786,2516 |
Balance sheet at Dec. 31
| EUR | 2020 | 2019 |
|---|---|---|
| CNY | 8,0225 | 7,8205 |
| RUB | 91,4671 | 69,9563 |
| CAD | 1,5633 | 1,4598 |
| USD | 1,2271 | 1,1234 |
| SGD | 1,6218 | 1,5111 |
| CLP | 870,6600 | 832,3500 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CHANGES IN ACCOUNTING STANDARDS
Conceptual Framework of Financial reporting
The IASB has issued a revised Conceptual Framework which will be used in standard-setting decisions with immediate effect. Key changes of the standard are:
- increasing the prominence of stewardship in the objective of financial reporting
- reinstating prudence as a component of neutrality
- defining a reporting entity, which may be a legal entity, or a portion of an entity
- revising the definitions of an asset and a liability
- removing the probability threshold for recognition and adding guidance on derecognition
- adding guidance on different measurement basis, and
- stating that profit or loss is the primary performance indicator and that, in principle, income and expenses in other comprehensive income should be recycled where this enhances the relevance or faithful representation of the financial statements.
Raute Group applies the Framework in determining accounting policies for transactions, events or conditions that are not otherwise dealt with under the accounting.
Definition of a Business - Amendments to IFRS 3
The amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition of the term outputs is amended to focus on goods and services provided to customers, generating investment income and other
income. The definition excludes returns in the form of lower costs and other economic benefits. In addition, entities can apply a concentration test. If a positive result of the test is met, the result eliminates the need for further assessment. Under this optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business.
Definition of Material - Amendments to IAS 1 and IAS 8
The IASB has made amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors which use a consistent definition of materiality throughout International Financial Reporting Standards and the Conceptual Framework for Financial Reporting, clarify when information is material and incorporate some of the guidance in IAS 1 about immaterial information.
In particular, the amendments clarify:
- that the reference to obscuring information addresses situations in which the effect is similar to omitting or misstating that information, and that an entity assesses materiality in the context of the financial statements as a whole, and
- the meaning of 'primary users of general purpose financial statements' to whom those financial statements are directed, by defining them as 'existing and potential investors, lenders and other creditors' that must rely on general purpose financial statements for much of the financial information they need.
Other published standards and interpretations adopted as of January 1, 2020
Other published standards applicable from January 1, 2020 have not a significant impact on Raute Corporation's consolidated financial statements.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
NEW AND REVISED STANDARDS
IFRS-standards that have been published and will be valid in future financial periods
International Accounting Standard Board (IASB) has published new or revised standards and interpretations or amendments, which the Group will apply at the beginning on the date that each standard and interpretation comes into effect. If the effective date is a date other than the first day of the financial year, the Group applies the standard at the start of the financial year following the effective date.
Classification of Liabilities as Current or Non-current – Amendments to IAS 1
The narrow-scope amendments to IAS 1 Presentation of Financial Statements clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (e.g. the receipt of a waiver or a breach of covenant). The amendments also clarify what IAS 1 means when it refers to the 'settlement' of a liability. The amendments could affect the classification of liabilities, particularly for entities that previously considered management's intentions to determine classification and for some liabilities that can be converted into equity.
They must be applied retrospectively in accordance with the normal requirements in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. Revised standard will not be expected to have a significant impact on Raute Corporation's consolidated financial statements.
Property, Plant and Equipment: Proceeds before intended use – Amendments to IAS 16
The amendment to IAS 16 Property, Plant and Equipment (PP&E) prohibits an entity from deducting from the cost of an item of PP&E any proceeds received from selling items produced while the entity is preparing the asset for its intended use. It also clarifies that an entity is 'testing whether the asset is functioning properly' when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. Entities must disclose separately the amounts of proceeds and costs related to produced items that are not part of output from the entity's ordinary activities. The revised standard will not be expected to have a significant impact on Raute Corporation's consolidated financial statements.
Reference to the Conceptual Framework – Amendments to IFRS 3
Minor amendments were made to IFRS 3 Business Combinations to update the references to the Conceptual Framework for Financial Reporting. The exception for the recognition of liabilities and contingent liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 21 Levies were added to the standard. The amendments also confirm that contingent assets should not be recognized at the acquisition date. Revised standard will not be expected to have a significant impact on Raute Corporation's consolidated financial statements.
Amendments to Interest Rate Bechmark (IBOR) and its impact on disclosures – IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest – Second phase
The IASB has issued amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 that address issues arising during the reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. Given the pervasive nature of IBOR-based contracts, the amendments could affect companies in all industries. The amendments cover:
- Accounting for changes in the basis for determining contractual cash flows as a result of IBOR reform
- Additional temporary exceptions from applying specific hedge accounting requirements to avoid failure of hedge relationships solely due to IBOR reform
- Additional disclosures related to IBOR reform has been applied.
The amendment is not expected to have a significant impact on Raute Corporation's consolidated financial statements.
Other standards and interpretations effective January 2, 2021 or later
Other published and future standards are not expected to have a significant impact on Raute Corporation's financial statements.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
FINANCING RISKS - MANAGEMENT'S JUDGMENT
Management of financing risks
The aim of the Group's financing risk management is to minimize the negative effects of the changes in the financial markets on the Group's financial performance and ensure sufficient liquidity in all market conditions. The Group implements a financing policy, which is approved by the Parent company's Board of Directors and defines the limiting values that guide operations, the adopted financial and hedging instruments, and the acceptable counterparties. The Parent company's financing unit is responsible for the management of financing risks, with a duty to identify, assess, and hedge financing risks in cooperation with operative units. The Group CFO is responsible for the financing operations. The Board regularly monitors the extent of the financing risks based on, among others, the net currency position, the age distribution and the hedging of receivables as well as cash flow estimates.
The Group, in its operations, is exposed to financing risks which have been classified into market, counterparty and liquidity risks. Market risks include currency, interest and price risks. Currency risks are further divided into transaction and translation risks. The Group's most significant counterparty risks are customer credit risks related to contractual counterparties in the project business and counterparty risks related to the Group's investment activities. The key risk areas of the Group's international business operations have been recognized as credit risk of the counterparty risks and currency risks of the market risks. The Group is also exposed to liquidity and refinancing risks.
The additional information related to the financing risks has been presented in the additional information items as follows:
- Customer credit risks, note Accounts receivables and customer contract assets, page 26
- Counterparty risks, note Accounts receivables and customer contract assets, page 27
- Price risks, note Materials and services, page 29
- Currency risks, note Risk Management – Currency risks, page 48
- Interest risks, note Financial liabilities, page 55.
Critical accounting judgments of the company management and key sources of estimation uncertainty
When preparing the consolidated financial statements in compliance with International Financial Reporting Standards, the company management has made certain estimates and assumptions. In addition, the management has exercised its judgment in selecting and applying the accounting policies. These estimates and assumptions have affected the assets and liabilities in the Group's balance sheet, the disclosure of commitments and possible assets in the consolidated financial statements, and income and expenses for the financial year.
Because the estimates have been based on management's best knowledge at the reporting date, and they comprise risks and uncertainties, therefore actual results may differ from these estimates. Possible changes in estimates and assumptions have been recognized in the financial year in which the estimate or assumptions has been changed.
The management is not, by the time the financial statements were to be published, aware of any major uncertainties concerning the estimates on the reporting date or any key assumptions concerning the future, on the basis of which there would be a considerable risk of a substantial change in the carrying values of assets and liabilities during the next financial year.
The judgments the management has used, when applying the accounting policies and which has the most significant impact on the financial statements, has been presented in the note it concerns. The management estimations have been presented in:
- Note Performance obligation to be satisfied over time, page 24
- Note Accounts receivables and customer contract assets, page 26
- Note Accounts receivables and other receivables, page 28
- Note Provisions, page 29
- Note Employee benefits, page 31 and 32
- Note Income taxes, page 35
- Note Group goodwill, page 38
- Note Other intangible assets, page 40
- Note Research and development costs, page 40
- Note Financial assets, page 57 and 58.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Project business
A major share of the Group's business is project-type business in which the delivery package contains products and services and the price, payment terms, delivery times and delivery terms are determined based on contract negotiations and the competitive situation. Projects are investments from the customer's viewpoint. With regard to the investment decision, the decision-making process and arranging financing may take a long time and their duration may be difficult to predict. For project business, significant demand fluctuation is typical. The percentage of completion procedure reduces variation in net sales between reporting periods but does not eliminate it. The contents and timing of the in-progress project portfolio impact Raute's working capital items.
NET SALES
| EUR 1,000 | 2020 | % | 2019 | % |
|---|---|---|---|---|
| NET SALES | ||||
| Net sales by market area | ||||
| CIS (Russia) | 63 411 | 55 | 47 060 | 31 |
| EMEA (Europe and Africa) | 25 495 | 22 | 51 173 | 34 |
| NAM (North America) | 12 339 | 11 | 26 852 | 18 |
| LAM (South America) | 7 625 | 7 | 13 580 | 9 |
| APAC (Asia-Pacific) | 6 125 | 5 | 12 632 | 8 |
| TOTAL | 114 994 | 100 | 151 297 | 100 |
Finland accounted for 6 percent (12%) of net sales
Raute serves the wood products industry with a full-service concept that is based on technology solutions that cover the customer's entire production process and services throughout their life cycle. Raute's business consists of project deliveries and technology services. Project deliveries encompass projects from individual machine or production line deliveries to deliveries of all the machines and equipment belonging to a mill's production process. Additionally, Raute's full-service concept includes comprehensive technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations, as well as consulting, training, reconditioned machinery and digital services.
Net sales
Technology services vs. Project deliveries
Net sales by market area
© Project deliveries, Plywood
© Technology services
© EMEA 22 % © CIS 55 % © NAM 33 % © APAC 5 % © LAM 7 %
Basis of preparation
Net sales include revenue from the sale of project deliveries and technology services, as well as raw materials and equipment, adjusted net of indirect taxes, discounts, and exchange differences from foreign currency sales. All components pertaining to each contractual entity have been treated as a whole and the same revenue recognition method is applied to them.
The revenue of the sales is recognized when or as control of the transferred goods or service passes to the customer. When determining the time of revenue recognition, it is assessed whether control of the goods or service subject to the performance obligation passes over time or at a point in time. This criterion applies by following five steps guidance: (1) identification of the contract, (2) identification of the performance obligation, (3) determining the transaction price, (4) allocation of the transaction price to the performance obligations and (5) recognition of revenue.
The main part of the net sales is comprised of project deliveries and modernization projects, which have been treated as performance obligations to be satisfied over time. The basis of preparation of the performance obligations to be satisfied over time has been presented on page 25.
Revenues from service and other expert services, such as consulting, training and digital services, have been recognized in net sales for the period in which the service has been provided. Revenues from time-based maintenance contracts have been recognized as income for the maintenance contract period and the costs incurred have been recognized as expenses on performance basis. Performance obligation of maintenance and other expert services shall be satisfied over time when the customer receives and consumes the benefit at the same time as the service is performed. Revenues from other services have been recognized in net sales for the period in which the service has been provided.
Performance obligations to be satisfied at a point in time include individual standard product deliveries and spare parts. Performance obligations related to the products will be recognized based on the delivery terms.
Revenues from the sale of spare parts and other goods, as well as small and short-term projects, have been recognized in full when the significant risks and rewards have been transferred to the buyer and the Group no longer has right of possession of and control over the product. This generally means the moment at which the goods have been delivered to the customer in accordance with the agreed delivery clause. The delivery conditions used in the Group are based on Incoterms 2010 delivery clauses which have been presented in the official rules published by the International Chamber of Commerce for the interpretation of trade terms.
Project deliveries and modernizations related to technology services include both product and service sales, so the breakdown of the Group's net sales into purely product and service sales cannot be reliably presented.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
PERFORMANCE OBLIGATIONS TO BE SATISFIED OVER TIME
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Specification of net sales | ||
| Performance obligations to be satisfied over time | 81 966 | 108 861 |
| Performance obligations to be satisfied at a point in time | 33 028 | 42 436 |
| TOTAL | 114 994 | 151 297 |
| Project revenues entered as income from performance obligations to be satisfied over time currently undelivered | 118 179 | 127 400 |
| Amount of performance obligations to be satisfied over time not yet entered as income (order book) | 85 997 | 84 246 |
| Balance sheet items of undelivered projects | ||
| Projects in which the value by percentage of completion exceeds advance payments invoiced | ||
| - aggregate amount of costs incurred and recognized profits less recognized losses | 97 047 | 89 878 |
| - advance payments received | 76 066 | 72 185 |
| Current customer contract assets | 20 981 | 17 694 |
| Projects in which advance payments invoiced exceed the value by percentage of completion | ||
| - aggregate amount of costs incurred and recognized profits less recognized losses | 25 257 | 38 366 |
| - advance payments received | 39 768 | 43 253 |
| Current customer contract liabilities | 14 511 | 4 887 |
| Advance payments included in current liabilities in the balance sheet | ||
| Current customer contract liabilities | 14 511 | 4 887 |
| Other advance payments received | 3 633 | 7 118 |
| Total | 18 144 | 12 005 |
| Advance payments of the customer contract included in inventories in the balance sheet | ||
| Advance payments paid | 1 023 | 602 |
| Total | 1 023 | 602 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
Basis of preparation
Project deliveries and modernization projects recognized by percentage of completion and customized and tailored to customer's needs, shall be determined as a performance obligation over time. These performance obligations do not have the alternative use in IFRS 15, those constitute still one performance obligation and Group has the right to receive the payment for the performance produced at the time of review. If a contractual entity (e.g. mill-scale delivery) includes sub-entities (e.g. production lines) with determined contract terms and conditions and with risks, rewards and control of ownership transferred to the buyer separately from the rest of the contractual entity, they have been treated as separate performance obligations to be satisfied over time.
The company applies the percentage of completion method as a revenue recognition principle in performance obligations over time (relation of actual project costs to the estimated total project costs). Percentage of completion has been measured on a cost basis as the relation of actual costs of performance obligation to the estimated total costs of performance obligation. The most recent estimates of the total revenue including the estimated penalty discounts on costs and risks have been used in the estimates based on the trade contract terms according to the percentage of completion estimates adjusted with typical performance estimate adjustments for similar contracts.
Revenue and cost from long-term projects has been recognized as an income and expense according to the percentage of completion as soon as the outcome of the performance has been reliably estimated, both expenses and income. The estimates have been based on previous experience of similar business transactions and the special features of each project have been considered. Changes to the project, requirements concerning additional charges and incentives have been taken into account in the project income and expenses to the extent which can be reliably determined and has been agreed upon with the customer. If the result of a performance obligations to be satisfied over time cannot be reliably estimated, the project costs have been recognized as an expenditure in the same financial year in which they have been incurred and the project revenue has been recognized only to the extent of project costs incurred that are likely to be recovered.
When it is probable that the total costs needed to complete the contract will exceed total contract revenue, the expected loss has been recognized as an expense immediately. If the net sales of performance obligation to be satisfied over time recognized by percentage of completion (incurred costs and recognized profits) are larger than the amount of advance payment received for the project, the difference has been recognized as a current customer contract asset in the balance sheet item Accounts receivables and other receivables. If the net sales of performance obligation to be satisfied over time recognized by percentage of completion (incurred costs and recognized profits) are minor than the amount of advance payment received for the project, the difference has been recognized as a current customer contract liability in the balance sheet item Accounts payable and other liabilities. At the beginning of the financial year, a sales income of EUR 4,446 thousand (13,078 thousand) has been recognized for items included in the current customer contract liabilities.
When the risks and responsibilities of the project have been essentially transferred to the counterparty on the contract, the customer contract has been recognized entirely as an income, unpaid contract price has been presented in accounts receivables and the estimated project warranty costs as a warranty reserve. During the financial year 2020 and the comparison period, the Group has had no financial costs allocated to the long-term projects entered in the balance sheet.
Management's critical accounting judgments and key sources of estimation uncertainty
The percentage of completion method is based on estimates of expected project revenue and expenses, as well as on reliable measurement of project progress. Should the estimates of the project outcome change, the recognized revenue and profit is adjusted in the period in which the change first becomes known or can be estimated.
ACCOUNTS RECEIVABLES – CURRENT CUSTOMER CONTRACT ASSETS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| ACCOUNTS RECEIVABLES AND CURRENT CUSTOMER CONTRACT ASSETS IN THE BALANCE SHEET | ||
| Accounts receivables excluding credit loss provision | 7 698 | 9 604 |
| Current customer contract assets | 20 981 | 17 693 |
| TOTAL | 28 679 | 27 297 |
| Customer receivables | 2020 | 2019 |
| Accounts receivables excluding credit loss provision | 7 698 | 9 604 |
| Invoiced outstanding advance payments | 6 609 | 18 655 |
| Total | 14 307 | 28 259 |
| Age distribution of customer receivables | 2020 | 2019 |
| Undue | 12 596 | 26 311 |
| Overdue 0–29 days | 578 | 1 190 |
| Overdue 30–60 days | 281 | 245 |
| Overdue over 60 days | 852 | 513 |
| Total | 14 307 | 28 259 |
The outstanding advance payments presented in the table "Customer receivables" are invoiced payments connected to binding contracts. They are not included in the assets of the balance sheet at the balance sheet date, because no payment has been received or they are not overdue. The combined age analysis of accounts receivables and advance payments of binding sales contracts invoiced according to payment terms has been presented in the table "Age distribution of customer receivables".
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
ACCOUNTS RECEIVABLES – CURRENT CUSTOMER CONTRACT ASSETS - BASIS OF PREPARATION
Basis of preparation
Sales and other revenue have been recognized in accounts receivables at the original receivable amount. Current accounts receivables have been measured at the original receivable amount and their book value is equal with their fair value. The payment terms for customer contracts are based primarily to the percentage of completion of the project, performance of the service, payment schedule or the contractual target determined in a customer contract. Accounts receivables of EUR 7,698 thousand (EUR 9,604 thousand) are non-interest bearing. The average terms of payment are 30 days.
Current customer contract assets are a balance sheet item comparable to accounts receivables. As an asset is recognized the amount with which the individual, performance obligations to be satisfied over time entered as an income according to the percentage of completion method exceeds the amount of advance payment received. The carrying amounts of receivables have been presented in the note Financial assets, page 57. Customer contract receivables have been presented in this note as a financial asset.
Management's critical accounting judgments and key sources of estimation uncertainty
The management has estimated customer's ability to remit the payment of such accounts receivables, for which the company has not received any guarantee for the payment or any other securities. The Group companies' ability to settle the accounts receivables and aymerts has been estimated by the management.
The credit risk related to the accounts receivables has been estimated according to the standard IFRS 9 on the basis of evaluation of the lifetime expected for accounts receivables at the balance sheet date. Raute Group has applied the simplified approach allowed for recognition of credit losses of accounts receivables, because accounts receivables do not contain significant financing component. The accounts receivables have been grouped based on an aging distribution and a credit risk characteristics. The expected credit loss is based on historical credit loss amounts taking into account individual estimates in the accounts receivables. Estimated impairment losses have been recognized through profit or loss. An impairment of EUR 66 thousand has been recognized for expected credit loss allowance on accounts receivables during the financial year.
If the amount of the impairment loss will decrease in any subsequent financial year and deduction may be considered related to the recognition of impairment after the event, the recognized loss is reversed through profit or loss. The impact of the impairments of expected credit loss allowance on accounts receivable was EUR 49 thousand positive due to the decrease in credit loss allowance previously recognized. Impairments have been recognized to the item Other operating expenses in the income statement. The information of credit losses on the accounts receivables has been presented in the note Impairment of financial assets, page 58.
Risk management
The total value of accounts receivables and customer contract assets in the balance sheet corresponds to the amount of money that is the maximum amount of credit risk at the balance sheet date without taking into account the fair value of collateral or later contractual obligations in the case that the contractual parties are unable to fulfill their obligations to pay in accordance with the sales contract.
The Group's credit risks or counterparty risks are realized when the customer or other counterparty is unable to fulfill its commitments to the Group. Receivables related to accounts receivables and current customer contract assets are derecognized as final credit losses when the contractual payment is significantly delayed, eg. due to significant financial difficulties of counterparty. According to the principles of credit management, the quality of receivables is assessed on the basis of customer-specific analysis. Credit risks related to contractual counterparties in project deliveries are managed with established suppliers and customers by advance payment terms and/or by expecting bank guarantees or confirmed letters of credit for customer payments. Credit risks related to technology services are managed by regularly monitoring the customer-specific amounts of receivables and customers' payment behavior.
