Vapo Oy Interim Report 1 May–31 August 2015
The first third of the year in brief:
- Group turnover in the May–August period was EUR 124.1 million (EUR 132.4 million in the same period in 2014).
- Operating margin (EBITDA) was EUR 1.7 million, or 1.3% of turnover (EUR 13.8 million, 10.4%).
- The operating result was EUR -12.8 million, or -10.3% of turnover (EUR -3.0 million, -2.3%). The operating result does not include any one-off items (EUR -0.5 million).
- Free cash flow before taxes was EUR -18.4 million (EUR -32.6 million).
- Gross investments were EUR 13.4 million (EUR 35.4 million).
- The Group produced a total of 9.8 million cubic metres of peat (19.1 million m3).
Tomi Yli-Kyyny, CEO: Operating profit reduced by the low volume of peat production, but the reliability of supply remained excellent
The Group’s turnover in the first third of the financial year (May–August) amounted to EUR 124.1 million (EUR 132.4). The most significant factors contributing to the 6.3 per cent decrease in turnover were reduced demand and lower prices for sawn timber, as well as the contraction of the turnover of Neova AB following the pellet joint venture between Agroenergi AB and Neova AB, which was implemented in June 2014.
The result for the first third of the financial year showed a loss as the Group’s operations focused on fuel production. The consolidated operating result was EUR -12.8 million (EUR -3.0 million). The primary reason for the increased operating loss was that Vapo Oy’s peat production volume in Finland totalled only 7.1 million cubic metres, or 65 per cent of the production target. The low production volume led to higher unit cost for peat. Profitability was weaker not only in the fuel business, but also in the sawmill business. Profitability improved in Kekkilä Group, Neova AB and Vapo Oy’s heating business.
The low peat production volume is reflected in the figures for the review period in the form of higher cash flow compared to the corresponding period in 2014. The Group recorded a positive cash flow of EUR 18.4 million in May–August. Due to the seasonality of the Group’s various businesses, the cash flow of energy businesses was negative during the review period, while the cash flow of Kekkilä, in particular, was significantly positive.
The Group’s weather risk was realised in peat production in summer 2015. It would be easier to prepare for this risk if permits were obtained for new peat production areas and production at new areas could begin. New production areas would enable a higher production volume and better security of supply, as lowered mires cannot be fully utilised in peat production in rainy summers. In spring 2015, before the start of the production season, Vapo Oy’s peat reserves corresponded to approximately 18 months of consumption. Combined with the peat produced in summer 2015, these reserves ensure that the Group can ensure the availability of peat to all of its contract customers.
The taxation of energy peat has resulted in uncertainty in the demand for peat. The Government Programme indicates that taxes on energy peat will be reduced back to EUR 1.9/MWh at the beginning of 2016. It is important that peat taxation and fuel wood subsidies in both heating and electricity production are confirmed for a period of several years to ensure that investments that increase the use of domestic energy can be implemented.
New challenges will be introduced by the setting of emissions limits for large combustion plants in accordance with the best available techniques, which is currently in progress at the EU level. The LCP BREF draft concerns the replacement of coal and other fossil fuels with biomass fuels and proposes substantially tougher limits on emissions arising from the combustion of biomass and peat.
The use of domestic fuels is being promoted at the EU level, and it seems likely that countries that produce coal will have less strict emissions limits on domestic brown coal, while Finland, Ireland and Sweden would not be granted a similar relaxation of emissions limits on domestic peat. Having peat be treated in the same manner as brown coal is very important, as stricter emissions limits on biomass and peat will make it more difficult for Finland to achieve the government’s stated aim of increasing its self-sufficiency in energy. This also affects the degree to which the production of domestic energy creates jobs in sparsely populated areas.
