News Column

OLVI GROUP’S INTERIM REPORT, 1 JANUARY TO 30 JUNE 2014 (6 MONTHS)

August 13, 2014

The entire Group's sales volume was almost on a par with the previous year. Extremely cold weather in the early summer took its toll on second-quarter sales volumes. Olvi's position remained strong in all market areas. Consolidated operating profit fell short of the previous year but relative profitability remained good. Iisalmi, Olvi plc, 2014-08-14 07:44 CEST (GLOBE NEWSWIRE) -- OLVI PLC INTERIM REPORT 14 AUG 2014 OLVI GROUP’S INTERIM REPORT, 1 JANUARY TO 30 JUNE 2014 (6 MONTHS) The entire Group’s sales volume was almost on a par with the previous year. Extremely cold weather in the early summer took its toll on second-quarter sales volumes. Olvi’s position remained strong in all market areas. Consolidated operating profit fell short of the previous year but relative profitability remained good. The earnings outlook for 2014 remains unchanged: sales volume and net sales are expected to slightly increase, and operating profit is estimated to remain at the healthy level of 2013. January-June in brief: - The entire Group’s net sales declined by 6.7 percent to 159.3 (170.7) million euro mostly due to the decline in the parent company’s net sales - The Group’s operating profit declined to 19.3 (22.8) million euro mainly due to weakened performance in the parent company - The Group’s equity to total assets ratio remained at a healthy level of 50.5% (50.0%) - Gross capital expenditure increased to 23.5 (13.3) million euro. The expenditure was spent on increasing production capacity and improving production efficiency - The entire Group’s sales volume diminished slightly by 1.1 percent to 278.9 (282.0) million litres due to a decline in the parent company’s sales - Business performance in the Baltic states was better than in the previous year: sales increased by 7.5 percent to 148.8 (138.5) million litres, net sales improved by 3.3 percent to 79.7 (77.2) million euro and operating profit improved by 3.6 percent to 10.2 (9.8) million euro - Sales in Belarus increased by 4.3 percent to 81.1 (77.8) million litres, net sales increased by 4.0 percent to 36.7 (35.3) million euro, and operating profit remained almost at the previous year’s level at 5.7 (5.8) million euro KEY RATIOS 1-6/2014 1-6/2013 Change % 1-12/2013 Net sales, MEUR 159.3 170.7 -6.7 327.3 Operating profit, MEUR 19.3 22.8 -15.3 43.2 Gross capital expenditure, MEUR 23.5 13.3 +76.6 35.7 Earnings per share, EUR 0.66 0.79 -16.5 1.61 Equity per share, EUR 8.22 7.39 +11.2 8.14 Equity to total assets, % 50.5 50.0 58.0 Gearing, % 38.4 34.8 26.4 Lasse Aho, Managing Director of Olvi plc, said the following in connection with the disclosure of the accounts: “Performance from January to June was in line with the budget. Business developed favourably in the Baltic states and also sustained a healthy level in Belarus. Factors contributing to the deterioration of performance in Finland included the impacts of excise tax hikes, the diminishing Finnish beverage markets, clearly intensified price competition within the industry, strong growth in tax-free tourist imports, and diminished exports of soft drinks. Extremely cold weather that lasted all of June impacted second-quarter sales volumes in all of the Group’s operating countries. We believe that the exceptionally long period of hot weather will have a positive effect on sales volumes for the late summer. OLVI GROUP’S SALES VOLUME, NET SALES AND EARNINGS IN JANUARY-JUNE 2014 In the first half of 2014, Olvi Group’s sales volume was 278.9 (282.0) million litres, a change of -3.1 million litres or 1.1 percent on the previous year. The parent company’s sales declined by 12.7 million litres, which was mainly due to diminished sales volumes in soft drink exports. Sales within Finland declined by slightly less than 3 percent while Olvi was able to increase its market share in a diminishing market. Sales in the Baltic states increased clearly by 10.3 million litres or 7.5 percent to 148.8 (138.5) million litres. Sales in Estonia remained almost on a par with the previous year. Sales in Latvia increased by 9.0 percent and in Lithuania by 22.0 percent. Sales in Belarus in January-June increased by 3.3 million litres or 4.3 percent to 81.1 (77.8) million litres. Intra-Group sales increased by 4.1 million litres on the previous year. The Group’s net sales from January to June amounted to 159.3 (170.7) million euro. Net sales declined by 11.4 million euro or 6.7 percent. Finnish net sales amounted to 52.5 (67.5) million euro. Net sales in the Baltic states increased by 3.3 percent to 79.7 (77.2) million euro and in Belarus by 4.0 percent to 36.7 (35.3) million euro. Among the Baltic states, Lithuania was the only one to show a clear net sales increase of 17.3 percent. Net sales in Latvia increased by 4.1 percent and in Estonia, declined slightly. Olvi Group’s operating profit for January-June stood at 19.3 (22.8) million euro, or 12.1 (13.4) percent of net sales. The Group’s operating profit declined by 3.5 million euro or 15.3 percent. Operating profit in Finland amounted to 4.2 (7.1) million euro, a decline of 2.9 million euro. Operating profit in the Baltic states declined by 0.4 million euro to 10.2 (9.8) million euro. Among the Baltic states, the greatest increase in operating profit was seen in Lithuania. In Estonia, the operating profit improved slightly and in Latvia there was a slight decline. Operating profit in Belarus was on a par with the previous year at 5.7 (5.8) million euro. Eliminations against operating profit increased by 0.7 million euro. Olvi Group’s profit after taxes in the period under review was 13.9 (16.9) million euro. Earnings per share calculated from the profit belonging to parent company shareholders in January-June declined to 0.66 (0.79) euro per