The maximum credit risk relating to customers' solvency is the amount of receivables relating to binding sales contracts that are not covered by bank guarantees, letters of credit or other securities. Received bank guarantees and letters of credit covered 58 percent (1%) of the accounts receivables and the customer contract assets recorded in the balance sheet and 56 percent (49%) of the order book at the end of the financial year. A main part of the receivables was related to established counterparties and customers. During the financial year, a credit loss amounting to EUR 13 thousand has been recognized as an expense. No significant credit risk clusters were recognized in the accounts receivables at the balance sheet date.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
ACCOUNTS RECEIVABLES AND OTHER RECEIVABLES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| ACCOUNTS RECEIVABLES AND OTHER RECEIVABLES | ||
| Accounts receivables | 8 272 | 9 489 |
| Customer contract assets | 20 981 | 17 693 |
| Accrued income and prepaid expenses | 2 329 | 1 875 |
| Derivative contract receivables | 30 | 124 |
| Other receivables | 2 668 | 2 515 |
| TOTAL | 34 280 | 31 696 |
| Substantial items included in accrued income and prepaid expenses | ||
| Accrued employee related expenses | 16 | 24 |
| Income tax receivable | 6 | 715 |
| Other accrued income and prepaid expenses | 2 308 | 1 135 |
| TOTAL | 2 329 | 1 875 |
Basis of preparation
The Group's assets include accounts receivables, customer contract assets, accrued income and prepaid expenses, derivative contract receivables and other receivables.
Information of credit losses related to the accounts receivables and customer contract assets as well as exposal to credit risk and counterparty risk has been presented in the note Account receivables and customer contract assets, page 27. Basis of preparation of derivative contracts has been presented in the note Derivatives, page 49. Fair values of the receivables have been presented in the note Financial assets, page 57.
Management's accounting judgments and key sources of estimation uncertainty
Management has monitored the customers' and other counterparties' ability to settle the commercial receivables and payment obligations related to loans. Despite the changed market situation caused by the coronavirus pandemic the management estimates that the receivables do not include any significant risk concentrations at the balance sheet date.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
MATERIALS AND SERVICES – PROVISIONS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| MATERIALS AND SERVICES | ||
| Purchases during the financial year | -58 328 | -66 241 |
| Change in inventories, materials and supplies | -108 | 357 |
| External services | -5 667 | -10 197 |
| TOTAL | -64 102 | -76 081 |
| EUR 1,000 | 2020 | 2019 |
| --- | --- | --- |
| PROVISIONS | ||
| Warranty provisions | ||
| Book value at Jan. 1 | 2 513 | 1 956 |
| Additions | 2 267 | 2 451 |
| Decrease | -2 530 | -1 900 |
| Exchange differences | -34 | 6 |
| Book value at Dec. 31 | 2 216 | 2 513 |
| Other provisions | ||
| Book value at Jan. 1 | 618 | 244 |
| Additions | 2 023 | 533 |
| Decrease | -1 251 | -159 |
| Book value at Dec. 31 | 1 390 | 618 |
| TOTAL | 3 606 | 3 131 |
| from which | ||
| - non-current | 363 | 543 |
| - current | 3 244 | 2 587 |
Basis of preparation
Purchases include materials and raw materials, as well as variable costs related to acquisition and manufacturing the products. External services include variable costs of production and subcontracting costs as well as service payments to suppliers.
Change in inventories includes material and raw material inventory change.
Risk management
The raw materials used by the Group are reprocessed steel products, other raw materials, components, and commodities. It is not possible to actively hedge against their market price risk with derivatives, and their price risk is a part of the business risk. The price risk of steel is managed by regularly analyzing and following the price fluctuation. The price risk of components is reduced by making blanket agreements with suppliers. The price risk of the electric power used in the Group's production processes is followed and managed through fixed-price contracts.
At the balance sheet date, there were no derivatives hedging price risk that would affect the profit or loss in the consolidated costs of the project. Provision for unprofitable contract has been recognized when the unavoidable direct costs and estimated indirect production costs and depreciation under the contract have exceeded the benefits from the contract.
Management's critical accounting judgments and key sources of estimation uncertainty
The amount of warranty provisions has been estimated on the basis of the management's experience from product costs in the warranty period, taking into consideration special product risks.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
PERSONNEL AND PERSONNEL COSTS
| 2020 | 2019 | |
|---|---|---|
| NUMBER OF PERSONNEL Employed at Dec. 31, persons | ||
| Workers | 205 | 223 |
| Office staff | 546 | 555 |
| TOTAL | 751 | 778 |
| Personnel working abroad | 250 | 260 |
| Effective, on average, persons | ||
| Workers | 207 | 225 |
| Office staff | 536 | 536 |
| TOTAL | 743 | 761 |
| Personnel working abroad, effective, on average | 245 | 260 |
| On average, persons | ||
| Workers | 211 | 230 |
| Office staff | 549 | 554 |
| TOTAL | 760 | 784 |
| Personnel working abroad, on average | 251 | 265 |
| EUR 1,000 | 2020 | 2019 |
| EMPLOYEE BENEFITS EXPENSE | ||
| Wages and salaries | -33 969 | -38 433 |
| Share-based payments | 118 | -211 |
| Pension contributions | -4 562 | -5 211 |
| Other personnel costs | -1 116 | -1 937 |
| Business cost support received (Covid19) | 500 | - |
| TOTAL | -39 029 | -45 793 |
Personnel at Dec. 31
Personnel, effective, on average
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
PERSONNEL COSTS - BASIS OF PREPARATION
Wages and salaries
Wages and salaries include the basic salaries with fringe benefits, a profit and performance benefits (performance-based bonuses) and long-term incentive schemes. Information on-share-based payments has been disclosed in note Employee benefits, page 32.
In 2020, Raute Group received financial support in the amount of EUR 1.3 million aimed at mitigating the impacts of the Covid-19 pandemic; EUR 0.8 million of the support was granted by Canada, and EUR 0.5 million by Finland. Thanks to this financial support, we were able to avoid extensive adjustment measures, retain our skilled employees and continue with our planned development projects in order to secure our future competitiveness.
Performance-based bonus systems based on annual targets
Performance-based bonus system includes the bonus systems for the President and CEO and for the Group's Executive Board, key personnel and the rest of the personnel. A person can receive the bonus from one performance bonus system at a time. The Board of Directors annually confirms the general principles, maximum amounts and calculation methods for the remuneration systems. The system is in force for a year at a time. The payment of the bonus is dependent of the positive Group's profit. The maximum amount of the bonus systems has been limited to 20 percent of the Group's operating profit. The majority of the performance-based bonuses are paid once a year after the Annual General Meeting has confirmed the consolidated financial statements.
The payment of bonuses within the performance-based bonus systems for the President and CEO, the Group's Executive Board and
key personnel is dependent on the profit and task-related personal targets determined for the entire year. The maximum amount of the bonus from the performance-based bonus system is 60% of the annual basic salary for the President and CEO and 40% of the annual basic salary for other Executive Board members.
The payment of bonuses within the plans for the rest of the personnel is dependent on the Group's profit and the shared targets set for the unit's performance, quality and operations. Part of the performance-based bonuses for entire personnel are determined and paid quarterly.
Performance-based bonus systems based on annual targets has been recognized as a provision when the Group has a contractual obligation or when a constructive payment obligation has arisen from an earlier practice.
Management's critical accounting judgments
The expenses and liabilities recognized on the performance-based bonuses on annual target are based on calculations of the bonuses that are based on valid contracts. The management has used estimates to assess the amount of the performance-based bonus plan's when the target's linked to the persons or personnel group's profit, quality and operations have been met.
Pension plans
Pension plans have been classified into defined benefit and defined contribution plans. Under a defined contribution plan the Group pays fixed contributions to a separate insurance company, after which the Group has no other obligations to pay. In addition, the Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay retirement benefits. Contributions to defined contribution pension plans have been recognized in the income statement as an expense in the period in which they were due. The Finnish statutory employment pension scheme and the pension plans of foreign subsidiaries have been classified as defined contribution plans.
The parent company Raute Corporation has a defined-contribution pension arrangement and the related obligations are determined in accordance with the pension act that applies to the employees. The pension arrangements of foreign subsidiaries are managed in accordance with local legislation and they are defined-contribution arrangements. Raute Corporation's voluntary supplementary pension insurance has been treated in accounting as a defined-benefit plan. The current Finnish employees' voluntary supplementary pension insurance has been arranged through Mandatum Life Insurance Company. At the end of the financial year, the balance sheet did not contain any obligations resulting from benefit-based obligations.
Raute's Sickness Fund is an insurance fund, which pays its members additional benefits on top of compensations paid according to the Sickness Insurance Act. Raute's Sickness Fund covers personnel in Raute Corporation and Lahti Precision Oy.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
SHARE-BASED INCENTIVE PLANTS
Share-based payment plan for senior management
Raute Group's share-based plans include two long-term performance share-based payment plans for the Group's senior management. The purpose of the plan is to align the objectives of the owners and management in order to develop the company's value, and to commit management to achieving the company's strategic goals by offering a competitive long-term incentive plan.
LTI Plan 2017-2019 commenced at the start of 2017. The plan consisted of a one-year earning period and the subsequent two-year vesting period. Based on the plan, a reward equaling the worth of 23,832 Raute Corporation's series A shares was paid during the financial year. The amount needed to cover the taxes and tax-like payments resulting from the shares has been taken into account in the payment.
The impact of the share-based incentive plans on the result for the financial year was EUR 118 thousand positive (EUR 211 thousand negative). During the financial year, the estimate of earned shares changed, and the conditions of two of the programs were not met. The amount entered in previous financial periods as a cost has been adjusted in the income statement for the current financial period. EUR 85 thousand (EUR 331 thousand) was allocated to the equity item "Other reserves" from the share-based incentive plans in force at the end of the financial year.
Share-based incentive plan 2018-2022 (LTI Plan 2018-2020, LTI Plan 2019-2021, LTI Plan 2020-2022)
On February 15, 2017, the Board of Directors of Raute Corporation resolved to implement a new performance-based, share-value-based, long-term incentive plan for the Group's senior management.
The Performance Share Plan is made up of three three-year plans that begin every year. A single plan may consist of either a three-year earnings period or a one-year earnings period and the subsequent two-year vesting period. The possible bonus earned by virtue of a single plan shall be paid at the end of the three-year plan in question. The earnings opportunity is limited such that the value of the bonus, at the time of payment, to be paid to a participant based on a single three-year plan can be no more than double the value of the maximum earnings opportunity allocated to him/her when the plan commenced. The company's Board of Directors decides separately on when each plan commences, the length of its earnings period, the performance targets, the persons entitled to participate in the plan and the earnings opportunity.
LTI Plan 2018-2020
LTI Plan 2018-2020 commenced at the start of 2018. The plan is made up of two parts. The first part consists of a three-year earnings period. Its weight is 80 per cent of the whole plan and the performance target is Total Shareholder Return (TSR) proportionate to the selected peer group. The second part consists of a one-year earnings period and the subsequent two-year vesting period. Its weight is 20 per cent of the whole plan and the performance target is Earnings Per Share (EPS). Any rewards based on both parts will be paid in April 2021 as Raute's series A shares, less the amount needed to cover
the taxes and tax-like payments resulting from the shares. If the performance targets set by the Board of Directors are achieved. Eight persons were entitled to participate in the system.
LTI Plan 2019-2021
LTI Plan 2019-2021 commenced at the start of 2019. The plan consists of two parts. The first part consists of a three-year earnings period. Its weight is 50 per cent of the whole plan and the performance target is Total Shareholder Return (TSR) proportionate to the selected peer group. The second part consists of a one-year earnings period and the subsequent two-year vesting period. Its weight is 50 per cent of the whole plan and the performance target is Earnings Per Share (EPS). Any rewards based on both parts will be paid in the spring of 2022 if the performance targets set by the Board of Directors are achieved. Ten persons belonging to Raute Group's senior management, including the members of the Executive Board, are entitled to participate in the LTI 2019-2021 plan.
LTI Plan 2020-2022
LTI Plan 2020-2022 commenced at the start of 2020. The plan consists of two parts. The first part consists of a three-year earnings period. Its weight is 50 per cent of the whole plan and the performance target is Total Shareholder Return (TSR) proportionate to the selected peer group. The second part consists of a one-year earnings period and the subsequent two-year vesting period. Its weight is 50 per cent of the whole plan and the performance target is Earnings Per Share (EPS). Any rewards based on both parts will be paid in the spring of 2023 if the performance targets set by the Board of Directors are achieved. Eleven persons belonging to Raute Group's senior management, including the members of the Executive Board, are entitled to participate in the LTI 2020-2022 plan.
Basis of preparation
Share-based payment plans have been recognized as an expense during the earnings period in the income statement item employee benefits expense. The fair value of the benefit is the share value at the benefit's grant date. The amount to be recognized as an expense is based on an estimate of the number of shares to which a right is expected to be born during the earnings period. The estimate of the shares earned will be assessed at each balance sheet date. If the estimate changes in later periods, the change shall be adjusted in the income statement at that period when the change has been detected. The contra account for shares to be granted according to the share-based payment plan, is the invested non-restricted equity reserve.
Granted share bonuses
| LTI Plan 2020-2022 | LTI Plan 2019-2021 | |
|---|---|---|
| Grant date | 12.2.2020 | 20.12.2018 |
| Fair value at grant date | 26,48 | 22,50 |
| Granted shares, pcs | 18 770 | 16 800 |
Management's accounting judgments
Management has estimated the performance level which is the basis of the bonuses and the amount of the eligible persons at the end of the vesting period. At the balance sheet date, the management has estimated the amount of shares earned from the share-based incentive plan.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
MANAGEMENT'S EMPLOYEE BENEFITS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Salaries and remunerations of the President and CEO and Board of Directors of the Parent company | ||
| Tapani Kiiski, President and CEO | ||
| Salaries and other short-term employee benefits | 335 | 397 |
| Post-employment benefits | 53 | 65 |
| Share-based payments | 197 | - |
| TOTAL | 585 | 462 |
| Remuneration of the Parent company's Board of Directors | ||
| Members of the Board of Directors | ||
| Raitio Laura, Chair of the Board as of April 2, 2019 | 48 | 39 |
| Mustakallio Mika, Vice-Chair of the Board | 24 | 23 |
| Suominen Pekka, Member of the Board | 24 | 23 |
| Bask Joni, Member of the Board | 24 | 23 |
| von Essen Patrick, Member of the Board | 24 | 23 |
| Harmaala Ari, Member of the Board as of April 2, 2019 | 24 | 16 |
| Pehu-Lehtonen Erkki, Chair of the Board until April 2, 2019 | - | 13 |
| TOTAL | 168 | 159 |
| Group Executive Board's employee benefits on an accrual basis | ||
| Salaries and other short-term employee benefits | 1 342 | 1 192 |
| Post-employment benefits | 194 | 207 |
| Share-based payments | 251 | - |
| TOTAL | 1 787 | 1 399 |
The President and CEO has a possibility to have a profit-related bonus amounting to a maximum of 60% of his annual basic salary. The amount of the profit-related bonus depends on the annual targets. The President and CEO's term of notice is six months, and the severance pay equals twelve months' salary.
Other Executive Board members have a possibility to have a profit-related bonus amounting to a maximum of 40% of their annual basic salary.
Information on the share-based payment plan for senior management has been disclosed in note Employee benefits, page 32. During the financial year, the management and the Board of Directors has not been granted share options.
Pension obligations of the President and CEO and the Board Members are determined according to the Employees Pensions Act. Other special conditions concerning the retirement or the amount of retirement allowance have not been agreed on. The statutory pension cost in the financial year 2020 was EUR 53 thousand (EUR 65 thousand). Remunerations paid to the Board of Directors do not include the statutory retirement obligation.
Raute's Remuneration statement contains information on the remuneration of the Board of Directors and the President and CEO. Up-to-date information is available on the company's website at www.raute.com.
On December 31, 2020, the Board of Directors and the Group's President and CEO and the Group's Executive Board held altogether 128,169 series A shares and 127,890 series K shares. The management's holding represents 6.0 percent of the company shares and 11.6 percent of the votes. The figures include the holdings of their own, minor children and control entities.
During the financial year no loans have been granted to the company's management. No pledges have been given or other commitments made on behalf of the company's management and shareholders.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
OTHER OPERATING INCOME AND EXPENSES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| OTHER OPERATING INCOME | ||
| Insurance compensations | - | 174 |
| Capital gain on sale of fixed assets | 80 | 16 |
| Other | 121 | 154 |
| TOTAL | 201 | 343 |
| EUR 1,000 | 2020 | 2019 |
| --- | --- | --- |
| OTHER OPERATING EXPENSES | ||
| Indirect production expenses | -2 617 | -4 016 |
| Renting expenses | -418 | -418 |
| Sales and marketing expenses | -1 470 | -3 192 |
| Credit losses and change in provision of credit losses | 36 | 43 |
| Administration expenses | -3 363 | -2 950 |
| Changes in the fair value of currency forward contracts | 0 | 145 |
| Other expenses | -5 113 | -5 041 |
| TOTAL | -12 945 | -15 428 |
| Auditors' remunerations | ||
| Authorized Public Accountants Pricewaterhouse-Coopers Oy (Finland) | ||
| Audit expenses, statutory | -66 | -57 |
| Audit expenses, other assignments according to the Audit Act | - | - |
| Audit expenses, other services | - | -2 |
| Audit expenses, tax services | - | -3 |
| Total | -66 | -62 |
| Authorized Public Accountants Pricewaterhouse-Coopers (Global) | ||
| Audit expenses, statutory | -12 | -14 |
| Audit expenses, other assignments according to the Audit Act | - | - |
| Audit expenses, other services | - | - |
| Audit expenses, tax services | - | - |
| Total | -12 | -14 |
Basis of preparation
Revenue not included in net sales, such as lease income, insurance compensations and gains on the disposal of fixed assets, has been recognized in the other operating income. Lease income has been recognized as income on a straight-line basis for the lease term.
Basis of preparation
Other operating expenses have been recognized as income-impact items by nature included in business operations. Other individual items such as direct purchases, changes in inventories and employee benefits expenses included in the income statement have been presented in connection of the corresponding income statement item.
Raute Group has adopted the standard IFRS 16 Leases starting on January 1, 2019. Raute Group has rented warehouses and production facilities for business use. As a result of the implementation of the standard change, part of the leases of premises and production facilities leased by Raute Group has been recognized in the balance sheet. The leases that include the right-of-use of the leased asset have been recognized in the item Right-of-use asset in the balance sheet. The transition has been adopted by applying the simplified approach and comparative information has not been restated. The effects adopting the standard have been presented in the Note Lease agreements, page 44.
The Parent company's auditor during the financial year was the Authorized Public Accountants PricewaterhouseCoopers Oy. Statutory audit fee includes audit fees for current financial year auditing. Other services and tax services include audit fees for other services recognized on accrual basis during the financial year. Fees do not include travel costs and fees payable to the authorities arising from auditing or other assignments.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
INCOME TAXES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| INCOME TAXES | ||
| Consolidated income statement | ||
| Current tax based on the taxable result of the financial year | -413 | -1 413 |
| Current tax of previous financial years | -220 | -25 |
| Deferred taxes | 1 269 | -127 |
| TOTAL | 636 | -1 565 |
| Reconciliation of the relationship between realized tax expense and theoretical accounting result using the Finnish tax rate of 20.0 percent | ||
| Result before taxes | -1 537 | 9 253 |
| Tax effect of the following items: | ||
| Taxes calculated using the Finnish tax rate, 20.0 % | 307 | -1 851 |
| Effect of differences in tax rates of foreign subsidiaries | 288 | 198 |
| Non-taxable income | 334 | 184 |
| Non-deductible costs in taxation | -91 | -172 |
| Taxes from the previous financial years | -220 | -25 |
| Utilization of previously unrecognized tax losses | 0 | 104 |
| Unrecognized tax assets from the losses of foreign subsidiaries | -150 | - |
| Other items | 168 | -5 |
| Consolidated tax expense | 636 | -1 565 |
| Effective tax rate, % | 41,4 % | 16,9 % |
Basis of preparation
The taxes in the consolidated income statement include the current tax based on the Group companies' taxable income, as well as tax adjustments for previous years and the change in deferred taxes. Current tax based on the taxable income has been calculated on taxable income using the tax rate in force in each country. Taxes have been recognized in the income statement, except when they are related to other comprehensive income items or recognized directly in equity. In such a case, the tax has also correspondingly been recognized in other comprehensive income items or directly in equity.
The Group companies can use special tax deductions related to certain new investments of assets or expenses under certain conditions. These tax credits are treated as a deductible from taxes at the moment when it is highly probable that the tax deduction will be received. The tax credit reduces the tax liability and the tax expense based on the taxable income for the period.
Deferred taxes have been recognized for all temporary differences between the accounting and taxation value. Deferred tax has been determined using tax rates that have been enacted or substantively enacted by the balance sheet date and have been expected to apply when the related deferred tax asset shall be realized or the deferred tax liability shall be settled. The most significant temporary differences have arisen from the amortization of tangible fixed assets, fair value adjustments of available-for-sale financial assets, fair value adjustments of derivatives and tax losses carried forward unused.
The undistributed profits of foreign subsidiaries are not recognized as deferred tax liabilities. The assets are invested permanently
in the countries in question. The translation differences generated by the consolidation of foreign subsidiaries are not recognized as deferred tax liabilities.
Deferred tax assets have been recognized to the extent that it is probable that taxable profits will be available against which temporary differences can be utilized. The recognition of deferred tax assets has been estimated at each reporting date. The undistributed profits of foreign subsidiaries are not recognized as deferred tax liabilities. Deferred tax assets and liabilities have been offset in the extent that there is an enforceable right to offset current tax liabilities based on taxable income for the financial year and tax assets based on taxable income for the financial year, and where the deferred tax assets and liabilities relate to the same taxation authority.