Consolidated key figures
|
MEUR |
5–8/2015 |
5–8/2014 |
5/2014–4/2015 |
1/2013–4/2014 |
|
|
|
|
|
|
|
Turnover |
124.1 |
132.4 |
486.9 |
847.4 |
|
Operating profit (EBIT) |
-12.8 |
-3.0 |
36.9 |
50.0 |
|
% of turnover |
-10.3 |
-2.2 |
7.6 |
5.9 |
|
Operating profit (EBITA) before impairments |
-12.8 |
-3.1 |
37.6 |
53.9 |
|
% of turnover |
-10.3 |
-2.3 |
7.7 |
6.4 |
|
Profit/loss for the period |
-11.8 |
-6.7 |
19.8 |
22.7 |
|
|
|
|
|
|
|
Operating margin (EBITDA) |
1.7 |
13.8 |
74.7 |
110.8 |
|
+/- Change in working capital |
16.4 |
-21.3 |
-32.7 |
-27.4 |
|
– Net investments |
0.4 |
-25.1 |
-67.1 |
-21.6 |
|
Free cash flow before taxes |
18.4 |
-32.6 |
-25.1 |
61.9 |
|
Gross investments |
13.4 |
35.4 |
88.4 |
57.5 |
|
Return on invested capital % * |
3.9 |
3.9 |
5.3 |
3.8 |
|
Return on invested capital % before impairments * |
4.0 |
4.4 |
5.5 |
4.4 |
|
Return on equity % * |
5.0 |
1.7 |
6.6 |
1.3 |
|
|
|
|
|
|
|
Balance sheet total |
|
|
838.2 |
786.9 |
|
Shareholders’ equity |
|
|
305.4 |
305.2 |
|
Interest-bearing net debt |
|
|
393.1 |
329.0 |
|
Equity ratio % |
|
|
37.9 |
40.2 |
|
Interest-bearing net debt/operating margin |
|
|
5.3 |
4.4 |
|
Gearing % |
|
|
128.7 |
110.3 |
|
|
|
|
|
|
|
Average number of employees |
|
|
961 |
1091 |
*) Previous 12 months
**) In calculating the equity ratio, the capital loan on the balance sheet was calculated as shareholders’ equity
Developments by business segment
Turnover by segment
|
MEUR |
5–8/2015 |
5–8/2014 |
Change % |
5/2014–4/2015 |
1/2013–4/2014 |
|
Vapo Oy |
53.0 |
52.9 |
0.2 |
251.9 |
386.8 |
|
Vapo Timber Oy |
27.5 |
31.0 |
-11.3 |
89.0 |
179.7 |
|
Kekkilä Group |
34.2 |
32.8 |
4.3 |
87.1 |
125.7 |
|
Neova AB |
9.1 |
11.8 |
-23.1 |
48.9 |
135.5 |
|
AS Tootsi Turvas |
3.2 |
3.3 |
-2.9 |
12.9 |
18.6 |
|
Others |
0.0 |
3.9 |
-99.8 |
7.8 |
27.0 |
|
Inter-segment turnover |
-2.8 |
-3.2 |
12.2 |
-10.8 |
-25.9 |
|
Total |
124.1 |
132.4 |
-6.2 |
486.9 |
847.4 |
Operating profit/loss by segment
|
MEUR |
5–8/2015 |
5–8/2014 |
Change % |
5/2014–4/2015 |
1/2013–4/2014 |
|
Vapo Oy |
-11.5 |
-2.7 |
-330.5 |
49.1 |
52.0 |
|
Vapo Timber Oy |
-0.8 |
0.7 |
-224.7 |
0.8 |
-5.2 |
|
Kekkilä Group |
1.7 |
0.7 |
147.7 |
1.1 |
1.7 |
|
Neova AB |
-1.5 |
-2.2 |
30.5 |
1.0 |
3.9 |
|
AS Tootsi Turvas |
0.3 |
0.5 |
-46.4 |
1.6 |
1.5 |
|
Others |
0.0 |
0.9 |
-104.4 |
0.9 |
-4.3 |
|
Eliminations |
-0.8 |
-0.9 |
5.3 |
-17.6 |
0.2 |
|
Total |
-12.8 |
-3.0 |
-331.4 |
36.9 |
50.0 |
Interim Report 1.5.-31.8.2015 (pdf)
For further information, please contact:
– Tomi Yli-Kyyny, CEO, Vapo Oy tel. +358 20 790 5605
– Suvi Kupiainen, CFO, Vapo Oy, tel. +358 20 790 5516
– Ahti Martikainen, Director, Communications and Public Affairs, Vapo Oy,
tel. +358 20 790 5608