Management's critical accounting judgments and key sources of estimation uncertainty
The Group is subject to income taxes in Finland and several other countries. Management's judgment has been required in determining the amount based on the taxable income for the financial year, tax of uncertain tax positions, as well as deferred tax assets and liabilities. The recognition and basis of preparation of the deferred tax assets has been estimated at the end of the financial year and the extent to which deferred tax assets can be recognized to the balance sheet. The management estimates how likely it is for the Group's companies to have future recoverable taxable income against which unused tax losses can be utilized. The preparatory estimates used for the estimates at the balance sheet date can differ from the actual figures, in which case changes in tax assets have been recognized as expenses in the income statement.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
DEFERRED TAX ASSETS AND LIABILITIES
DEFERRED TAX ASSETS AND LIABILITIES
| EUR 1,000 | 1.1.2020 | Entered through profit or loss | Entered in comprehensive income statement | Re-cognized in shareholders’ equity | 31.12.2020 |
|---|---|---|---|---|---|
| Intercompany inventory profit | 191 | -136 | - | - | 55 |
| Provisions | 163 | -13 | - | - | 150 |
| Employee benefits | 10 | -10 | - | - | 0 |
| Tax losses and credits unused | 0 | 940 | - | - | 940 |
| Other temporary differences | 20 | 274 | - | - | 294 |
| Deferred tax assets, total | 384 | 1 055 | 0 | 0 | 1 438 |
| Offset from deferred tax liabilities | -371 | - | - | - | -196 |
| Deferred tax assets, net | 13 | 1 242 |
COMPARISON YEAR
| EUR 1,000 | 1.1.2019 | Entered through profit or loss | Entered in comprehensive income statement | Re-cognized in shareholders’ equity | 31.12.2019 |
|---|---|---|---|---|---|
| Intercompany inventory profit | 37 | 154 | - | - | 191 |
| Provisions | 248 | -85 | - | - | 163 |
| Employee benefits | 1 | 9 | - | - | 10 |
| Tax losses and credits unused | - | - | - | - | 0 |
| Other temporary differences | 212 | -151 | -41 | 20 | |
| Deferred tax assets, total | 472 | -73 | -41 | 0 | 384 |
| Offset from deferred tax liabilities | -408 | - | - | - | -371 |
| Deferred tax assets, net | 35 | 13 |
Deferred tax assets in the parent company Raute Corporation has been recognized to the extent that future return expectations are estimated to generate taxable income, and against which the temporary difference can be utilized. The assumptions for recognizing deferred tax assets have been estimated at the end of each reporting period.
DEFERRED TAX LIABILITIES
| EUR 1,000 | 1.1.2020 | Entered through profit or loss | Entered in comprehensive income statement | Re-cognized in shareholders’ equity | 31.12.2020 |
|---|---|---|---|---|---|
| Financial assets at fair value | 280 | -238 | - | - | 42 |
| Effect of Group consolidation | 127 | -21 | - | - | 106 |
| Other temporary differences | 30 | 54 | -34 | - | 50 |
| Deferred tax liabilities, total | 436 | -205 | -34 | 0 | 196 |
| Offset to deferred tax assets | -358 | -196 | |||
| Deferred tax liabilities, net | 77 | 0 |
COMPARISON YEAR
| EUR 1,000 | 1.1.2019 | Entered through profit or loss | Entered in comprehensive income statement | Re-cognized in shareholders’ equity | 31.12.2019 |
|---|---|---|---|---|---|
| Financial assets at fair value | 140 | - | 140 | - | 280 |
| Effect of Group consolidation | 192 | -65 | - | - | 127 |
| Other temporary differences | 77 | -81 | 34 | - | 30 |
| Deferred tax liabilities, total | 408 | -146 | 174 | 0 | 436 |
| Offset to deferred tax assets | -408 | -358 | |||
| Deferred tax liabilities, net | 0 | 77 |
A deferred tax asset (EUR 149 thousand) has been unrecognized from losses of foreign subsidiaries from the financial year 2020.
A deferred tax asset of EUR 359 thousand (EUR 379 thousand) has been unrecognized from loss carry-forwards of foreign subsidiaries. It is probable that no taxable income, against which the losses can be utilized, shall be available to the Group before the expiry date of the losses.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
BUSINESS COMBINATION
BUSINESS COMBINATION
| EUR 1,000 | 16.6.2020 |
|---|---|
| Purchase consideration | |
| Cash paid | 696 |
| Conditional redemption liability | 231 |
| Total purchase consideration | 927 |
| Fair values of the acquisition | |
| Tangible assets | 29 |
| Sales receivables and other receivables | 363 |
| Trade payables and other payables | -139 |
| Deferred tax liability | -4 |
| Net identifiable assets acquired | 249 |
| Goodwill | 679 |
Basis of preparation
Raute Corporation signed on June 16, 2020 an agreement on the acquisition of the majority of the share capital in Oulu-based Hiottu Oy. Hiottu is a company offering software services with special knowhow in various machine vision solutions and other system solutions for demanding industrial environment. Hiottu's services include software consulting and project management, machine vision programming and systems, industrial programming, and web programming. Hiottu's business will be continued as a separate limited company in Oulu and all employees will continue in the company as former employees. Hiottu Oy's financial information will be reported as part of Raute's wood products technology segment.
The acquisition is carried out as a share transaction, after which Raute holds 80 percent of the company shares. Business acquisition has been paid in cash. The terms of acquiring the minority holding through an additional agreement after a transition period have been agreed on in the terms and conditions of the agreement. Based on the redemption obligation the conditional redemption liability in the amount of EUR 231 thousand has been recognized at the date of acquisition. The redemption liability has been presented in the balance sheet item Accrued liabilities.
Based on the seller's transferring obligation and purchaser's redemption obligation Hiottu Oy has been fully consolidated into the Group from the date of acquisition. Transferred consideration, redemption liability as well as the acquired identifiable assets and liabilities of the company has been valued at fair value at the time of acquisition. In the acquisition the fair values of the balance sheet items recognized are preliminary. Acquisition-related costs have been recognized in item Other operating expenses in the income statement.
The cash flow effect of the business transaction at the acquisition date was EUR 696 thousand.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
GROUP GOODWILL
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| GOODWILL | ||
| Goodwill at the beginning of the year | 1 035 | 1 035 |
| Increases | 679 | - |
| Total | 1 714 | 1 035 |
Basis of preparation
Business combinations have been entered using the acquisition method. The addition recognized in the Group goodwill in the consolidated balance sheet has been generated in connection of the subsidiary share acquisition of Hiottu Oy at June 16, 2020. Details related to the business combinations has been presented in the note Business acquisitions, page 37. The goodwill is the amount over which the acquisition cost has exceeded the fair values of identified acquired assets and liabilities. Net identifiable other intangible assets acquired has been presented in the balance sheet item Other tangible assets. These items shall be depreciated over their useful life.
Group goodwill has been recognized in the balance sheet at original acquisition cost less impairments. No amortization according to a plan is booked from group goodwill. The group goodwill is tested annually for impairment and always if any indication of impairment exists.
Impairment testing
For the impairment test the goodwill is allocated to the cash generating units (CGUs) of the group structure, in which the business is located. Goodwill is allocated to cash-generating units according to the business unit in which the goodwill is monitored.
The recoverable amount of a CGU is determined by value-in-use calculations which require the usage of assumptions. Cash flow estimates used in the calculations are based on management's best judgment and budget accepted by the management. The discount rate used in the calculations is based on the weighted average cost of capital (WACC) at the business area.
The possible impairment loss is recognized immediately in the income statement. Previously recognized goodwill impairment losses will not be revised.
The management has estimated the assumptions for the impairment testing at the balance sheet date. When estimating the amount of future cash flow and the discount rate, management has assessed the effects of the corona pandemic in the operating environment. Based on these estimates no significant changes has been made based on Corona-pandemic. The recoverable amount of the cash generating unit is based on the budget accepted by the management and for forecasts for three years. The discount rate used in calculations is 7,4% before taxes. The assumptions used in the cash flow estimates for future operations are based on management estimates at the balance sheet date. During the financial year impairment has not been recognized to the consolidated income statement.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
OTHER INTANGIBLE ASSETS
OTHER INTANGIBLE ASSETS
| EUR 1,000 | Development costs | Development costs in progress | Other intangible assets | Advance payments and assets in progress | Total |
|---|---|---|---|---|---|
| Acquisition cost at Jan. 1, 2020 | 0 | 349 | 10 880 | - | 11 229 |
| Exchange rate differences | - | - | 10 | - | 10 |
| Additions | - | 367 | 113 | 1 604 | 2 084 |
| Reclassification between items | - | -187 | 274 | - | 87 |
| Acquisition cost at Dec. 31, 2020 | 0 | 529 | 11 277 | 1 604 | 13 410 |
| Accumulated depreciation and amortization at Jan. 1, 2020 | 0 | 0 | -8 574 | 0 | -8 574 |
| Exchange rate differences | - | - | 4 | - | 4 |
| Depreciation and amortization for the financial year | - | - | -540 | - | -540 |
| Impairments | - | - | - | - | 0 |
| Reclassification between items | - | - | -87 | - | -87 |
| Accumulated depreciation and amortization at Dec. 31, 2020 | 0 | 0 | -9 197 | 0 | -9 197 |
| Book value at Dec. 31, 2019 | 0 | 529 | 2 080 | 1 604 | 4 213 |
COMPARISON YEAR
| EUR 1,000 | Development costs | Development costs in progress | Other intangible assets | Advance payments and assets in progress | Total |
|---|---|---|---|---|---|
| Acquisition cost at Jan. 1, 2019 | 4 640 | 398 | 10 346 | 0 | 15 384 |
| Exchange rate differences | - | - | 2 | - | 2 |
| Additions | - | - | 85 | - | 85 |
| Reclassification between items | -4 640 | -49 | 447 | - | -4 242 |
| Acquisition cost at Dec. 31, 2019 | 0 | 349 | 10 880 | 0 | 11 229 |
| Accumulated depreciation and amortization at Jan. 1, 2019 | -4 640 | -38 | -8 206 | 0 | -12 884 |
| Exchange rate differences | - | - | -1 | - | -1 |
| Depreciation and amortization for the financial year | - | - | -477 | - | -477 |
| Impairments | - | - | - | - | 0 |
| Reclassification between items | 4 640 | 38 | 109 | - | 4 787 |
| Accumulated depreciation and amortization at Dec. 31, 2019 | 0 | 0 | -8 574 | 0 | -8 574 |
| Book value at Dec. 31, 2019 | 0 | 349 | 2 306 | 0 | 2 655 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
OTHER INTANGIBLE ASSETS - BASIS OF PREPARATION
Basis of preparation
Other intangible assets include computer software licences, patents, capitalized development costs and other intangible rights. An intangible asset has been recognized in the balance sheet when it is probable that the expected future financial benefit attributable to the asset will flow to the entity over a period of several years (amortization period) and the cost of the asset can be measured reliably. Intangible assets acquired in a business acquisition have been recognized at fair value at the acquisition date. In other cases the expenditure from intangible assets has been recognized as an expense when incurred.
Other intangible assets with a finite useful life have been recorded in the balance sheet and recognized in the income statement as an expense based on the straight-line depreciation method over their useful life as follows:
| Patents | 10 years |
|---|---|
| Computer software | 3–5 years |
| Other intangible assets | 3–10 years |
| Capitalized development | 3–10 years. |
Development costs incurred in planning new or more advanced products and in manufacturing test machinery for testing them has been recognized as intangible assets in the balance sheet from the moment the product can be produced technologically, utilized commercially, and future financial benefit is expected from it. Capitalized product development costs include the material, work and testing expenditure incurred directly from completing the product for the intended purpose. After they have originally recognized in the balance sheet capitalized product development costs have been measured at acquisition cost less accumulated amortization and impairment. Development costs recognized as an expense during previous financial year is not capitalized at a later date.
An other intangible asset has been recognized in the balance sheet at original cost when it is probable that the expected future financial benefit attributable to the assets will flow to the entity over a period of several years (amortization period) and the cost of the assets can be measured reliably.
Impairment of intangible assets
Assets that are subject to the amortization have been reviewed for impairment always when events or changes in circumstances have provided indications that it may be impossible to recover the carrying amount of the assets. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. The value in use is the present value of the expected recoverable cash flows from the asset. For the assessment of impairment, the assets are classified at the lowest levels at which the cash flows can be separately identified.
The amount by which the carrying amount of the asset exceeds the recoverable amount has been recognized in the income statement as an impairment loss. An impairment loss recognized in previous periods for non-financial assets other than goodwill has been reassessed at each balance sheet date. The recognition of an impairment loss has been reversed when a change has taken place in the circumstances or in the estimates used to determine the recoverable amount of the asset. However, reversal of impairment has not exceeded the asset's carrying amount less impairment loss.
Management's accounting judgments
The expected useful lives of the items in the intangible assets in the balance sheet have been reviewed at each reporting date. If they differ considerably from previous estimates, the amortization plan is updated in accordance with the new expected useful lives.
Each asset has been assessed for indications of impairment as explained in the accounting principles above. Where the carrying amount of the asset exceeds the assets' estimated recoverable fair value, impairment has been recognized in the income statement. Previous impairment can be reversed if it can be confirmed that the circumstances have significantly been improved.
The valuations are sensitive to the assumptions involving future expected returns and discount rates. The discount rate describes the estimated interest rate expected on the markets, taking into account the time value of money and the special risks pertaining to the asset in question, the related adjustments for which have not been made to the estimated cash flows. The discount rate is defined using the average weighted capital cost, which describes the total equity and borrowing costs, taking into account the special risks linked to the assets. The discount rate used in calculations is 7.4%.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
RESEARCH AND DEVELOPMENT COSTS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| RESEARCH AND DEVELOPMENT COSTS | ||
| Research and development costs for the financial year | -4 627 | -4 419 |
| Development costs recognized as an asset in the balance sheet | 367 | 163 |
| Research and development costs recognized as an expense for the financial year | -4 260 | -4 256 |
Investing in the future
Basis of preparation
Research cost and those development costs which have not been capitalized to the balance sheet, has been recognized as an expense to the operating expenses before operating profit.
Amortization of capitalized product development costs has been started when the product is ready for use and released for sale. The useful life of development costs is three to ten years depending on the estimated lifetime of the product, during which time capitalized assets have been recognized as an expense on a straight-line basis. Capitalized costs for product development in progress have been tested annually for impairment with the value calculation, if the changes in the circumstances have provided indications of impairment.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
| EUR 1,000 | Land and water | Buildings and structures | Buildings and structures, right-of-use | Machinery and equipment | Other tangible assets | Advance payments and assets in progress | Total |
|---|---|---|---|---|---|---|---|
| Acquisition cost at Jan. 1, 2020 | 386 | 12 168 | 8 322 | 41 326 | 878 | 429 | 63 509 |
| Exchange rate differences | - | - | -379 | -569 | -2 | -26 | -950 |
| Additions | - | 13 | 702 | 1 042 | - | 1 316 | 3 073 |
| Disposals | - | - | 0 | -1 885 | - | - | -1 885 |
| Reclassification between items | - | 295 | 0 | 440 | 79 | -899 | -85 |
| Acquisition cost at Dec. 31, 2020 | 386 | 12 475 | 8 645 | 40 354 | 955 | 820 | 63 635 |
| Accumulated depreciation and amortization at Jan. 1, 2020 | - | -8 571 | -1 386 | -35 203 | -560 | - | -45 720 |
| Exchange rate differences | - | - | 40 | 493 | 10 | - | 543 |
| Accumulated depreciation and amortization of disposals and reclassifications | - | - | - | 1 774 | - | - | 1 804 |
| Depreciation and amortization for the financial year | - | -379 | -1 382 | -1 630 | -51 | - | -3 442 |
| Accumulated depreciation and mortization at Dec. 31, 2020 | - | -8 950 | -2 728 | -34 536 | -602 | - | -46 816 |
| Book value at Dec. 31, 2019 | 386 | 3 525 | 5 917 | 5 818 | 354 | 820 | 16 820 |
COMPARISON YEAR
| EUR 1,000 | Land and water | Buildings and structures | Buildings and structures, right-of-use | Machinery and equipment | Other tangible assets | Advance payments and assets in progress | Total |
|---|---|---|---|---|---|---|---|
| Acquisition cost at Jan. 1, 2019 | 386 | 11 815 | 7 391 | 39 041 | 749 | 1 398 | 60 781 |
| Exchange rate differences | - | - | 188 | 599 | 12 | - | 799 |
| Additions | - | - | 743 | 747 | - | 1 774 | 3 264 |
| Disposals | - | - | - | -779 | - | - | -779 |
| Reclassification between items | - | 353 | - | 1 718 | 116 | -2 743 | -556 |
| Acquisition cost at Dec. 31, 2019 | 386 | 12 168 | 8 322 | 41 326 | 878 | 429 | 63 509 |
| Accumulated depreciation and amortization at Jan. 1, 2019 | - | -8 147 | -1 389 | -33 131 | -501 | - | -43 167 |
| Exchange rate differences | - | - | 3 | -536 | -11 | - | -543 |
| Accumulated depreciation and amortization of disposals and reclassifications | - | - | - | 17 | - | - | 17 |
| Depreciation and amortization for the financial year | - | -424 | - | -1 553 | -49 | - | -2 026 |
| Accumulated depreciation and mortization at Dec. 31, 2019 | - | -8 571 | -1 386 | -35 203 | -560 | - | -45 720 |
| Book value at Dec. 31, 2019 | 386 | 3 597 | 6 936 | 6 123 | 318 | 429 | 17 789 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
PROPERTY, PLANT AND EQUIPMENT - BASIS OF PREPARATION
Basis of preparation
Property, plant and equipment have been measured at acquisition cost less accumulated depreciation and impairment. The acquisition cost includes the purchase price, cash and other discounts, import duties and fixed taxes. When a property, plant or equipment is manufactured in-house, it also includes, in addition to the above-mentioned items, a share of the Group's fixed costs. Ordinary property, plant and equipment repair and maintenance costs have been recognized through profit or loss as incurred. Possible costs incurred in restoring to the original state have been taken into account in IFRS accounting as part of the acquisition cost.
Depreciation of tangible assets is calculated using the straight-line method over their estimated useful lives as follows:
| Buildings | 25–40 years |
|---|---|
| Machinery and equipment | 4–12 years |
| Other fixed assets | 3–10 years |
| Land | no depreciations are made. |
Right-of-use assets are depreciated during the lease period of the lease contract.
The residual value and useful lives of assets are reviewed at the last day of each reporting period and are changed if necessary. If the carrying amount of an asset exceeds the estimated recoverable amount, it is immediately reduced to correspond to the recoverable amount. Gains and losses on decommissioning and disposal of property, plant and equipment have been recognized through profit or loss.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
RIGHT-OF-USE ASSETS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| LEASE CONTRACTS | ||
| Right-of-use assets, changes | ||
| Booking value at the beginning of the period | 6 936 | 7 391 |
| Exchange rate differences | -327 | 191 |
| Additions | 666 | 743 |
| Depreciations and impairments | -1 382 | -1 389 |
| Booking value at the end of the period | 5 917 | 6 936 |
| Liabilities | ||
| Lease liability, non-current | 4 496 | 5 495 |
| Lease liability, current | 1 385 | 1 441 |
| Lease liability, total | 5 881 | 6 936 |
| Items recognized in the income statement | ||
| Depreciation of the fixed assets, buildings | -1 382 | -1 389 |
| Interest expenses included in the financial items | -29 | -26 |
| Expenses related to the short-term lease contracts and low-value assets | -534 | -418 |
The information of off-balance sheet pledges and contingent liabilities have been presented in note Pledged assets and contingent liabilities, page 62.
Basis of preparation
Raute Group has rented warehouses and production facilities as well as machines and equipment for business use. Raute Group has adopted the standard IFRS 16 Leases starting on January 1, 2019. As a result of the implementation of the standard change, part of the leases of premises and production facilities leased by Raute Group has been recognized in the balance sheet.
The leases that include the right-of-use of the leased asset have been recognized in the item Right-of-use asset in the balance sheet. The asset has been recognized based on the right-of-use the asset and the lease liability based on the obligation to pay lease rent. Assets related to the lease contracts are depreciated during the lease period of the lease contract. If the lease contract is valid indefinitely, the Contract term has been specified by a contract.
The lease liability has been recognized as a liability based on the obligation to pay lease rent. The leases based on extension options that are relatively certain to be exercised in Raute Group have been included in the lease liability. The lease liability has been recognized based on the present value of those rents which are to be paid in the future according to the contract, but which has not been paid at the recognition date. The incremental loan rate has been used as a discount rate which was 1,4 per cent. The interest expense on the lease liability has been recognized in the income statement item financial expenses. The lease liability has been included in the item Interest-bearing liabilities in the consolidated balance sheet.
If the existing lease contract changes or the assumptions to be used in the calculation of the lease contract liability and the right-of use asset, the fixed asset and the lease liability shall be revaluated with the discount rate at the time of calculation. If the provided contract rent has been tied to the index, the lease contract and the fixed asset shall be revaluated again at the time of the lease change.
The short-term lease contracts with expected lease period no longer than 12 months, has been accounted for as off-balance sheet leases and the rent expenses of these contracts have been recognized in the income statement as incurred according to the rental period.
Lease contracts in which the lease assets are of low value have been accounted for as off-balance sheet leases, regardless of whether the contract is a non-current or current. The rent expenses of these contracts have been recognized as an expense to the income statement according to the rental period. Leases of short-term leases and low-value assets are presented as an off-balance sheet item in lease liabilities in pledged assets and contingent liabilities, page 62.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
DEPRECIATION AND AMORTIZATION
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| DEPRECIATION AND AMORTIZATION | ||
| Depreciation and amortization by class of assets | ||
| Intangible assets | ||
| - Capitalized development costs | - | - |
| - Other intangible assets | -649 | -477 |
| Property, plant and equipment | ||
| - Buildings and structures | -379 | -424 |
| - Buildings, right-of-use assets | -1 382 | -1 389 |
| - Machinery and equipment | -1 577 | -1 553 |
| - Other tangible assets | -51 | -49 |
| TOTAL | -4 039 | -3 892 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
INVENTORIES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| INVENTORIES | ||
| Materials and supplies | 6 461 | 7 053 |
| Work in progress | 5 793 | 3 626 |
| Other inventories | 1 765 | 1 079 |
| Advance payments paid | 1 023 | 602 |
| TOTAL | 15 041 | 12 360 |
During the financial year EUR 785 thousand (EUR 70 thousand) have been recognized in expenses recuding the carrying amount of inventories to correspond to the disposal price.
Basis of preparation
Inventories have been measured at the lower of acquisition cost or net realizable value. Raw materials and supplies have been measured using the weighted average cost method. The cost of finished goods and work in progress comprises direct material and production costs and the portion of indirect production costs and depreciation allocated to products at a normal capacity excluding financial expenses. Net realizable value is the estimated selling price in the ordinary course of business, less costs of completion and sale. The value of inventories includes impairment due to obsolescence.
Risk management
Advance payments made to suppliers and subcontractors at the reporting date involve a risk of the counterparty not being able to fulfil their contractual obligations and return the advance payment. The risk is managed by examining the size of the subcontractors' risk position and the physical progress of the task and by demanding collateral for the advance payments from specific suppliers. At the reporting date, there was EUR 1.0 million in unsecured paid advance payments (EUR 0.6 million).
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CURRENT PAYABLES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| TRADE PAYABLES AND OTHER PAYABLES | ||
| Current interest-free liabilities in the balance sheet | ||
| Advance payments received | 18 144 | 12 005 |
| Trade payables | 6 534 | 6 852 |
| Accrued expenses and prepaid income | 7 833 | 7 834 |
| Derivatives | 138 | 61 |
| Income tax liability | 412 | 903 |
| Other liabilities | 1 436 | 1 850 |
| TOTAL | 34 496 | 29 504 |
| Substantial items included in accrued expenses and prepaid income | ||
| Accrued project expenses related to customer contracts | 846 | 668 |
| Accrued employee related expenses | 6 393 | 6 775 |
| Financial expenses | 66 | 66 |
| Redemption obligation of the subsidiary acquisition | 231 | - |
| Other accrued expenses and prepaid income | 297 | 324 |
| TOTAL | 7 833 | 7 834 |
Advance payments received, EUR 18,144 thousand (EUR 12,005 thousand), include advance payments received from performance obligations to be satisfied over time in the amount of EUR 14,511 thousand (EUR 4,887 thousand).
Basis of preparation
The Group's trade payables and other payables include liabilities arising from goods and services delivered prior to the financial year-end. Liabilities are unsecured and are due to be paid within 12 months after the reporting period. The book value of the items corresponds to the fair value at the closing date.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
EXCHANGE RATE GAINS AND LOSSES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| EXCHANGE RATE GAINS AND LOSSES (NET) | ||
| Included in net sales | 164 | -65 |
| Included in financial income and expenses | -109 | 160 |
| Included in other comprehensive income items | -596 | -66 |
| TOTAL | -541 | 29 |
Basis of preparation
Foreign currency transactions of foreign subsidiaries' financial statements have been translated into the functional currency using the exchange rates prevailing at the dates of the transactions. In practice the translation is often carried out using rates that approximately correspond to those prevailing at the dates of transactions. Monetary items in foreign currency have been translated into the functional currency using the rates prevailing on the last day of the reporting period. Foreign currency non-monetary items measured at fair value have been translated into the functional currency using the rates prevailing at the date of fair value measurement. Otherwise non-monetary items have been measured using the rate prevailing at the date of transaction.
Gains and losses from foreign currency transactions and translation of monetary items have been recognized in the income statement. Exchange rate gains and losses from transactions have been presented in the corresponding items in a net basis above the operating profit or loss. Exchange rate gains and losses related to cash and cash equivalents, loans and other financial assets and liabilities have been presented in the income statement under the item Financial income and expenses.
The exchange gains and losses included in the comprehensive income items include exchange rate differences linked to monetary items which fulfill the terms defined for the hedging of cash flows. In addition, the items include the translation difference profits generated by the net investments linked to a foreign subsidiary.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
DERIVATIVES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| DERIVATIVES | ||
| Nominal values of forward contracts in foreign currency | ||
| Hedge accounting | ||
| - Related to the hedging of net sales | 320 | 1 578 |
| Derivatives which do not meet the criteria of hedge | ||
| - Related to financing | 733 | 801 |
| - Related to the hedging of net sales | 1 805 | 6 432 |
| Fair values of forward contracts in foreign currency | ||
| Hedge accounting | ||
| - Related to the hedging of net sales | -2 | 7 |
| Derivatives which do not meet the criteria of hedge | ||
| - Related to financing | - | 15 |
| - Related to the hedging of net sales | 31 | 47 |
| EUR 1,000 | 2020 Nominal value | 2019 Nominal value |
| CONTRACTUAL MATURITIES OF HEDGE ACCOUNTING DERIVATIVES | ||
| Economic hedging | ||
| Under one year | 320 | 1 578 |
| TOTAL | 320 | 1 578 |
| EUR 1,000 | 2020 | 2019 |
| CHANGES IN HEDGE RESERVES | ||
| Hedge reserves Jan., 1 | 83 | 143 |
| Additions to hedge accounting (through comprehensive income) | - | 117 |
| Transferred to profit or loss (from comprehensive income items) | -117 | -143 |
| From hedge accounting to economic hedging | - | - |
| Deferred tax at Group's tax rate 20% | 34 | -34 |
| Hedge reserve at Dec., 31 | 0 | 83 |
Basis of preparation
The Group has according to its finance policy used currency derivative contracts to hedge against currency risks related to future transactions of commercial transactions and financial items. At the time of the adoption of each derivative contract have been determined in which assets or liability recognized in the balance sheet, or highly probable forecast transaction (cash flow hedge) the risk it protects and has the hedge accounting applied.
Hedge accounting has been applied when the derivative meets the conditions for hedge accounting. The decision to apply hedge accounting is made separately for each contract at the time of contract. Each hedging derivative protects certain assets and liabilities, binding contracts or future binding business transactions. The hedging relationship between the hedging instrument and the hedged item, as well as the risk management objectives and the strategy for hedging transactions, has been documented when the hedging relationship arises. The effective share of changes in the fair values of derivatives that meet the criteria for hedge accounting is recognized in equity. The gain or loss associated with the ineffective portion is recognized immediately in the income statement when the hedge is ineffective. When a derivative no longer meets the criteria for hedge accounting, gains or losses accumulated in equity has been recognized in profit or loss. Gains and losses on fair value accumulated in equity has been recognized in profit or loss in the period when the hedged transaction, such as the future transaction, has been recognized in the income statement and the exchange rate changes in the transaction are recognized in the income statement.
Derivatives which do not meet the criteria of hedge accounting, have been classified as held-for-sale. Derivatives classified as these contracts have been accounted for at fair value through profit or loss in the other operating income or expenses.
Exchange rate losses EUR 124 (179 thousand) have been recognized in the income statement for the derivatives classified under hedge accounting.
Derivatives that do not meet hedge accounting criteria the exchange rate gains EUR 64 thousand (losses EUR 224 thousand) have been recognized in profit or loss.
Recognized derivatives have been presented as accrued income or accrued liabilities in current assets or liabilities in the balance sheet. Derivatives mature at contractual due dates and within 12 months after the balance sheet date.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
RISK MANAGEMENT – CURRENCY RISKS
Risk management
The Group operates in international markets and is thus exposed to currency risks resulting from changes in currency exchange rates. The Group's currency risks consist of foreign currency denominated sales and purchases as well as assets and liabilities recognized in the balance sheet (transaction risks) and investments in foreign subsidiaries (translation risks).
The Group's main currency is the euro. The most significant currency risks result from the following currencies:
- Canadian dollar (CAD)
- US dollar (USD)
- Chinese yuan (CNY)
- Russian rouble (RUB).
The distribution of the Group's sales varies annually according to market area. In 2020 amount of 80 percent (67%) of net sales were generated outside the euro zone. The Group primarily uses Group company's functional currency as the primary trading currency, of which the most important is the euro. The proportion of the net sales sold in another currency than the Group's home currency was 7 percent (12%) during the year 2020.
The Group's operative units hedge foreign currency denominated payments based on binding sales contracts through the Parent company's financing unit when the contracts take effect. Currency forward contracts are used to hedge sales payments operatively.
The Group hedges the internal trading with forward contracts. The most significant individual currency risk related to purchasing in the Group arises from the Parent company's internal purchases from China. The trading currency of these purchase agreements is the euro but the Group's costs are determined by the Chinese yuan. Primarily, cash flows accumulating from
un-hedged sales payments in the same currency are used in the hedging of currency risks related to binding procurement contracts.
Future cash flows, which are not based on contracts binding both parties, are usually not hedged. Currency clauses are used to hedge against currency risks during the quotation period. Depending on the case, currency risks related to preliminary sales contracts are hedged with currency option contracts. The nominal value of forward contracts used to hedge business operations was EUR 3 million (MEUR 9) and the fair value EUR 31 thousand negative (EUR 69 thousand) at the balance sheet date.
The internal loans taken out by the Group companies and their deposits are mainly in the functional currency of the subsidiary in question. The currency exchange risks of the Group's internal loans have been hedged with forward contracts, with the exception of equity loans or loans in fact classified as such.
At the end of the financial year 2020, no forward contracts were related to the hedging of the Group's financing. The subsidiaries' loans from external financial institutions were in each company's functional currency.
The forward contract receivables and liabilities related to the economic hedging of sales currency payments, which do not meet the hedge accounting criteria, form a profit affecting currency risk to the Group at the balance sheet date to the extent that value of the hedged contracts exceeds the net sales recognized from the respective binding sales contracts. The measurement of these forward contracts and current customer contract assets had an EUR 31 thousand positive effect on the Group's operating profit (EUR 120 thousand) at the reporting date. The nominal values of the derivatives have been presented in the note Derivatives, page 49.
The Group applies the hedge accounting to the currency derivative contracts when the change in the fair value of a contract may have a significant temporary effect on the Group's operating profit due to the change in exchange rates. The Group's Parent company concludes, with an external counterparty, a derivative contract which is defined as a hedging instrument in hedge accounting. Subsidiaries use internal derivatives to hedge transactions defined as hedged items. The total amounts of the valuation gains and losses for derivatives have been presented in the note Derivatives, page 49.
The Group regularly monitors transaction risks in the main currency pairs. Currency flows related to binding contracts, and derivative contracts used for their hedging, are taken into account in the net currency position from the reporting date onwards regardless of which year's profit or loss the currency risk will affect. The aim of managing currency risks is to keep the open net currency positions of each Group currency pair at less than EUR 500 thousand for each currency pair other than for the Russian ruble, for which the aim is to keep the net currency position at less than EUR 1 million. The Group's net currency position and its portion included in the balance sheet at the reporting date (Net balance sheet risk) is presented in currency pairs in the following table:
| Net currency position | Net balance sheet risk | |||
|---|---|---|---|---|
| EUR 1,000 | 2020 | 2019 | 2020 | 2019 |
| CNY/EUR | -44 | 60 | -94 | -289 |
| RUB/EUR | 26 | 87 | 26 | 87 |
| CAD/EUR | 123 | -261 | 550 | 199 |
| USD/EUR | 2 937 | 488 | 2 675 | 1 012 |
Cash flows related to binding contracts included in the net currency position have been hedged EUR 319 thousand in the CAD/EUR currency pair and EUR 277 thousand in the USD/EUR currency pair.
The Group has foreign subsidiaries which have equities in currencies other than the Parent company's functional currency. The currency risks related to the conversion of the foreign subsidiaries' net investments to the Group's home currency, the euro, have not been hedged. The Group's subsidiaries' non-euro-denominated equities equalled altogether EUR 8,654 thousand on December 31, 2019 (EUR 9,909 thousand). Non-euro-denominated equities are detailed according to currency in the following table:
Subsidiaries' equity, non-euro-denominated
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| CNY | -304 | 696 |
| RUB | 529 | 470 |
| CAD | 2 830 | 2 894 |
| USD | 4 907 | 5 343 |
| Other | 603 | 506 |
| Total | 8 564 | 9 908 |
A sensitivity analysis in the main currency pairs on the transaction risk, i.e. the effect of reasonable potential changes in the exchange rates on the Group's profit or loss after tax on December 31, 2020 is presented in the following table:
Effect on profit after tax
| EUR 1,000 | 2020 | 2019 | |
|---|---|---|---|
| CNY +/- 30% | +/- | 82 | 114 |
| RUB +/- 30% | +/- | 14 | 72 |
| CAD +/-30% | +/- | 51 | 706 |
| USD +/- 30% | +/- | -295 | 134 |
All foreign currency receivables and liabilities as well as the currency derivative contracts, recognized in the balance sheet on the reporting date, have been taken into account in the sensitivity analysis. In the analysis, the change in exchange rate has been estimated to be +/-30 percent from the reporting date based on the prevailing uncertainty in the financial market development. Other factors are estimated to remain unchanged.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
EQUITY
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| SHARE CAPITAL | ||
| Share capital at Jan. 1 | 8 256 | 8 256 |
| Share capital at Dec. 31 | 8 256 | 8 256 |
| FAIR VALUE RESERVE AND OTHER RESERVES | ||
| Invested non-restricted equity reserve at Jan. 1 | 5 711 | 5 711 |
| Exercised stock options | - | - |
| Invested non-restricted equity reserve at Dec. 31 | 5 711 | 5 711 |
| Other reserves at Jan. 1 | 2 794 | 1 453 |
| Fair value reserve | -1 355 | 1 565 |
| Hedging reserve, hedge accounting | -117 | 283 |
| Equity-settled share-based payments | -118 | -329 |
| Deferred taxes related to these items | 272 | -178 |
| Transfer of gain on disposals of equity investments at fair value through other comprehensive income to retained earnings | - | - |
| Other reserves at Dec. 31 | 1 477 | 2 794 |
| EXCHANGE RATE DIFFERENCES | ||
| Exchange rate differences at Jan. 1 | 949 | 1 015 |
| Exchange rate differences on translating foreign operations | -596 | -66 |
| Exchange rate differences at Dec. 31 | 353 | 949 |
| RETAINED EARNINGS | ||
| Retained earnings at Jan. 1 | 31 794 | 30 075 |
| Transfer of gain on disposals of equity investments at fair value through other comprehensive income to retained earnings | - | - |
| Dividends | -6 182 | -5 968 |
| Profit for the financial year | -901 | 7 687 |
| Retained earnings at Dec. 31 | 24 712 | 31 794 |
| TOTAL EQUITY | 40 406 | 49 502 |
Basis of preparation
Series K and series A shares held by third parties have been presented in share capital. Expenditure related to issues or acquisitions of own equity instruments has been presented as allowance for equity.
Invested non-restricted equity reserve includes other equity investments and the share subscription price unless not recognized to the equity based on an explicit resolution.
Other reserves include the fair value reserve arising from the valuation of revaluation reserve, granted share-based remuneration settled in shares and the changes in fair value in derivative contracts which meet the conditions of hedging.
Exchange rate differences include exchange differences arising from translation of foreign subsidiaries financial statements.
The dividend proposed by the Board of Directors to the Annual General Meeting has been recognized as a liability and a deduction from distributable equity for the period in which the dividend has been approved for distribution by the shareholders.
The Annual General Meeting held on March 31, 2020 decided to pay a dividend of EUR 1.45 per share for the financial year 2019. The total amount of dividends was EUR 6.2 million with series A shares accounting for EUR 4,744,447.85 and series K shares for EUR 1,437,183.45. The dividend payment date was April 9, 2020.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
OTHER COMPREHENSIVE INCOME ITEMS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| OTHER COMPREHENSIVE INCOME ITEMS | ||
| Items that will not be reclassified to profit or loss | ||
| Changes in the fair value of financial asset at fair value through other comprehensive income | -1 355 | 1 565 |
| Items that may be subsequently reclassified to profit or loss | ||
| Hedging reserve, hedge accounting | -117 | 283 |
| Exchange differences on translating foreign operations | -596 | -66 |
| Deferred taxes related to these items | 272 | -178 |
| Total | -441 | 39 |
| TOTAL OTHER COMPREHENSIVE INCOME ITEMS | -1 796 | 1 604 |
Basis of preparation
Other comprehensive items include income and expense items that are included in other comprehensive income in accordance with IFRS standards, and are not recognized in profit or loss. At the balance sheet date, the other comprehensive income of the Raute Group included exchange rate gains and losses arising from translating the financial statements of the foreign operation, the portion of gains and losses on the hedging instrument in cash flow hedges, the gains and losses recognized on remeasuring financial assets that are measured or classified as at fair value through other comprehensive income, and the current tax effects based on the taxable income for the period and deferred taxes related to these items.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
SHARES AND SHARE CAPITAL
| Shares, 1,000 pcs | 2020 | 2019 | |
|---|---|---|---|
| Series K shares (ordinary shares) | 20 votes/share | 991 | 991 |
| Series A shares | 1 vote/share | 3 272 | 3 272 |
| Total shares at Dec. 31 | 4 263 | 4 263 | |
| Own shares at Jan. 1 | 0 | 0 | |
| Acquisition of own shares | - | - | |
| Disposal of own shares | - | - | |
| Own shares at Dec. 31 | 0 | 0 | |
| Reconciliation of the number of shares, 1,000 pcs | |||
| Number of shares at Jan. 1 | 4 263 | 4 263 | |
| Exercised stock options | - | - | |
| Number of shares at Dec. 31 | 4 263 | 4 263 |
Raute Corporation has two series of shares, series K and series A. Series K and Series A shares have an equal right to dividends and company assets.
Share-related data is presented on page 86 of the financial statements.
Capital structure management
The objective of the Group's capital structure management is an effective capital structure that secures the Group's operational preconditions on the capital market. The Group's Parent company's credit ranking throughout 2020, as well as in the comparison year 2019, was good. The Group's capital structure is followed using the equity ratio, which has been set a strategic target value. During the financial year 2020 the target value of the equity ratio was over 40 percent. At the end of the financial year, the equity ratio was 59 percent (63%) and gearing -9.6 percent (-28%).
| Changes in share capital from Jan. 1, 1994 to Dec. 31, 2019 | Share capital EUR | Number of series K shares | Number of series A shares |
|---|---|---|---|
| Share capital at Jan. 1, 1994 | 5 359 073 | 1 054 600 | 2 124 240 |
| Issue of share capital Sep. 21, 1994 | 1 069 285 | - | 635 768 |
| Conversion of series K shares into series A shares 1998 | - | -14 000 | 14 000 |
| Decrease of share capital (premium fund) June 30, 2000 | -12 648 | - | - |
| Increase of share capital, capitalization issue June 30, 2000 | 1 213 506 | - | - |
| Conversion of series K shares into series A shares 2003 | - | -44 539 | 44 539 |
| Conversion of series K shares into series A shares 2004 | - | -4 900 | 4 900 |
| Registration of shares with options 2006 | 380 300 | - | 190 150 |
| Share subscriptions with series 2010 stock options 2014 | 20 940 | - | 10 470 |
| Share subscriptions with series 2010 stock options 2015 | 192 960 | - | 96 480 |
| Directed issue of shares to the company itself 2016 | - | - | 14 523 |
| Share subscriptions with series 2010 stock options 2016 | 32 900 | - | 80 231 |
| Directed issue of shares to the company itself 2017 | - | - | 8 913 |
| Share subscriptions with series 2010 stock options 2017 | - | - | 33 873 |
| Share subscriptions with series 2010 stock options 2018 | - | - | 13 946 |
| Share capital at Dec. 31, 2020 | 8 256 316 | 991 161 | 3 272 033 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
EARNINGS PER SHARE
| 2020 | 2019 | |
|---|---|---|
| Undiluted earnings per share | ||
| Share of result that belongs to the owners of the Parent company, EUR 1,000 | -901 | 7 687 |
| Weighted average number of shares, 1,000 pcs | 4 263 | 4 263 |
| Earnings per share, EUR | -0,21 | 1,80 |
| Diluted earnings per share | ||
| Share of result that belongs to the owners of the Parent company, EUR 1,000 | -901 | 7 687 |
| Diluted weighted average number of shares, 1,000 pcs | 4 267 | 4 287 |
| Diluted earnings per share, EUR | -0,21 | 1,79 |
| The weighted average number of shares used as divider when calculating the diluted earnings per share | ||
| The weighted average number of shares used as divider when calculating the diluted earnings per share, 1,000 pcs | 4 263 | 4 263 |
| Share-based payments, 1,000 pcs | 4 | 24 |
| The weighted average number of shares used when calculating the diluted earnings per share, 1,000 pcs | 4 267 | 4 287 |
Basis of preparation
Undiluted earnings per share have been calculated by dividing the period's profit attributable to equity holders of the Parent company by the weighted average of outstanding shares in the period.
Diluted earnings per share have been calculated by dividing the period's profit attributable to equity holders of the Parent company by the weighted average of shares in the period, which have been adjusted by dilutive effect of the share-based payments. Share-based payments have dilutive effect if the exercise price of the share benefit is lower than the fair value of the share.
For the calculation of diluted earnings per share, share-based payments calculation is done to determine the number of shares that could have been acquired at fair value (the company's share's average market price for the financial year) based on the monetary value of the subscription rights attached to outstanding share benefits. This number of shares is compared with the number of shares that would have been issued assuming the exercise of the share benefits. The share-based payments had a diluted effect of 3,739 pieces (23,797 pieces) on calculating the diluted number of shares.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
FINANCIAL LIABILITIES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| CURRENT INTEREST-BEARING LIABILITIES | ||
| Financial liabilities recognized at amortized cost | ||
| Partial payments of financial loans | 1 857 | 1 502 |
| TOTAL | 1 857 | 1 502 |
| Distribution of the Group's current loans by currencies | ||
| - Chinese yuan (CNY) | 100 % | 100 % |
| The weighted averages of effective interest rates of current interest-bearing loans | ||
| Partial payments of financial loans | 4,89 % | 4,93 % |
The following table shows the carrying amounts of financial item which corresponds their fair value carried in the consolidated balance sheet. The Group's principles of fair value determination related to the financial instruments have been described in the note Basis of preparation.
| EUR 1,000 | Carrying amount 31.12.2020 | Carrying amount 31.12.2019 |
|---|---|---|
| Carrying amounts of financial liabilities | ||
| Financial liabilities at fair value through profit or loss | ||
| - Derivative contracts | 138 | 61 |
| Financial liabilities recognized at amortized cost | ||
| - Financial loans | 1 857 | 1 502 |
| - Trade payables and other liabilities | 26 114 | 20 706 |
| - Accrued expenses and prepaid income | 7 833 | 7 834 |
| Total | 35 942 | 30 103 |
| EUR 1,000 | Level 1 | Level 2 |
| --- | --- | --- |
| Hierarchy levels | ||
| Financial liabilities at fair value through profit or loss | ||
| - Derivative contracts | - | 138 |
| Total | - | 138 |
The fair value of the instruments included in the hierarchy level 2 is based on the price available from the market data but instruments are not traded in an active market.
Basis of preparation
Financial liabilities have been classified as financial liabilities at amortized cost and as financial liabilities at fair value through profit or loss according to the standard IFRS 9 Financial instruments. Financial liabilities are initially recognized at fair value. Transaction costs have been included in the initial carrying amount of the financial liabilities at amortized cost. Later, financial liabilities, excluding derivative liabilities, have been measured at amortized cost using the effective interest method. Current financial liabilities are debts where the Group has no unconditional right to defer the payment of the debt to at least 12 months from the reporting date.
Partial payments of the financial loan in the following financial year have been presented in the current liabilities.
The Group's financial liabilities include a financial loan of a foreign subsidiary totaling EUR 1.9 million (MEUR 1.5) from a financial institution approved by the Parent company. The loan is secured by a counter guarantee from the Parent company. The Group's pledges and contingent liabilities have been presented in note Pledged assets and contingent liabilities, page 62.
The lease liability has been recognized as a liability based on the obligation to pay lease rent. The lease liability has been recognized based on the present value of those rents which are to be paid in the future according to the contract, but which has not been paid at the recognition date. The incremental loan rate has been used as a discount rate which was 1.4 percent on the date of transition. The interest expense on the lease liability has been recognized in the income statement item financial expenses. The lease liability has been included in the item Interest-bearing liabilities in the consolidated balance sheet. At the balance sheet date December 31, 2020, the amount of the Group's lease liabilities was EUR 5,881 thousand (EUR 6,936 thousand), of which EUR 1,385 was current lease liability (EUR 1,441 thousand) and EUR 4,496 thousand (EUR 5,496 thousand) was non-current lease liability.
Risk management
The Group's interest risk results from financial liabilities. The Group's objective is to hedge against interest risks related to liabilities through fixed-interest rate loans, interest rate derivative instruments and sufficient liquid assets. The Group takes out loans with either fixed interest rates or floating interest rates. The floating interest rate loans expose the Group's cash flow to interest risk.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
MATURITIES OF FINANCIAL LIABILITIES
| Maturities of financial liabilities at Dec. 31, 2020 | |
|---|---|
| EUR 1,000 | 2021 |
| Financial loans | |
| --- | --- |
| Repayments | 1 857 |
| Financial expenses | 47 |
| Total | 1 904 |
| Trade payables | |
| --- | --- |
| Repayments | 6 534 |
| Financial expenses | - |
| Total | 6 534 |
| Accrued expenses and prepaid income | |
| --- | --- |
| Repayments | 7 833 |
| Financial expenses | - |
| Total | 7 833 |
| Derivatives | |
| --- | --- |
| Cash outflow | -2 150 |
| Cash inflow | 2 124 |
| Total | -26 |
| Maturities of financial liabilities at Dec. 31, 2019 | |
| --- | --- |
| EUR 1,000 | 2020 |
| Financial loans | |
| --- | --- |
| Repayments | 1 502 |
| Financial expenses | 18 |
| Total | 1 520 |
| Trade payables | |
| --- | --- |
| Repayments | 6 852 |
| Financial expenses | - |
| Total | 6 852 |
| Accrued expenses and prepaid income | |
| --- | --- |
| Repayments | 7 834 |
| Financial expenses | - |
| Total | 7 834 |
| Derivatives | |
| --- | --- |
| Cash outflow | -8 296 |
| Cash inflow | 8 335 |
| Total | 39 |
| EUR 1,000 | 2020 |
| --- | --- |
| FINANCIAL LOANS | |
| Financial loans at the beginning of the period | 1 502 |
| Proceed from financial loans | 1 857 |
| Repayments of financial loans | -1 502 |
| Financial loans maturing within one year | 1 857 |
| LEASE LIABILITY | |
| Lease liability at the beginning of the year* | 6 936 |
| Change in lease liability | -1 055 |
| Lease liability at the end of the financial year | 5 881 |
| FINANCIAL ASSETS | |
| Financial assets at the beginning of the period | 22 360 |
| Change in financial assets | -10 638 |
| Exchange rate differences from financial assets | -121 |
| Financial assets at the end of the period | 11 601 |
| NET LIABILITIES | |
| Financial loans maturing within one year | 1 857 |
| Lease liability at the end of the financial year | 5 881 |
| Deducted: Financial assets at the end of the period | -11 601 |
| Net liabilities | -3 863 |
MATURITIES OF LEASE LIABILITIES AT DEC. 31, 2020
| EUR 1,000 | 1 year | 1-5 years | more than 5 years |
|---|---|---|---|
| Repayments | 1 521 | 3 139 | 1 643 |
| Financial expenses | 25 | 104 | 53 |
| Total | 1 546 | 3 243 | 1 696 |
- Raute has adopted the standard IFRS 16 as of January 1, 2019.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
FINANCIAL ASSETS
| EUR 1,000 | Carrying amount 31.12.2020 | Carrying amount 31.12.2019 |
|---|---|---|
| Carrying amounts of financial assets | ||
| Financial assets at fair value through profit or loss | ||
| - Derivative contracts | 30 | 124 |
| Financial assets at fair value through other comprehensive income | ||
| - Unquoted share investments | 1 387 | 2 741 |
| Financial assets at amortized cost | ||
| - Account receivables and other receivables | 34 323 | 30 856 |
| - Cash and cash equivalents | 11 601 | 22 360 |
| Total | 47 342 | 56 083 |
The balance sheet item Accounts receivables and other receivables includes current customer contract assets of performance obligations to be satisfied over time EUR 20,981 thousand (EUR 17,693 thousand).
| EUR 1,000 | Level 1 | Level 2 | Levl 3 | Total |
|---|---|---|---|---|
| Hierarchy levels | ||||
| Financial assets at fair value through other comprehensive income | ||||
| - Unquoted share investments | - | - | 1 387 | 1 387 |
| Financial assets at fair value through profit or loss | ||||
| - Derivative contracts | - | 30 | - | 30 |
| Total | - | 30 | 1 387 | 1 417 |
Financial instruments at fair value are categorized according to standard. Instruments included in level 1 are traded in active markets. The fair values of these instruments are based on the quoted market prices at the balance sheet date. The fair value of the instruments included in level 2 is based on the price available from the market data but instruments are not traded in an active market. The fair value of the instruments included in level 3 is not based on the observable market data but is based on the estimates from the management.
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| OTHER FINANCIAL ASSETS | ||
| Unquoted share investments | 1 387 | 2 741 |
| Total | 1 387 | 2 741 |
Basis of preparation
Financial assets have been classified as financial assets at fair value through profit and loss, fair value through other comprehensive income and financial assets at amortized costs according to the standard IFRS 9 Financial instruments. The classification has been made based on the purpose of acquisition and nature of the cash flow in conjunction with the original acquisition. Financial assets have been derecognized from the balance sheet when the contractual right to receive cash flows has expired or the Group has substantially transferred risks and income outside the Group. Financial assets maturing within 12 months are included in current assets.
Derivative contracts which do not fulfill the conditions of the hedge accounting have been classified as financial assets at fair value through profit or loss. All purchases and sales of financial assets have been recognized on the transaction date.
Investments in unquoted shares have been included in non-current assets unless the intention is to hold them less than 12 months from the balance sheet date. The Group has so far no intention to dispose these investments in which case they have been included in non-current assets.
The fair value of the derivative contracts which do not fulfill the conditions of hedge accounting have been determined using the market values for corresponding contracts and maturity at the balance sheet date. Gains and losses from fair value measurement has been recognized in the income statement at the financial period they have been incurred. Nominal values of currency derivative contracts have been disclosed in the note Derivatives, page 49.
Financial assets at amortized cost include accounts receivables, accrued receivables, current customer contract assets and other receivables. Due to the short-term nature of receivables, the original carrying amount of the receivables corresponds to their fair value. The discounting effect is not significant when taking into account the maturity of the receivables. The balance sheet accounts receivables at the reporting date do not include significant risk clusters.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
IMPAIRMENT OF FINANCIAL ASSETS
Expected credit loss risk
| Dec. 31, 2020 | Not due | 1-30 days | 31-60 days | 61-90 days | 91-180 days | 181-360 days | >360 days | Total |
|---|---|---|---|---|---|---|---|---|
| Expected loss rates, % | 0 % | 0 | 0 % | 1 % | 1 % | 25 % | 100 % | |
| Gross carrying amount of accounts receivables, EUR 1 000 | 6 502 | 578 | 235 | 371 | 127 | 56 | 47 | |
| Loss allowance, EUR 1 000 | 0 | 0 | 0 | 4 | 1 | 14 | 47 | 66 |
| Dec. 31, 2019 | Not due | 1-30 days | 31-60 days | 61-90 days | 91-180 days | 181-360 days | >360 days | Total |
| Expected loss rates, % | 0 % | 0 % | 1 % | 3 % | 5 % | 25 % | 100 % | |
| Gross carrying amount of accounts receivables, EUR 1 000 | 7 323 | 891 | 184 | 65 | 237 | 129 | 65 | |
| Loss allowance, EUR 1 000 | 2 | 1 | 1 | 2 | 12 | 32 | 65 | 115 |
| EUR 1,000 | 2020 | 2019 | ||||||
| --- | --- | --- | ||||||
| The reconciliation of loss allowance for the Accounts receivables | ||||||||
| Amounts restated through opening retained earnings | ||||||||
| Opening loss allowance | 115 | 158 | ||||||
| Change in the expected credit loss during the financial year | -49 | -43 | ||||||
| Closing loss allowance at the end of the financial year | 66 | 115 |
Impairment of financial assets
The credit risk related to the accounts receivables has been estimated according to the standard IFRS 9 on the basis of evaluation of the lifetime expected for accounts receivables at the balance sheet date. Raute Group has applied the simplified approach allowed for recognition of credit losses of accounts receivables, because accounts receivables do not contain significant financing component.
The accounts receivables have been grouped based on an aging distribution and a credit risk characteristics. The expected credit loss is based on historical credit loss amounts taking into account individual estimates in the accounts receivables. The information of the expected credit loss has been presented in the table Expected credit loss risk. Estimated impairment losses have been recognized through profit or loss. If the amount of the impairment loss will decrease in any subsequent financial year and deduction may be considered related to the recognition of impairment after the event, the recognized loss is reversed through profit or loss.
An impairment of EUR 66 thousand has been recognized for expected credit loss allowance on accounts receivables during the financial year. Previously recognized losses of the expected credit losses of accounts receivables have been reversed, and the total impact to the profit is EUR 49 thousand positive. If the amount of the impairment loss will decrease in any subsequent financial year and deduction may be considered related to the recognition of impairment after the event, the recognized loss is reversed through profit or loss.
The credit loss model has no impact on other financial assets nor on the financial assets recognized at fair value through profit or loss in accordance with IFRS 9 because, at the time of fair value measurement expected credit losses have already been taken into account.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CASH AND CASH EQUIVALENTS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| CASH AND CASH EQUIVALENTS | ||
| Cash and bank accounts | 11 601 | 22 360 |
| TOTAL | 11 601 | 22 360 |
| Cash and cash equivalents in cash flow statement | ||
| Cash and cash equivalents | 11 601 | 22 360 |
| TOTAL | 11 601 | 22 360 |
Basis of preparation
Cash and cash equivalents comprise cash in hand, current bank deposits and other highly liquid short-term investments with original maturities of three months or less. Bank overdrafts are included in current interest-bearing liabilities. Credit accounts related to Group accounts are included in current interest-bearing liabilities and presented net if the Group has a contractual legal right of set-off concerning full or partial payment or elimination of an amount to the lender. Financial assets are derecognized when the contractual right to cash flows expires or the Group has substantially transferred risks and income outside the Group.
Risk management
Counterparty risk for investment activities
The financing instrument contracts that the Group has concluded with banks and financial institutions involve the risk that the counterparty is not able to fulfill its obligations according to the contract. In investment activities and when concluding derivative contracts, only those parties which have a good credit rating and meet the other terms and conditions defined by the financing policy are accepted as counterparties. When making investments, or derivative and loan agreements, the Group applies counterparty-specific upper limits to avoid risk clusters. On the balance sheet date, the investments assets related to the Group's cash management were in bank accounts. The liquid assets in financial institutions outside the euro zone were EUR 2.8 million (MEUR 2.3) at the balance sheet date.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
LIQUIDITY RISK - COVENANTS
Risk management
Due to the nature of the Group's project business, required financing and the amount of liquid assets also fluctuate in the short term. Predicting working capital requirements is made especially challenging by new orders which have individual payment terms and involve uncertainties related to delivery schedules.
The minimum amounts of cash and cash equivalents, current investments, and available credit liabilities have been defined in the Group's financing policy to ensure the Group's liquidity. Good liquidity is maintained primarily through efficient working capital and cash management. In the long term, risks related to the availability and pricing of funding are managed by using a variety of sources for financing. Investments are made mainly in current deposits or marketable euro-based investments with a good credit rating. Investments are required to exhibit sufficient liquidity. The Group did not have interest-bearing net liabilities in the consolidated financial statements of December 31, 2020 or in the comparison year. The cash and cash equivalents available to the Group and credit limit agreements are sufficient to cover the Group's short-term financing needs.
The Group's cash and cash equivalents totaled EUR 11.6 million (MEUR 22.4) at the end of the financial year. The Group has made preparations for fluctuating working capital requirements and possible disturbances in the availability of money with non-current credit limit agreements worth EUR 23.0 million with four Nordic banks. At the end of the financial year, EUR 23.0 million (EUR 22.0 million) was unused of the limit. The current credit limit agreements terminate in the year 2021. In addition, the Group has unused bank account limits of EUR 11.2 million.
The Group's financial liabilities include trade payables, derivative liabilities and interest-bearing liabilities. Trade payables are due within less than a month on average. Repayment of interest-bearing loans based on the Group's loan contracts and cash flows from financial expenses related to them and cash flows from other financial liabilities are presented in note Financial liabilities, page 55.
In addition, Raute Corporation's EUR 10 million (MEUR 10) domestic commercial paper program, which allows the Group to issue commercial papers maturing in less than one year, secures the Group's liquidity.
Credit facility agreements covenants
The Group has set in its loan and credit contracts, as well as in the security agreements related to them, the following specific conditions of key ratios, so called covenants:
- equity ratio at least 30 percent and
- gearing under +100 percent.
The loan covenants are reported to the creditor on a quarterly basis. If the Group breaks the loan covenant conditions, the creditor may require expedited repayment of the loans.
During the financial year 2020 and the comparison year, the Group met the conditions of the covenants and reached the set target value of equity ratio.
Fluctuations in working capital
Fluctuations in balance sheet working capital items and the key figures based on them are due to differences in the timing of customer payments and the cost accumulation from project deliveries, which is typical of the project business. Major individual projects in particular typically employ working capital just before the delivery of machines and equipment to customers.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
FINANCIAL INCOME AND EXPENSES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| FINANCIAL EXPENSES, NET | ||
| Financial income | ||
| Interest income from receivables | 22 | 10 |
| Dividend income | 640 | 814 |
| Capital gains from available-for-sale investments | - | 80 |
| Exchange rate gains from financial liabilities | 74 | 182 |
| Other financial income | - | 13 |
| Total financial income | 736 | 1 099 |
| Financial expenses | ||
| Interest expenses on financial loans recognized at amortized cost | -100 | -65 |
| Exchange rate losses on other financial items | -193 | -22 |
| Other financial expenses | -128 | -213 |
| Total financial expenses | -421 | -300 |
| Financial expenses, net | 315 | 799 |
Basis of preparation
Interest income has been recognized as income in the financial year in which it has arisen. Dividend income has been recognized as income in the financial year when the right to receive the dividend payment has been established.
Foreign exchange gains arise from the valuation of the Group's foreign currency cash and cash equivalents and financial liabilities.
Interest expenses from financial liabilities have been recognized as expense in the financial year in which they belong to, based on the interest liability determined in the financial loan contract. Other interest expenses have been recognized as expense in the financial year in which they have arisen.
Foreign exchange losses arise from the valuation of the Group's foreign currency cash and cash equivalents and financial liabilities.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
PLEDGED ASSETS AND CONTINGENT LIABILITIES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Mortgage agreements on behalf of subsidiaries | ||
| Financial loans | 1 857 | 1 502 |
| Other obligations | - | 991 |
| Other credit guarantee arrangements | 1 857 | 2 493 |
| Commercial bank guarantees on behalf of the Parent company and subsidiaries | 29 752 | 17 767 |
| Other own obligations | ||
| Rental liabilities maturing within one year | 106 | 95 |
| Rental liabilities maturing in one to five years | 23 | 56 |
| Total | 129 | 151 |
Loans and guarantees on behalf of the related party
The Parent company Raute Corporation had loan receivables from its subsidiary Metriguard Technologies, Inc. a total of EUR 800 thousand (EUR 867 thousand).
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
SEGMENT INFORMATION
| EUR 1,000 | 2020 | % | 2019 | % |
|---|---|---|---|---|
| SEGMENT INFORMATION | ||||
| Wood products technology | ||||
| Net sales | 114 994 | 151 297 | ||
| Operating profit | -1 852 | 8 454 | ||
| Assets | 86 346 | 90 651 | ||
| Liabilities | 45 840 | 41 149 | ||
| Capital expenditure | 4 481 | 2 956 | ||
| Assets of the wood products technology segment by geographical location | ||||
| Finland | 70 158 | 84 | 75 882 | 84 |
| North America | 8 939 | 10 | 8 397 | 9 |
| China | 5 382 | 4 | 4 378 | 5 |
| Russia | 1 312 | 2 | 1 662 | 2 |
| South America | 260 | 0 | 194 | 0 |
| Other | 296 | 0 | 138 | 0 |
| Total | 86 346 | 100 | 90 651 | 100 |
| Capital expenditure of the wood products technology segment by geographical location | ||||
| Finland | 4 377 | 98 | 2 751 | 93 |
| North America | 41 | 1 | 81 | 3 |
| China | 52 | 1 | 48 | 2 |
| Russia | 4 | 0 | 26 | 1 |
| South America | 6 | 0 | 26 | 1 |
| Other | 1 | 0 | 24 | 1 |
| Total | 4 481 | 100 | 2 956 | 100 |
Basis of preparation
Operations of Raute Group belong to the wood products technology segment. Raute Corporation's Board of Directors is the chief operating decision maker that is responsible for assigning resources to the operating segment and assessing its result. The Board monitors profitability through the operating profit key figures.
Due to Raute's business model, operational nature and administrative structure, the operational segment to be reported as wood products technology segment is comprised of the whole Group and the information on the segment is consistent with that of the Group.
The division into operating segments is based on the Group's internal decision-making order and is consistent with the financial reports submitted to the chief operating decision maker. Segment reporting follows the principles of presentation of the consolidated financial statements.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
Parent company's financial statements, FAS
RAUTE CORPORATION
Financial statements
January 1 – December 31, 2020
The accounting principles of the Parent company's financial statements have been presented only for those parts that differ from the IFRS accounting principles of the consolidated financial statements.
Basis of preparation
The Parent company's financial statements have been prepared in accordance with the Finnish Accountancy Act (FAS).
Other than euro-denominated transactions have been recognized at the exchange rate effective on the transaction date. Receivables and liabilities denominated in other than euro-based currencies have been translated into euro at the average rate of the balance sheet date, except for business operations where the associated currency risk has been hedged by a currency derivative contract. These items have been measured at the value hedged through the derivative contract. Advances paid and received have been recognized in the balance sheet at the exchange rate effective on the payment date. Exchange gains and losses related to changes in the exchange rates have been recognized through profit or loss.
PARENT COMPANY'S INCOME STATEMENT, FAS
PARENT COMPANY'S INCOME STATEMENT
| euros | 1.1.–31.12.2020 | 1.1.–31.12.2019 |
|---|---|---|
| NET SALES | 96 266 190,93 | 120 372 575,64 |
| Change in inventories of finished goods and work in progress | 940 967,81 | -722 149,32 |
| Other operating income | 862 505,42 | 547 306,12 |
| Materials and supplies | -56 089 890,37 | -66 584 690,83 |
| Personnel expenses | -30 446 449,03 | -32 135 803,95 |
| Depreciation and amortization | -2 309 378,01 | -2 068 432,53 |
| Other operating expenses | -12 740 170,10 | -14 381 243,16 |
| Total operating expenses | -101 585 887,51 | -115 170 170,47 |
| OPERATING RESULT | -3 516 223,35 | 5 027 561,97 |
| Financial income and expenses | 497 278,63 | 919 542,86 |
| RESULT BEFORE APPROPRIATIONS AND TAXES | -3 018 944,72 | 5 947 104,83 |
| Appropriations | -276 779,00 | -432 780,00 |
| Income taxes | 621 447,28 | -975 438,88 |
| RESULT FOR THE FINANCIAL YEAR | -2 674 276,44 | 4 538 885,95 |
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
PARENT COMPANY'S BALANCE SHEET, FAS
PARENT COMPANY'S BALANCE SHEET
| euros | 31.12.2020 | 31.12.2019 |
|---|---|---|
| ASSETS | ||
| Non-current assets | ||
| Intangible assets | 4 129 252,40 | 2 937 956,06 |
| Tangible assets | 9 306 160,94 | 8 881 172,79 |
| Investments | 10 749 300,87 | 10 053 300,87 |
| Total non-current assets | 24 184 714,21 | 21 872 429,72 |
| Current assets | ||
| Inventories | 12 619 590,93 | 10 344 806,00 |
| Deferred tax assets | 893 922,41 | 140 240,11 |
| Current receivables | 31 654 316,09 | 25 975 368,94 |
| Cash and cash equivalents | 10 124 511,26 | 21 668 261,36 |
| Total current assets | 55 292 340,69 | 58 128 676,41 |
| TOTAL ASSETS | 79 477 054,90 | 80 001 106,13 |
PARENT COMPANY'S BALANCE SHEET
| euros | 31.12.2020 | 31.12.2019 |
|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholders' equity | ||
| Share capital | 8 256 316,00 | 8 256 316,00 |
| Fair value reserve and other reserves | 5 711 120,18 | 5 711 120,18 |
| Retained earnings | 30 632 124,19 | 32 274 869,54 |
| Profit for the financial year | -2 674 276,44 | 4 538 885,95 |
| Total shareholders' equity | 41 925 283,93 | 50 781 191,67 |
| Appropriations | 1 052 305,00 | 775 526,00 |
| Obligatory provisions | 3 041 179,79 | 2 822 661,88 |
| Liabilities | ||
| Current liabilities | 33 458 286,18 | 25 621 726,58 |
| Total liabilities | 33 458 286,18 | 25 621 726,58 |
| TOTAL LIABILITIES | 79 477 054,90 | 80 001 106,13 |
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
PARENT COMPANY'S CASH FLOW STATEMENT, FAS
PARENT COMPANY'S CASH FLOW STATEMENT
| euros | 1.1.–31.12.2020 | 1.1.–31.12.2019 |
|---|---|---|
| CASH FLOW FROM OPERATING ACTIVITIES | ||
| Proceeds from sales | 98 363 385,42 | 134 176 857,94 |
| Proceeds from other operating income | 564 482,42 | 402 532,24 |
| Payments of operating expenses | -101 647 360,44 | -117 252 843,84 |
| Cash flow before financial items and taxes | -2 719 492,60 | 17 326 546,34 |
| Interest paid from operating activities | -3 945,94 | -2 197,88 |
| Dividends received from operating activities | 639 750,00 | 814 430,00 |
| Interest received from operating activities | 25 466,52 | 314 215,10 |
| Other financing items from operating activities | -152 386,32 | -129 113,50 |
| Income tax paid | 631 354,35 | -2 338 858,04 |
| Net cash flow from operating activities (A) | -1 579 253,99 | 15 985 022,02 |
| CASH FLOW FROM INVESTING ACTIVITIES | ||
| Capital expenditure in tangible and intangible assets | -3 589 772,28 | -2 760 358,13 |
| Proceeds from sale of tangible and intangible assets | 163 562,49 | 57 800,38 |
| Purchase of subsidiary shares | -696 000,00 | - |
| Proceeds from sale of investments | - | 88 200,00 |
| Loans granted to Group companies | - | -1 783 018,63 |
| Repayments of loan receivables from Group companies | 218 112,63 | 3 459 827,28 |
| Net cash flow from investing activities (B) | -3 904 097,16 | -937 549,10 |
| CASH FLOW FROM FINANCING ACTIVITIES | ||
| Dividends paid | -6 181 631,30 | -5 968 471,60 |
| Net cash flow from financing activities (C) | -6 181 631,30 | -5 968 471,60 |
| Net change in cash and cash equivalents (A+B+C) | -11 664 982,45 | 9 079 001,32 |
| increase (+)/decrease (-) | ||
| Cash and cash equivalents at the beginning of the year | 21 668 261,36 | 12 492 968,50 |
| Net change in cash and cash equivalents | -11 664 982,45 | 9 079 001,32 |
| Effect of exchange rate changes on cash | 121 232,35 | 96 291,54 |
| Cash and cash equivalents at the end of the year | 10 124 511,26 | 21 668 261,36 |
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
| EUR 1,000 | 2020 | % | 2019 | % |
|---|---|---|---|---|
| NET SALES | ||||
| Net sales by market area | ||||
| CIS (Russia) | 61 344 | 64 | 45 488 | 38 |
| EMEA (Eurooppa ja Afrikka) | 25 298 | 26 | 50 900 | 42 |
| LAM (South America) | 5 728 | 6 | 12 259 | 10 |
| APAC (Asia-Pacific) | 3 008 | 3 | 7 903 | 7 |
| NAM (North America) | 888 | 1 | 3 823 | 3 |
| TOTAL | 96 266 | 100 | 120 373 | 100 |
Finland accounted for 7 percent (15%) of net sales
Basis of preparation
The revenue recognition related to net sales corresponds to the accounting principles of the Group consolidated financial statements.
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Specification of net sales | ||
| Net sales by percentage of completion | 74 656 | 93 583 |
| Other net sales | 21 610 | 26 790 |
| TOTAL | 96 266 | 120 373 |
| Project revenues entered as income from currently undelivered projects recognized by percentage of completion | 108 766 | 111 798 |
| Amount of performance obligations to be satisfied over time not yet entered as income (order book) | 84 583 | 78 801 |
| Balance sheet items of undelivered projects | ||
| Projects in which the value by percentage of completion exceeds advance payments invoiced | ||
| - aggregate amount of costs incurred and recognized profits less recognized losses | 90 938 | 80 294 |
| - advance payments received | 70 422 | 65 150 |
| Current customer contract assets | 20 516 | 15 144 |
| Projects in which advance payments invoiced exceed the value by percentage of completion | ||
| - aggregate amount of costs incurred and recognized profits less recognized losses | 17 829 | 31 503 |
| - advance payments received | 31 591 | 38 086 |
| Current customer contract liabilities | 13 762 | 6 583 |
| Advance payments included in the current liabilities in the balance sheet | ||
| Current customer contract liabilities | 13 762 | 6 583 |
| Other advance payments received, not under percentage of completion | 2 672 | 2 941 |
| TOTAL | 16 434 | 9 524 |
| Advance payments of the customer contracts included in inventories in the balance sheet | ||
| Advance payments paid of the customer contracts | 3 212 | 1 615 |
| TOTAL | 3 212 | 1 615 |
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
CURRENT RECEIVABLES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Current receivables from Group companies | ||
| Loan receivables | 800 | 1 139 |
| Accounts receivables | 1 315 | 1 199 |
| Other receivables | 24 | 13 |
| Total from Group companies | 2 139 | 2 351 |
| Current receivables from others | ||
| Accounts receivables | 5 367 | 4 882 |
| Accrued income and prepaid expenses | 21 832 | 16 656 |
| Other receivables | 2 317 | 2 086 |
| Total from others | 29 516 | 23 624 |
| TOTAL | 31 654 | 25 975 |
| Substantial items included in accrued income | ||
| Current customer contract assets according to the percentage of completion method | 20 516 | 15 145 |
| Income tax receivable | - | 701 |
| Other accrued income | 1 316 | 810 |
| TOTAL | 21 832 | 16 656 |
Basis of preparation
Receivables in the balance sheet include accounts receivables and other receivables. Receivables have been valued at original carrying amount or at the lower disposal price. Accounts receivables in the balance sheet do not include significant credit risk clusters at the balance sheet date.
MATERIALS AND SERVICES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Purchases during the financial year | -49 503 | -55 574 |
| Change in inventories, materials and supplies, other inventories | -263 | -42 |
| External services | -6 323 | -10 969 |
| TOTAL | -56 090 | -66 585 |
INVENTORIES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Materials and supplies | 4 210 | 4 473 |
| Work in progress | 3 908 | 3 858 |
| Finished products | 1 290 | 398 |
| Advance payments received for long-term projects | 3 212 | 1 615 |
| TOTAL | 12 620 | 10 345 |
During the financial year, EUR 329 thousand (EUR 56 thousand) were recognized in expenses, reducing the carrying amount of inventories to correspond to the disposal price.
OBLIGATORY PROVISIONS
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Warranty provisions | ||
| Book value at Jan. 1 | 2 204 | 1 813 |
| Additions | 2 064 | 2 219 |
| Decrease | -2 422 | -1 828 |
| Book value at Dec. 31 | 1 847 | 2 204 |
| Other obligatory provisions | ||
| Book value at Jan. 1 | 618 | 244 |
| Additions | 1 828 | 533 |
| Decrease | -1 251 | -159 |
| Book value at Dec. 31 | 1 195 | 618 |
| TOTAL | 3 041 | 2 822 |
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
PERSONNEL EXPENSES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Wages and salaries | -24 936 | -26 762 |
| Pension costs | -4 151 | -4 403 |
| Fixed share-based employee payments | -474 | - |
| Other personnel expenses | -886 | -970 |
| TOTAL | -30 446 | -32 136 |
PERSONNEL
Employed at Dec. 31, persons
| Workers | 150 | 159 |
|---|---|---|
| Office staff | 354 | 361 |
| TOTAL | 504 | 520 |
| Personnel working abroad at Dec. 31 | 3 | 2 |
Effective, on average, persons
| Workers | 149 | 158 |
|---|---|---|
| Office staff | 352 | 344 |
| TOTAL | 501 | 502 |
| Personnel working abroad, effective, on average | 3 | 2 |
On average, persons
| Workers | 152 | 162 |
|---|---|---|
| Office staff | 361 | 358 |
| TOTAL | 512 | 520 |
Basis of preparation
Statutory pension coverage of Raute Corporation has been arranged through an external pension insurance company. Pension expenses have been recognized as expenses according to accrual over time.
OTHER OPERATING INCOME
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Allowances received | 500 | 2 |
| Other operating income from Group companies | 247 | 289 |
| Capital gain on non-current assets | 80 | 12 |
| Other operating income | 35 | 69 |
| Insurance compensations | - | 174 |
| TOTAL | 863 | 547 |
Basis of preparation
Revenue not included in net sales has been recognized in the other operating income. Lease income included in the other operating income has been recognized as income on a straight-line basis for the lease term.
During the financial year Raute Corporation has received temporary cost support (Covid-19 pandemic) amount of EUR 500 thousand granted by Ministry of Economic Affairs and Employment of Finland from April 1 to May 31, 2020.
OTHER OPERATING EXPENSES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Indirect production costs | -2 075 | -3 707 |
| Sales and marketing costs | -2 946 | -3 678 |
| Administration costs | -4 146 | -2 423 |
| Other costs | -3 572 | -4 573 |
| TOTAL | -12 740 | -14 381 |
Basis of preparation
Research and development costs have been recognized as expenses in the income statement in the year they incurred. During the financial year research and development costs have been recognized in the income statement in the amount of EUR 4 845 thousand (EUR 4 061 thousand).
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
OTHER OPERATING EXPENSES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Auditor's remunerations | ||
| Authorized Public Accountants Pricewaterhouse-Coopers Oy (Finland) | ||
| Audit expenses, statutory | -66 | -57 |
| Audit expenses, other assignments according to the Audit Act | - | - |
| Audit expenses, other services | - | -2 |
| Audit expenses, tax services | - | -3 |
| TOTAL | -66 | -62 |
The Parent company's auditor during the financial year was Authorized Public Accountants PricewaterhouseCoopers Oy. Statutory audit fee includes audit fees for current financial year auditing. Other services and tax services include audit fees for other services recognized on accrual basis during the financial year. Fees do not include travel costs and fees payable to the authorities arising from auditing or other assignments.
OTHER LEASES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Raute Corporation as a lessee | ||
| Minimum rents paid on the basis of other non-cancellable leases: | ||
| - Within one year | 357 | 340 |
| - After a period of more than one year and less than five years | 533 | 826 |
| TOTAL | 890 | 1 166 |
INCOME TAXES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Income taxes from operations | - | -1 024 |
| Current tax of previous financial years | -132 | -2 |
| Deferred tax assets | 754 | 50 |
| TOTAL | 621 | -975 |
Basis of preparation
The income taxes in the income statement include the current tax based on the taxable income, as well as tax adjustments for previous years.
Current tax based on the taxable income of the financial year has been calculated on taxable income using the tax rate in force.
Deferred taxes have been recognized for temporary differences between the accounting and taxation value.
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
INTANGIBLE ASSETS
| EUR 1,000 | Intangible rights | Goodwill | Other intangible assets | Advance payments | Total |
|---|---|---|---|---|---|
| Acquisition cost at Jan. 1, 2020 | 3 879 | 662 | 6 924 | 187 | 11 652 |
| Additions | 65 | - | 48 | 1604 | 1 717 |
| Reclassification between items | - | - | 274 | -187 | 87 |
| Acquisition cost at Dec. 31, 2020 | 3 944 | 662 | 7 246 | 1 604 | 13 457 |
| Accumulated amortization and depreciation at Jan. 1, 2020 | -2 541 | -179 | -5 994 | - | -8 714 |
| Depreciation for the financial year | -215 | -66 | -333 | - | -613 |
| Accumulated amortization and depreciation at Dec. 31, 2020 | -2 755 | -245 | -6 327 | - | -9 328 |
| Book value at Dec. 31, 2020 | 1 189 | 417 | 919 | 1 604 | 4 129 |
| Book value at Dec. 31, 2019 | 1 338 | 483 | 930 | 187 | 2 938 |
Basis of preparation
The Goodwill recognized in the Parent company's balance sheet has been generated in the business acquisition from Metriguard, Inc. The identifiable other intangible assets acquired have been presented in the balance sheet item Other intangible assets. These items shall be depreciated over their useful life.
Tangible and intangible assets have been recognized in the balance sheet at original cost less accumulated depreciation, with the exception of tangible assets and shares, which have been subject to impairment. Variable costs arising from the acquisition and production of a product have been included in the carrying amount.
The carrying values of intangible assets with limited useful lives have been reviewed at each reporting date. If the value of an asset has decreased significantly the impairment has been transferred to the income statement.
Depreciations and amortizations have been recorded from the beginning of the month in which the asset has been taken into use. Residual expenditures on decommissioning and disposal of tangible assets have been presented under the item Depreciation and amortization in the income statement. Gains and losses on disposal of tangible assets have been presented in other operating income or expenses.
TANGIBLE ASSETS
| EUR 1,000 | Land and water | Buildings and structures | Machinery and equipment | Other tangible assets | Advance payments and assets in progress | Total |
|---|---|---|---|---|---|---|
| Acquisition cost at Jan. 1, 2020 | 218 | 11 059 | 30 445 | 686 | 430 | 42 837 |
| Additions | - | 49 | 927 | - | 1 316 | 2 292 |
| Disposals | - | - | -83 | - | - | -83 |
| Reclassification between items | - | 275 | 485 | 79 | -925 | -87 |
| Acquisition cost at Dec. 31, 2020 | 218 | 11 382 | 31 774 | 765 | 820 | 44 958 |
| Accumulated depreciation and amortization at Jan. 1, 2020 | - | -7 828 | -25 747 | -380 | - | -33 955 |
| Depreciation and amortization for the financial year | - | -379 | -1 280 | -37 | - | -1 696 |
| Accumulated depreciation and amortization at Dec. 31, 2020 | - | -8 207 | -27 027 | -417 | - | -35 651 |
| Book value at Dec. 31, 2020 | 218 | 3 175 | 4 747 | 347 | 820 | 9 307 |
| Book value at Dec. 31, 2019 | 218 | 3 231 | 4 698 | 305 | 430 | 8 882 |
Book value for production machinery was EUR 3 187 thousand (EUR 3 443 thousand) at the end of the financial year.
DEPRECIATION AND AMORTIZATION
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Depreciation and amortization of intangible assets | -613 | -514 |
| Depreciation and amortization of tangible assets | -1 696 | -1 554 |
| TOTAL | -2 309 | -2 068 |
Depreciations of tangible assets and amortizations of intangible assets according to a plan have been recorded with the straight-line method over the expected economic lives of the assets as follows:
Intangible rights 10 years
Goodwill 10 years
Other intangible assets 3–10 years
Buildings and structures 25–40 years
Machinery and equipment 4–12 years
Other tangible assets 3–10 years.
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
NON-CURRENT INVESTMENTS
| EUR 1,000 | Shares, Group companies | Shares, Others | Total |
|---|---|---|---|
| Acquisition cost at Jan. 1, 2020 | 14 174 | 1 479 | 15 654 |
| Additions | 696 | - | 696 |
| Disposals | - | - | 0 |
| Acquisition cost at Dec. 31, 2020 | 14 870 | 1 479 | 16 350 |
| Accumulated impairments at Jan. 1, 2020 | -5 297 | -303 | -5 599 |
| Impairments | - | - | - |
| Accumulated impairments at Dec. 31, 2020 | -5 297 | -303 | -5 599 |
| Book value at Dec. 31, 2020 | 9 573 | 1 176 | 10 749 |
| Book value at Dec. 31, 2019 | 8 877 | 1 176 | 10 053 |
SHARES OWNED BY THE COMPANY
| Holding and voting rights, % | Book value, EUR 1,000 | |
|---|---|---|
| Subsidiaries | ||
| Raute Canada Ltd., Delta, B.C., Kanada | 100 | 7 592 |
| Raute Inc., Delaware, USA | 100 | 1 058 |
| RWS-Engineering Oy, Lahti | 100 | 203 |
| Raute WPM Oy, Lahti | 100 | 9 |
| Raute Group Asia Pte Ltd., Singapore | 100 | 0 |
| Raute (Shanghai) Machinery Co., Ltd, Shanghai, Kiina | 100 | 0 |
| Hiottu Oy, Oulu | 80 | 696 |
| Raute Chile Ltda., Santiago, Chile | 50 | 15 |
| TOTAL | 9 573 | |
| Other shares | Number of shares, pcs | Book value, EUR 1,000 |
| --- | --- | --- |
| PHP Holding Oy | 521 | 1 040 |
| Esys Oy | 600 | 42 |
| DIMECC OY | 50 | 50 |
| Others | 44 | |
| TOTAL | 1 176 |
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
SHAREHOLDERS' EQUITY
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Share capital at Jan. 1 | 8 256 | 8 256 |
| Share capital at Dec. 31 | 8 256 | 8 256 |
| Invested non-restricted equity reserve at Jan. 1 | 5 711 | 5 711 |
| Invested non-restricted equity reserve at Dec. 31 | 5 711 | 5 711 |
| Retained earnings at Jan. 1 | 32 275 | 18 553 |
| Changes during the financial year | ||
| - Profit from the previous year | 4 539 | 19 691 |
| - Dividends | -6 182 | -5 968 |
| Retained earnings at Dec. 31 | 30 632 | 32 275 |
| Result for the financial year | -2 674 | 4 539 |
| SHAREHOLDERS' EQUITY AT DEC. 31 | 41 925 | 50 781 |
| Distributable funds | ||
| Retained earnings at Dec. 31 | 30 632 | 32 275 |
| Result for the financial year | -2 674 | 4 539 |
| Invested non-restricted equity reserve | 5 711 | 5 711 |
| Items deductible from distributable funds | -500 | - |
| Distributable funds at Dec. 31 | 33 169 | 42 525 |
| Shares of the company | ||
| Series K shares (ordinary shares, 20 votes/share), 1,000 pcs | 991 | 991 |
| Series A shares (1 vote/shares), 1,000 pcs | 3 272 | 3 272 |
| Shares, 1,000 pcs | 4 263 | 4 263 |
| Book counter value of the share | 1,94 | 1,94 |
| Total book counter value, 1 000 pcs | 8 256 | 8 256 |
LIABILITIES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Current liabilities | ||
| Current liabilities to Group companies | ||
| - Advance payments received | 3 214 | 3 032 |
| - Accounts payable | 1 722 | 1 239 |
| - Accrued expenses and prepaid income | - | - |
| - Other current liabilities | 1 823 | 1 877 |
| Total to Group companies | 6 759 | 6 148 |
| Current liabilities to others | ||
| - Advance payments received | 13 221 | 6 492 |
| - Accounts payable | 6 701 | 5 639 |
| - Accrued expenses and prepaid income | 6 140 | 5 692 |
| - Other liabilities | 638 | 1 650 |
| Total to others | 26 699 | 19 473 |
| TOTAL | 33 458 | 25 622 |
| Interest-bearing liabilities | ||
| - Current other liabilities | 1 823 | 1 877 |
| TOTAL | 1 823 | 1 877 |
| Substantial items included in accrued expenses and prepaid income | ||
| - Accrued personnel expenses | 5 709 | 5 323 |
| - Accrued project expenses | - | 91 |
| - Income tax liability | 111 | - |
| - Financial accruals | 138 | - |
| - Other accrued expenses | 182 | 278 |
| TOTAL | 6 140 | 5 692 |
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
NOTES TO THE PARENT COMPANY'S FINANCIAL STATEMENTS
FINANCIAL INCOME AND EXPENSES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Dividend income | ||
| From others | 640 | 814 |
| Total | 640 | 814 |
| Other interest and financial income | ||
| From Group companies | 34 | 181 |
| From others | 4 | 130 |
| Total | 38 | 310 |
| Total financial income | 678 | 1 125 |
| Interest and other financial expenses | ||
| To Group companies | -68 | -83 |
| To others | -113 | -122 |
| Total | -181 | -205 |
| Total financial expenses | -181 | -205 |
| Financial income and expenses, net | 497 | 920 |
| Exchange rate losses (-) included in total financial income | -19 | -87 |
At the end of the financial year, Raute Corporation had loan receivables from its Group company Metriguard Technologies, Inc. a total of EUR 800 thousand (EUR 867 thousand).
DERIVATIVES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Nominal values of forward contracts in foreign | ||
| Hedge accounting | ||
| - Related to the hedging of net sales | 320 | 1 578 |
| Derivatives which do not meet the criteria of hedge accounting | ||
| - Related to financing | 733 | 801 |
| - Related to the hedging of net sales | 1 170 | 3 859 |
| Fair values of forward contracts in foreign currency | ||
| Hedge accounting | ||
| - Related to the hedging of net sales | -2 | 7 |
| Derivatives which do not meet the criteria of hedge accounting | ||
| - Related to financing | 0 | 15 |
| - Related to the hedging of net sales | 23 | 47 |
Basis of preparation
The company's derivatives include foreign currency derivative contracts. Currency derivatives are used to hedge against currency risks related to currency cash flow.
PLEDGED ASSETS AND CONTINGENT LIABILITIES
| EUR 1,000 | 2020 | 2019 |
|---|---|---|
| Mortgage agreements on behalf of subsidiaries | ||
| Financial loans | 1 857 | 1 502 |
| Other obligations | - | 991 |
| Other credit guarantee arrangements | 1 857 | 2 493 |
| Commercial bank guarantees on behalf of the Parent company and subsidiaries | 29 752 | 17 767 |
"Letters of Guarantee" engagements have been issued on behalf of certain subsidiaries. No pledges or other contingent liabilities have been given on behalf of the management or shareholders. No loans have been granted to the management and shareholders.
RAUTE FINANCIAL STATEMENTS 2020 | PARENT COMPANY
LIST OF THE PARENT COMPANY'S COMMON ACCOUNTING DOCUMENT TYPES,
FINANCIAL STATEMENTS DECEMBER 31, 2020
| Common accounting document types | Documents' means of storaging | |
|---|---|---|
| Financial statements | Separately bound, in paper | |
| General journal and general ledger | In electronic format | |
| Accounts payable and accounts receivable | In electronic format | |
| Description of voucher group | Voucher group | Vouchers' means of storaging |
| Bank vouchers | 10 | In paper |
| Purchase invoices | 81, 83, 85, 86, 87 and 88 | In electronic format |
| Sales invoices | 30, 31, 34, 35 and 36 | In paper |
| Transactions of purchase and sales invoices | 70, 72 and 80 | In electronic format |
| Fixed asset register | In paper | |
| Salary vouchers | 55, 56, 64, 65, 66, 67 and 68 | In paper |
| Memo vouchers | PS, PD, PDA, 11, 15, 19, 20, 21, 22, 23, 25, 48, 49, 50, 51, 52, 53 and 54 | In paper |
| Automatic contra entries of memo vouchers | 58, 59, 90, 91, 92, 93 and 98 | In electronic format |
| Imputed and entries of cost accounting | SS and 29 | In electronic format |
THE BOARD OF DIRECTORS' PROPOSAL AND THE AUDITOR'S NOTE
THE BOARD OF DIRECTORS' PROPOSAL FOR RESULT DISTRIBUTION, SIGNATURES FOR THE REPORT OF THE BOARD OF DIRECTORS AND FINANCIAL STATEMENTS AND THE AUDITOR'S NOTE
The Parent company's distributable funds total EUR 33,168,967.93 of which the loss for the financial year is 2,674,276.44 and the balance sheet amounts to EUR 79,477,054.90.
The Board of Directors will propose to the Annual General Meeting 2020 that the distributable funds will be used in the following way based on the total amount of shares entitled for the dividend at the date of the proposal for dividend distribution, i.e. 4,263,194 shares:
- EUR 0.80 per share to be distributed as dividend, i.e. a total of EUR 3,410,555.20
- Retained in equity EUR 29,758,412.73
Total EUR 33,168,967.93
No material changes have taken place in the company's financial position after the end of the financial year. The company has good liquidity, and the proposed profit distribution does not pose a risk to solvency.
Lahti, February 12, 2021
Laura Raitio
Chair of the Board
Mika Mustakallio
Joni Bask
Ari Harmaala
Pekka Suominen
Patrick von Essen
Tapani Kiiski
President and CEO
Auditor's note
A report on the audit performed has been issued today.
Lahti, February 12, 2021
PricewaterhouseCoopers Oy
Authorized Public Accountants
Markku Launis
Authorized Public Accountant
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
AUDITOR'S REPORT
(Translation of the Finnish Original)
To the Annual General Meeting of Raute Oyj
Report on the Audit of the Financial Statements
Opinion
In our opinion
- the consolidated financial statements give a true and fair view of the group's financial position and financial performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
- the financial statements give a true and fair view of the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report to the Board of Directors.
What we have audited
We have audited the financial statements of Raute Oyj (business identity code 0149072-6) for the year ended 31 December 2020. The financial statements comprise:
- the consolidated balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies
- the parent company's balance sheet, income statement, statement of cash flows and notes.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, the non-audit services that we have provided to the parent company and to the group companies are in accordance with the applicable law and regulations in Finland and we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in note Other operating expenses to the Financial Statements.
Our Audit Approach
Overview
- We have applied an overall group materiality of EUR 1,15 million.
- We have audited parent company and its subsidiaries in Finland and Canada. In addition, we have performed group level procedures over specific consolidated accounts and analytical procedures to assess unusual movements across all entities.
- Revenue recognition of project deliveries and modernization projects
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial statements as a whole.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
AUDITOR'S REPORT
(Translation of the Finnish Original)
| Overall group materiality | EUR 1,15 million |
|---|---|
| How we determined it | Net sales |
| Rationale for the materiality benchmark applied | We chose net sales as the benchmark because, in our view, the performance of the Group is most commonly measured by using this criteria, and it is a generally accepted benchmark. We chose net sales as the benchmark as we considered that this provides us with a consistent year-on-year basis for determining materiality. |
How we tailored our group audit scope
The group audit scope was tailored to take into account the structure of the Group and the size, complexity and risk of individual subsidiaries. Using this criteria we selected companies into our audit scope and at the same time ensured that we get sufficient coverage to our audit, in order to issue an audit opinion for the Group.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
| Key audit matter in the audit of the group | How our audit addressed the key audit matter |
|---|---|
| Revenue recognition of project deliveries and modernization projects | |
| Refer to accounting principles of the consolidated financial statements and notes net sales and performance obligations to be satisfied over time in the consolidated financial statements | • Our revenue testing included both testing of the company's controls, as well as substantive audit procedures targeted at selected project deliveries and modernization projects. Our substantive procedures included the following but was not limited to: |
| The main part of net sales is comprised of projects deliveries and modernizations projects, which are treated as performance obligations to be satisfied over time. The group applies the percentage of completion method as a revenue recognition principle in performance obligations over time. | • We have verified, by sampling new contracts signed during the accounting period, that the revenue recognition method applied was appropriate based on the terms of the arrangement |
| Percentage of completion has been measured on a cost basis as the relation of actual project costs to the estimated total project costs. | • We have tested by sample, that estimated revenues are based on signed contracts and that new projects have been processed in accordance with Raute's decision making policy. |
| The revenue recognition of projects deliveries and modernization projects includes significant management judgments, which have a direct impact on the revenue and profit of the financial year. The most important judgment relates to the estimated total revenues as well as estimated material, subcontracting and labour costs. | • We have assessed reliability of the expected expenses for projects by comparing expenses of unfinished projects in the previous year-end to the final outcome. We have had discussions with relevant personnel about uncertainty relating to the estimated total expenses of the projects. We have read minutes from monthly project meetings into which the changes in expected expenses are documented by project. |
| Our audit procedures focused on the revenue recognition of projects deliveries and modernization projects, as they include management judgment. The revenue recognition of projects deliveries and modernization projects includes management judgment in a form of estimates affecting both on the amount of revenue being recognized and profitability of the projects. | • We have tested the arithmetic of the spreadsheets with which the percentage of completion and revenue to be recognized for projects is calculated. |
| This matter is a significant risk of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014. | • We also considered the appropriateness of the related disclosures provided in the notes to the consolidated financial statements. |
We have no key audit matters to report with respect to our audit of the parent company financial statements.
There are no significant risks of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014 with respect to the parent company financial statements.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
AUDITOR'S REPORT
(Translation of the Finnish Original)
Responsibilities of the Board of Directors and the President and CEO for the Financial Statements
The Board of Directors and the President and CEO are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the President and CEO are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the President and CEO are responsible for assessing the parent company's and the group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or to cease operations, or there is no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
-
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company's or the group's internal control.
-
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of the Board of Directors' and the President and CEO's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
AUDITOR'S REPORT
(Translation of the Finnish Original)
Other Reporting Requirements
Appointment
We were first appointed as auditors by the annual general meeting on 31 March 2010. Our appointment represents a total period of uninterrupted engagement of 11 years.
Other Information
The Board of Directors and the President and CEO are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements and our auditor's report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor's report and the Annual Report is expected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion
- the information in the report of the Board of Directors is consistent with the information in the financial statements
- the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Lahti 12 February 2021
PricewaterhouseCoopers Oy
Authorised Public Accountants
Markku Launis
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
Development of Group result and Key ratios
DEVELOPMENT OF QUARTERLY RESULTS
The presented interim figures have not been audited.
| EUR 1,000 | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 |
|---|---|---|---|---|---|---|---|---|
| NET SALES | 38 934 | 27 905 | 24 377 | 23 779 | 39 258 | 33 749 | 36 981 | 41 309 |
| Change in inventories of finished goods and work in progress | 3 992 | 76 | -318 | -622 | 208 | -1 310 | -1 818 | 890 |
| Other operating income | 85 | 50 | -19 | 85 | 170 | -47 | 109 | 112 |
| Materials and services | -27 244 | -14 634 | -11 938 | -10 286 | -20 852 | -15 166 | -16 900 | -23 163 |
| Employee benefits expense | -9 866 | -8 334 | -9 441 | -11 448 | -12 172 | -10 751 | -11 152 | -11 718 |
| Depreciation, amortization amd impairments | -999 | -1 141 | -937 | -962 | -889 | -941 | -1 034 | -989 |
| Other operating expenses | -4 053 | -2 594 | -2 747 | -3 550 | -3 915 | -3 824 | -3 848 | -3 842 |
| Total operating expenses | -42 162 | -26 702 | -25 064 | -26 246 | -37 829 | -30 682 | -32 933 | -39 712 |
| OPERATING RESULT | 849 | 1 329 | -1 024 | -3 005 | 1 807 | 1 709 | 2 338 | 2 599 |
| % of net sales | 2,2 | 4,8 | -4,2 | -12,6 | 4,6 | 5,1 | 6,3 | 6,3 |
| Financial income | 96 | 5 | 465 | 170 | 777 | 6 | 109 | 206 |
| Financial expenses | -163 | -71 | -133 | -54 | -59 | -47 | -136 | -58 |
| Financial expenses, net | -67 | -66 | 332 | 117 | 719 | -41 | -27 | 148 |
| RESULT BEFORE TAX | 782 | 1 263 | -692 | -2 888 | 2 526 | 1 668 | 2 311 | 2 747 |
| % of net sales | 2,0 | 4,5 | -2,8 | -12,1 | 6,4 | 4,9 | 6,3 | 6,6 |
| Income taxes | 631 | -483 | -165 | 653 | -266 | -263 | -424 | -612 |
| TOTAL RESULT FOR THE PERIOD | 1 412 | 780 | -857 | -2 235 | 2 260 | 1 405 | 1 887 | 2 135 |
| % of net sales | 3,6 | 2,8 | -3,5 | -9,4 | 5,8 | 4,2 | 5,1 | 5,2 |
| Attributable to | ||||||||
| Equity holders of the Parent company | 1 412 | 780 | -857 | -2 235 | 2 260 | 1 405 | 1 887 | 2 135 |
| Undiluted earnings per share, euros | 0,33 | 0,18 | -0,20 | -0,52 | 0,53 | 0,33 | 0,44 | 0,50 |
| Diluted earnings per share, euros | 0,33 | 0,18 | -0,20 | -0,52 | 0,53 | 0,33 | 0,44 | 0,50 |
| Adjusted average number of shares, 1 000 pcs | 4 263 | 4 263 | 4 263 | 4 263 | 4 263 | 4 263 | 4 263 | 4 233 |
| Adjusted average number of shares, diluted, 1 000 pcs | 4 267 | 4 284 | 4 283 | 4 281 | 4 287 | 4 300 | 4 299 | 4 262 |
| FINANCIAL DEVELOPMENT QUARTERLY | ||||||||
| Order intake during the period, EUR million | 70 | 11 | 13 | 25 | 17 | 73 | 26 | 32 |
| Order book at the end of the period, EUR million | 94 | 62 | 80 | 92 | 88 | 109 | 72 | 84 |
Quarterly development
Order book
Order intake
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
KEY RATIOS DESCRIBING THE GROUP'S FINANCIAL DEVELOPMENT
| 2020 | 2019 | 2018 | 2017 | 2016 | |
|---|---|---|---|---|---|
| Net sales | 114 994 | 151 297 | 180 993 | 148 064 | 113 130 |
| Change in net sales, % | -24,0 | -16,4 | 22,2 | 30,9 | -11,1 |
| Exported portion of net sales | 108 267 | 133 535 | 153 180 | 122 249 | 88 612 |
| % of net sales | 94,2 | 88,3 | 84,6 | 82,6 | 78,3 |
| Operating profit | -1 852 | 8 454 | 14 922 | 11 171 | 8 558 |
| % of net sales | -1,6 | 5,6 | 8,2 | 7,5 | 7,6 |
| Result before tax | -1 537 | 9 253 | 14 912 | 11 120 | 8 220 |
| % of net sales | -1,3 | 6,1 | 8,2 | 7,5 | 7,3 |
| Result for the financial year | -901 | 7 687 | 11 836 | 8 979 | 6 684 |
| % of net sales | -0,8 | 5,1 | 6,5 | 6,1 | 5,9 |
| Return on investment (ROI), % | -2,5 | 18,1 | 34,6 | 29,5 | 25,3 |
| Return on equity (ROE), % | -2,0 | 16,0 | 27,6 | 24,4 | 20,9 |
| Balance sheet total** | 86 346 | 90 651 | 96 382 | 87 006 | 69 767 |
| Interest-bearing net liabilities** | -3 863 | -13 923 | -12 295 | -29 311 | -20 633 |
| % of net sales | -3,4 | -9,2 | -6,8 | -19,8 | -18,2 |
| Non-interest-bearing liabilities | 37 740 | 32 635 | 48 793 | 45 428 | 31 760 |
| Equity ratio, %** | 59,3 | 62,9 | 61,7 | 64,3 | 60,4 |
| Gearing, %** | -9,6 | -28,1 | -26,4 | -74,4 | -60,3 |
| Gross capital expenditure | 5 157 | 2 956 | 4 384 | 6 962 | 3 224 |
| % of net sales | 4,5 | 2,0 | 2,4 | 4,7 | 2,8 |
| Research and development costs | 4 627 | 4 419 | 3 735 | 3 237 | 2 863 |
| % of net sales | 4,0 | 2,9 | 2,1 | 2,2 | 2,5 |
| Order book, EUR million | 94 | 88 | 95 | 110 | 106 |
| Order intake, EUR million | 119 | 148 | 167 | 155 | 162 |
| Personnel at Dec. 31 | 751 | 778 | 772 | 704 | 643 |
| Personnel, effective, on average | 743 | 761 | 725 | 660 | 631 |
| Personnel, on average | 760 | 784 | 748 | 682 | 642 |
| Dividend | 3 411* | 6 182 | 5 968 | 5 320 | 4 220 |
- The Board of Directors' proposal to the Annual General Meeting.
**Raute Group has adopted IFRS 16 standard as of financial year 2019. The figures for the comparison years 2016-2018 have not been restated.
Raute Group uses key ratios and alternative performance measures (APM's) to describe the income, operational financial result, capital structure, return on equity, financial position and cash flows.
The purpose of the key ratios and APMs is to give the readers an overview of the Group's financial position and help in analyzing the financial statements and evaluating the development of the operations.
The key ratios have been derived from the consolidated financial statements or are
based on items presented in the financial statements which have been prepared in accordance with the accounting standards. If there is a change in the accounting principles of the Group during a certain financial year, the figures of the comparison years are restated to correspond to those accounting principles in force for the current year.
The calculation of the key figures and the alternative performance measures has been presented on page 85 and the calculation of share-related data in connection with the share-related data, on page 86.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
CALCULATION OF KEY RATIOS
| Change in net sales, % | Net sales of the financial year ./net sales of the previous financial year x 100
Net sales |
| --- | --- |
| Exported portion of net sales | Exported portion of materials and services sold from Finland |
| Exported portion of net sales, % | Exported portion
Net sales of the financial year x 100 |
| Operating profit | Operating profit is the net sum calculated by adding other operating income to net sales, deducting purchase expenses that have been adjusted by changes in inventories of finished goods and work in progress and by expenses from production for own use; and by deducting expenses from employee benefits, depreciation and possible impairment losses, as well as other operating expenses. |
| Operating profit, % of net sales | Net sales of the financial year x 100 |
| Profit before tax, % of net | Profit before tax
Net sales of the financial year x 100 |
| Profit for the financial year, % of net sales | Profit for the financial year
Net sales of the financial year x 100 |
| Return on investment (ROI), % | Profit before tax + financial expenses
Shareholders' equity + interest-bearing financial liabilities x 100
(average of the financial year) |
| Return on equity (ROE), % | Profit for the financial year
Shareholders' equity (average of the financial year) x 100 |
| Interest-bearing net liabilities | Interest-bearing liabilities /. (cash and cash equivalents + financial assets at fair value through profit or loss) |
| Interest-bearing net liabilities, % of net sales | Interest-bearing liabilities /. (cash and cash equivalents + financial assets at fair value through profit or loss) x 100
Net sales |
| --- | --- |
| Non-interest-bearing liabilities | Provisions + current advance payments received + income tax liability + trade payables and other liabilities |
| Equity ratio, % | Shareholders' equity x 100
Balance sheet total /. advance payments received |
| Gearing, % | Interest-bearing net financial liabilities x 100
Shareholders' equity |
| Gross capital expenditure | Gross capital expenditure includes additions in intangible and tangible assets. |
| Gross capital expenditure, % of net sales | Gross capital expenditure
Net sales of the financial year x 100 |
| Research and development costs | Research and development costs include materials and supplies, working hours and other operating costs |
| Research and development costs, % of net sales | Research and development costs
Net sales of the financial year x 100 |
| Order book, EUR million | Binding sales contracts received but not yet delivered as far the orders have not been recognized in net sales. |
| Order intake, EUR million | Binding sales contracts entered into force during the financial year according to the latest net sales estimate. |
| Personnel, effective, average | Average of the effective number of employed personnel at the end of the calendar months of the financial year. |
| Personnel, average | Average of the number of employed personnel at the end of calendar months. |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
SHARE-RELATED DATA AND CALCULATION
| 2020 | 2019 | 2018 | 2017 | 2016 | |
|---|---|---|---|---|---|
| Earnings per share, (EPS), undiluted, EUR | -0.21 | 1,80 | 2,78 | 2,13 | 1,60 |
| Earnings per share, (EPS), diluted, EUR | -0.21 | 1,79 | 2,76 | 2,11 | 1,59 |
| Equity to share, EUR | 9,50 | 11,61 | 10,82 | 9,27 | 8,13 |
| Dividend per series A share, EUR | *0,80 | 1,45 | 1,40 | 1,25 | 1,00 |
| Dividend per series K share, EUR | *0,80 | 1,45 | 1,40 | 1,25 | 1,00 |
| Dividend per profit, % | *378,5 | 80,4 | 50,4 | 58,8 | 62,3 |
| Effective dividend return, % | *3,5 | 5,8 | 6,6 | 4,3 | 6,0 |
| Price/earnings ratio (P/E ratio) | -108,10 | 13,86 | 7,67 | 13,65 | 10,41 |
| Development in share price (series A share) | |||||
| Lowest share price for the financial year, EUR | 17,40 | 20,00 | 20,50 | 16,84 | 12,06 |
| Highest share price for the financial year, EUR | 27,40 | 28,70 | 34,90 | 30,52 | 17,98 |
| Average share price for the financial year, EUR | 20,57 | 24,71 | 28,58 | 22,70 | 14,50 |
| Share price at the end of the financial year, EUR | 22,70 | 25,00 | 21,30 | 29,00 | 16,70 |
| Market value of capital stock at Dec. 31, EUR thousand** | 96 775 | 106 580 | 90 806 | 123 228 | 70 248 |
| Trading of the company's shares (series A shares) | |||||
| Shares traded during the financial year, 1 000 pcs | 680 | 503 | 880 | 846 | 988 |
| % of the number of series A shares | 21 | 15,4 | 26,9 | 26,0 | 30,7 |
| Total number of shares (undiluted) | |||||
| Issue-adjusted weighted average number of shares | 4 263 194 | 4 263 194 | 4 259 525 | 4 225 082 | 4 166 966 |
| Issue-adjusted number of shares at the end of the financial year | 4 266 933 | 4 286 991 | 4 290 433 | 4 249 248 | 4 206 462 |
The deferred tax liabilities have been included in the calculation of the key ratios.
Board of Directors' proposal to the Annual General Meeting.
*Series K shares valued at the value of series A shares.
| Earnings per share, undiluted, euros | Profit (loss) for the financial year |
|---|---|
| Equity issue-adjusted average number of shares during the financial year | |
| Earnings per share, diluted, euros | Diluted profit (loss) for the financial year |
| Diluted equity issue-adjusted average number of shares during the financial year | |
| Equity to share, euros | Share of shareholders' equity belonging to the owners of the Parent company |
| Undiluted number of shares at the end of the financial year | |
| Dividend per series A share, euros | Distributed dividend for the financial year |
| Undiluted number of shares at the end of the financial year | |
| Dividend per series K share, euros | Distributed dividend for the financial year |
| Undiluted number of shares at the end of the financial year | |
| Dividend per profit, % | Dividend per share |
| Earnings per share | |
| Effective dividend return, % | Dividend per share |
| Closing share price at the end of the financial year | |
| Price/earnings ratio (P/E ratio) | Closing share price at the end of the financial year |
| Earnings per share | |
| Average share price for the financial year, euros | Total EUR value of series A shares traded during the financial year |
| Average number of series A shares traded during the financial year | |
| Market value of capital stock at Dec. 31, EUR 1,000** | Number of shares (series A and series K shares) at the end of the financial year x closing price of the share at the end of the financial year |
| Total number of series A shares traded during the financial year | |
| Share tunover (series A shares) during the financial year | Average number of series A shares during the financial year |
| Average of the number of shares at the end of calendar months of the financial year. | |
| Number of shares, average, diluted | Average of the issue-adjusted number of shares at the end of calendar months of the financial year. |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
Shares and shareholders
MARKET CAPITALIZATION AND SHAREHOLDERS
Raute Corporation
Raute is a financially sound Small Cap company with a strong family background. The company's series A shares are listed on Nasdaq Helsinki Ltd.
Raute operates globally and has a leading position in its field.
Market capitalization and trading
Raute Corporation's series A shares are listed on the Nasdaq Helsinki Ltd in the Industrials sector. The trading code is RAUTE.
In 2020, a total of 680,073 Raute Corporation's series A shares were traded (503,305 pieces). The total value of trading was EUR 14.0 million (MEUR 12.4). The highest share price was EUR 27.40 (EUR 28.70) and the lowest EUR 17.400 (EUR 20.00). At the end of the year 2020, the share price was EUR 22.70 (EUR 25.00). The average price was EUR 20.57 (EUR 24.71). The company's market capitalization at the end of the financial year was EUR 96.8 million (MEUR 106.6), with series K shares valued at the closing price of series A shares on December 31, 2020.
Share-based payment plan 2018-2022
Information is presented in note Employee benefits, page 32.
Board authorizations
The Annual General Meeting on March 31, 2020 authorized the Board to decide on the repurchase of a maximum of 400,000 Raute Corporation's series A shares using assets from the company's non-restricted equity, which would lead to a decrease in the company's distributable assets.
The authorization entitles the Board to acquire the company's series A shares to be used for the development of the company's capital structure, as consideration for funding or carrying out any acquisitions or other arrangements, or to be otherwise disposed of or cancelled.
The purchase consideration paid for shares purchased by virtue of the authorization shall be based on the price of the series A share in public trading so that the minimum price of acquired shares is the lowest market price quoted in public trading during the term of validity of the authorization and the maximum price, correspondingly, the highest market price quoted in public trading during the term of validity of the authorization.
The authorization includes the right to acquire shares other than in proportion to the holdings of the shareholders. A targeted repurchase of the company's own shares can take place, for example, by acquiring shares in public trading in markets where, according to regulations, the company is permitted to engage in the trade of its own shares. Repurchasing shares in public trading as mentioned above or otherwise in a targeted way, requires that the company has a weighty financial reason to do so.
Series K shares can be converted to series A shares in accordance with Article 3 of Raute Corporation's Articles of Association. The Board of Directors will decide on the other conditions related to share repurchases.
By the authority granted to the Board at the Annual General Meeting on April 2, 2019 the Board can decide on an issue of Raute Corporation's series A shares, as well as on all of the related conditions, including the recipients and the sum of consideration to be paid. The Board of Directors may decide to issue either new shares or company shares held by Raute. The maximum number of shares that can be issued is 400,000 series A shares. As proposed, the authorization can be used to fund or carry out acquisitions or other arrangements or for other purposes decided by the Board of Directors.
The authorizations are valid until the end of the next Annual General Meeting.
On December 31, 2020, the company had no valid share issues.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
DISTRIBUTION OF OWNERSHIP
ENTIRE CAPITAL STOCK
| Series A and series K shares by shareholder category at Dec. 31, 2020 | Number of shareholders | % | Number of shares | % | Number of voting rights | % |
|---|---|---|---|---|---|---|
| Households | 5 876 | 95,8 | 3 624 500 | 85,0 | 22 456 559 | 97,2 |
| Financial and insurance institutions | 20 | 0,4 | 224 611 | 5,3 | 224 611 | 1,0 |
| Companies | 187 | 3,0 | 178 885 | 4,2 | 178 885 | 0,8 |
| Non-profit institutions | 20 | 0,3 | 78 442 | 1,8 | 78 442 | 0,3 |
| Public institutions | 1 | 0,0 | 51 950 | 1,2 | 51 950 | 0,2 |
| Foreign shareholders | 19 | 0,4 | 10 030 | 0,2 | 10 030 | 0,0 |
| Nominee-registered | 11 | 0,2 | 94 776 | 2,2 | 94 776 | 0,4 |
| Total | 6 134 | 100,0 | 4 263 194 | 100,0 | 23 095 253 | 100,0 |
| Series A and series K shares by number of shares at Dec. 31, 2020 | Number of shareholders | % | Number of shares | % | Number of voting rights | % |
| --- | --- | --- | --- | --- | --- | --- |
| 1–1 000 | 5 828 | 95,0 | 951 887 | 22,3 | 987 417 | 4,3 |
| 1 001–5 000 | 230 | 3,8 | 475 790 | 11,2 | 799 968 | 3,5 |
| 5 001–10 000 | 23 | 0,4 | 166 162 | 3,9 | 682 962 | 3,0 |
| 10 001–20 000 | 18 | 0,3 | 257 515 | 6,0 | 1 710 806 | 7,4 |
| 20 001–30 000 | 8 | 0,1 | 202 265 | 4,7 | 2 611 275 | 11,3 |
| 30 001–40 000 | 6 | 0,1 | 207 593 | 4,9 | 2 232 043 | 9,7 |
| 40 001–50 000 | 3 | 0,0 | 132 574 | 3,1 | 1 515 394 | 6,6 |
| 50 001–60 000 | 7 | 0,1 | 380 653 | 8,9 | 3 106 013 | 13,4 |
| 60 001– | 11 | 0,2 | 1 488 755 | 34,9 | 9 449 375 | 40,9 |
| Total | 6 134 | 100,0 | 4 263 194 | 100,0 | 23 095 253 | 100,0 |
Shareholding at December 31, 2020
Number of shareholders
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
DISTRIBUTION OF OWNERSHIP
SERIES A SHARES
| Series A shares by shareholder category at Dec. 31, 2020 | Number of shareholders | % | Number of shares | % | Number of voting rights | % |
|---|---|---|---|---|---|---|
| Households | 5 855 | 95,8 | 2 633 339 | 80,5 | 2 633 339 | 80,5 |
| Financial and insurance institutions | 20 | 0,3 | 224 611 | 6,9 | 224 611 | 6,9 |
| Companies | 187 | 3,1 | 178 885 | 5,5 | 178 885 | 5,5 |
| Non-profit institutions | 20 | 0,3 | 78 442 | 2,4 | 78 442 | 2,4 |
| Public institutions | 1 | 0,0 | 51 950 | 1,6 | 51 950 | 1,6 |
| Foreign shareholders | 19 | 0,4 | 10 030 | 0,3 | 10 030 | 0,3 |
| Nominee-registered | 11 | 0,2 | 94 776 | 2,9 | 94 776 | 2,9 |
| Total | 6 113 | 100,0 | 3 272 033 | 100,0 | 3 272 033 | 100,0 |
| Series A shares by number of shares at Dec. 31, 2020 | Number of shareholders | % | Number of shares | % | Number of voting rights | % |
| --- | --- | --- | --- | --- | --- | --- |
| 1–1 000 | 5 822 | 95,2 | 951 399 | 29,1 | 951 399 | 29,1 |
| 1 001–5 000 | 232 | 3,8 | 482 913 | 14,8 | 482 913 | 14,8 |
| 5 001–10 000 | 25 | 0,4 | 179 529 | 5,5 | 179 529 | 5,5 |
| 10 001–20 000 | 14 | 0,2 | 206 965 | 6,3 | 206 965 | 6,3 |
| 20 001–30 000 | 5 | 0,1 | 123 969 | 3,8 | 123 969 | 3,8 |
| 30 001–40 000 | 2 | 0,0 | 70 500 | 2,2 | 70 500 | 2,2 |
| 40 001–50 000 | 4 | 0,1 | 175 553 | 5,4 | 175 553 | 5,4 |
| 50 001–60 000 | 5 | 0,1 | 260 461 | 8,0 | 260 461 | 8,0 |
| 60 001– | 4 | 0,1 | 820 744 | 25,1 | 820 744 | 25,1 |
| Total | 6 113 | 100,0 | 3 272 033 | 100,0 | 3 272 033 | 100,0 |
SERIES K SHARES
| Series K shares by shareholder category at Dec. 31, 2020 | Number of shareholders | % | Number of shares | % | Number of voting rights | % |
|---|---|---|---|---|---|---|
| Households | 54 | 100,0 | 991 161 | 100,0 | 19 823 220 | 100,0 |
| Total | 54 | 100,0 | 991 161 | 100,0 | 19 823 220 | 100,0 |
| Series K shares by number of shares at Dec. 31, 2020 | Number of shareholders | % | Number of shares | % | Number of voting rights | % |
| --- | --- | --- | --- | --- | --- | --- |
| 1–1 000 | 10 | 18,5 | 2 250 | 0,2 | 45 000 | 0,2 |
| 1 001–5 000 | 8 | 14,8 | 21 551 | 2,2 | 431 020 | 2,2 |
| 5 001–10 000 | 6 | 11,1 | 32 100 | 3,2 | 642 000 | 3,2 |
| 10 001–20 000 | 10 | 18,5 | 137 940 | 13,9 | 2 758 800 | 13,9 |
| 20 001–30 000 | 7 | 13,0 | 169 910 | 17,1 | 3 398 200 | 17,1 |
| 30 001–40 000 | 3 | 5,6 | 99 550 | 10,0 | 1 991 000 | 10,0 |
| 40 001–50 000 | 5 | 9,3 | 238 480 | 24,1 | 4 769 600 | 24,1 |
| 50 001–60 000 | 2 | 3,7 | 106 320 | 10,7 | 2 126 400 | 10,7 |
| 60 001– | 3 | 5,6 | 183 060 | 18,5 | 3 661 200 | 18,5 |
| Total | 54 | 100,0 | 991 161 | 100,0 | 19 823 220 | 100,0 |
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
LARGEST SHAREHOLDERS
20 LARGEST SHAREHOLDERS AT DECEMBER 31, 2020 BY NUMBER OF SHARES
| Number of series K shares | Number of series A shares | Total number of shares | % of total shares | Total number of votes | % of voting rights | ||
|---|---|---|---|---|---|---|---|
| 1. | Sundholm Göran | - | 500 000 | 500 000 | 11,7 | 500 000 | 2,2 |
| 2. | Mandatum Henkivakuutusosakeyhtiö | - | 138 396 | 138 396 | 3,2 | 138 396 | 0,6 |
| 3. | Laakkonen Mikko Kalervo | - | 119 919 | 119 919 | 2,8 | 119 919 | 0,5 |
| 4. | Suominen Pekka | 48 000 | 62 429 | 110 429 | 2,6 | 1 022 429 | 4,4 |
| 5. | Siivonen Osku Pekka | 50 640 | 53 539 | 104 179 | 2,4 | 1 066 339 | 4,6 |
| 6. | Kirmo Kaisa Marketta | 55 680 | 48 341 | 104 021 | 2,4 | 1 161 941 | 5,0 |
| 7. | Suominen Tiina Sini-Maria | 48 000 | 52 856 | 100 856 | 2,4 | 1 012 856 | 4,4 |
| 8. | Keskiaho Kaija Leena | 33 600 | 51 116 | 84 716 | 2,0 | 723 116 | 3,1 |
| 9. | Mustakallio Mika Tapani | 62 100 | 21 170 | 83 270 | 2,0 | 1 263 170 | 5,5 |
| 10. | Särkijärvi Anna Riitta | 60 480 | 22 009 | 82 489 | 1,9 | 1 231 609 | 5,3 |
| 11. | Mustakallio Kari Pauli | 60 480 | - | 60 480 | 1,4 | 1 209 600 | 5,2 |
| 12. | Mustakallio Marja Helena | 46 740 | 12 547 | 59 287 | 1,4 | 947 347 | 4,1 |
| 13. | Särkijärvi Anu Riitta | 12 000 | 43 256 | 55 256 | 1,3 | 283 256 | 1,2 |
| 14. | Särkijärvi Timo Juha | 12 000 | 43 256 | 55 256 | 1,3 | 283 256 | 1,2 |
| 15. | Mustakallio Ulla Sinikka | 47 740 | 7 240 | 54 980 | 1,3 | 962 040 | 4,2 |
| 16. | Suominen Jukka Matias | 24 960 | 27 964 | 52 924 | 1,2 | 527 164 | 2,3 |
| 17. | Keskinäinen työeläkevakuutusyhtiö Varma | - | 51 950 | 51 950 | 1,2 | 51 950 | 0,2 |
| 18. | Relander Pär-Gustaf | - | 51 000 | 51 000 | 1,2 | 51 000 | 0,2 |
| 19. | Suominen Jussi | 48 000 | - | 48 000 | 1,1 | 960 000 | 4,2 |
| 20. | Keskiaho Ilta Marjaana | 24 780 | 19 094 | 43 874 | 1,0 | 514 694 | 2,2 |
| Total | 635 200 | 1 326 082 | 1 961 282 | 46,0 | 14 030 082 | 60,7 |
MANAGEMENT'S SHAREHOLDING AT DECEMBER 31, 2020
The Board of Directors, the President and CEO as well as the Executive Board held altogether 128,169 series A shares and 127,890 series K shares at December 31, 2020, equaling 6.0 percent of the company shares and 11.6 percent of the votes.
The figures include the holding of their own, minor children and control entities.
NOMINEE-REGISTERED SHARES AT DECEMBER 31, 2020
Nominee-registered shares accounted for 2.2 percent (3.5%) of the total shares.
20 LARGEST SHAREHOLDERS AT DECEMBER 31, 2019 BY NUMBER OF VOTES
| Number of series K shares | Number of series A shares | Total number of shares | % of total shares | Total number of votes | % of voting rights | |
|---|---|---|---|---|---|---|
| 1. Mustakallio Mika Tapani | 62 100 | 21 170 | 83 270 | 2,0 | 1 263 170 | 5,5 |
| 2. Särkijärvi Anna Riitta | 60 480 | 22 009 | 82 489 | 1,9 | 1 231 609 | 5,3 |
| 3. Mustakallio Kari Pauli | 60 480 | - | 60 480 | 1,4 | 1 209 600 | 5,2 |
| 4. Kirmo Kaisa Marketta | 55 680 | 48 341 | 104 021 | 2,4 | 1 161 941 | 5,0 |
| 5. Siivonen Osku Pekka | 50 640 | 53 539 | 104 179 | 2,4 | 1 066 339 | 4,6 |
| 6. Suominen Pekka | 48 000 | 62 429 | 110 429 | 2,6 | 1 022 429 | 4,4 |
| 7. Suominen Tiina Sini-Maria | 48 000 | 52 856 | 100 856 | 2,4 | 1 012 856 | 4,4 |
| 8. Mustakallio Ulla Sinikka | 47 740 | 7 240 | 54 980 | 1,3 | 962 040 | 4,2 |
| 9. Suominen Jussi | 48 000 | - | 48 000 | 1,1 | 960 000 | 4,2 |
| 10. Mustakallio Marja Helena | 46 740 | 12 547 | 59 287 | 1,4 | 947 347 | 4,1 |
| 11. Keskiaho Kaija Leena | 33 600 | 51 116 | 84 716 | 2,0 | 723 116 | 3,1 |
| 12. Mustakallio Hanna Leena | 32 975 | 5 565 | 38 540 | 0,9 | 665 065 | 2,9 |
| 13. Mustakallio Jukka Jeremias | 32 975 | - | 32 975 | 0,8 | 659 500 | 2,9 |
| 14. Keskiaho Vesa Heikki | 29 680 | - | 29 680 | 0,7 | 593 600 | 2,6 |
| 15. Keskiaho Juha-Pekka | 27 880 | 5 716 | 33 596 | 0,8 | 563 316 | 2,4 |
| 16. Suominen Jukka Matias | 24 960 | 27 964 | 52 924 | 1,2 | 527 164 | 2,3 |
| 17. Keskiaho Ilta Marjaana | 24 780 | 19 094 | 43 874 | 1,0 | 514 694 | 2,2 |
| 18. Sundholm Göran | - | 500 000 | 500 000 | 11,7 | 500 000 | 2,2 |
| 19. Kultanen Leea Annikka | 21 595 | 8 031 | 29 626 | 0,7 | 439 931 | 1,9 |
| 20. Piik Ari Aarne Juhani | 20 855 | 418 | 21 273 | 0,5 | 417 518 | 1,8 |
| Total | 777 160 | 898 035 | 1 675 195 | 39,3 | 16 441 235 |
NUMBER OF SHAREHOLDERS AT DECEMBER 31, 2020
The number of shareholders totaled 6,134 (5,614) at the end of the year 2020. Series K shares were owned by 54 (54) private individuals at the end of the financial year.
RAUTE FINANCIAL STATEMENTS 2020 | GROUP
RAUTE
Raute Corporation
Rautetie 2, P.O. Box 69
FI-15551 Nastola, Finland
Tel. +358 3 829 11