share. OLVI GROUP’S SALES VOLUME, NET SALES AND EARNINGS IN APRIL-JUNE 2014 The Group’s sales volume in the second quarter was on a par with the previous year at 171.7 (171.3) million litres. Historically cold weather in June had an impact on second-quarter sales volumes in all of Olvi Group’s operating countries. Sales in Finland declined by 4.0 million litres to 44.6 (48.6) million litres. Sales in the Beltic states increased by 5.7 million litres to 89.4 (83.7) million litres and sales in Belarus by 0.6 million litres to 51.2 (50.6) million litres. Among the Baltic states, a clear growth in sales was seen in Lithuania, 23.5 percent. Intra-Group eliminations increased by 1.9 million litres. The Group’s net sales from April to June amounted to 98.3 (102.7) million euro. Net sales declined by 4.4 million euro or 4.3 percent. Net sales in Finland declined by 6.5 million euro to 31.5 (38.0) million euro. Net sales in the Baltic states improved slightly on the previous year, amounting to 48.0 (47.6) million litres. Among the Baltic states, a clear increase in net sales was seen in Lithuania, while net sales in Estonia and Latvia declined slightly. Net sales in Belarus increased by 1.3 million euro to 24.0 (22.7) million euro. The Group’s operating profit for the second quarter stood at 15.9 (17.8) million euro, or 16.2 (17.4) percent of net sales. The operating profit declined by 1.9 million euro or 10.9 percent compared to the previous year. Operating profit in Finland declined by 1.4 million euro and in Belarus by 0.6 million euro, while operating profit in the Baltic states was on a par with the previous year. Operating profit in Finland amounted to 2.9 (4.3) million euro, in the Baltic states to 7.8 (7.8) million euro and in Belarus to 5.1 (5.7) million euro. Among the Baltic states, the greatest increase in operating profit was seen in Lithuania, while operating profit in Estonia increased slightly and the corresponding figure in Latvia declined clearly. SALES VOLUME, NET SALES AND EARNINGS BY GEOGRAPHICAL SEGMENT IN JANUARY-JUNE 2014 Seasonal nature of the operations The Group’s business operations are characterised by seasonal variation. The net sales and operating profit from the reported geographical segments do not accumulate evenly but vary according to the time of the year, the conditions and and the variation between seasons. Most of the Group’s earnings is accumulated during the second and third quarters. PARENT COMPANY OLVI PLC (Olvi) January to June 2014 According to statistics by the Federation of the Brewing and Soft Drinks Industry, the Finnish beverage market in January-June diminished by 15 million litres or four percent compared to the previous year. Sales declined in all product groups. The greatest reasons for the sales decline were the excise tax hikes effective as of the beginning of 2014, increasing private imports and extremely cold weather in June. Consumer purchasing power has also weakened due to the poor economic situation and tax hikes. Sales of alcoholic beverages declined by more than three percent while sales of non-alcoholic beverages declined by five percent. The sales volume declined by three percent in beers, almost six percent in ciders and more than two percent in long drinks. Total sales of soft drinks in January-June declined by almost five percent and the sales of mineral waters by almost six percent. (Federation of the Brewing and Soft Drinks Industry, June 2014). Olvi’s domestic sales in the first half of the year were almost on a par with the previous year, and sales declined less than the entire industry’s sales, thanks to which Olvi’s overall market position strengthened in January-June, from 17.8 percent to 18.2 percent compared to the previous year. Olvi’s total sales in January-June amounted to 72.4 (85.1) million litres. Sales declined by 12.7 million litres or 14.9 percent. The major reason for the substantial decline in sales was that exports of Angry Birds soft drinks into Russia diminished greatly in comparison to the initial launch in the comparison period. The decline in soft drink exports was also affected by substantial devaluation of the Russian rouble. Any decline in the exchange rate of the rouble will increase the retail prices of imported foodstuffs in Russia. However, the exports of beer increased in the review period. Among Olvi’s main product groups in Finland, the sales of beers increased slightly and the sales of ciders increased clearly, while the entire industry’s sales were declining. The sales of long drinks declined clearly. The sales of soft drinks declined clearly due to a sales dip in Angry Birds beverages. The sales of mineral waters declined slightly but the decline was smaller than that of the industry. According to statistics by the Federation of the Brewing and Soft Drinks Industry, Olvi’s market share in alcoholic beverages (beers, ciders and long drinks) increased in January-June 2014 to 24 (23) percent. The market share in non-alcoholic beverages was 9 (9) percent. Olvi’s exports and tax-free sales declined substantially during the review period, amounting to 4.7 (15.5) million litres. The decline in exports was due to a halt in soft drink exports into Russia. However, tax free sales to ships and harbour sales increased clearly in the review period. Exports and tax-free sales represented 6.6 (18.2) percent of total sales. Olvi’s net sales from January to June declined to 52.5 (67.5) million euro. Net sales declined by 15.0 million euro or 22.3 percent. The average price of net sales was affected by greatly intensified price competition and a change in consumption habits towards a lower price bracket due to a decline in consumer purchasing power. Olvi’s operating profit also declined in the review period. Operating profit stood at 4.2 (7.1) million euro, which was 7.9 (10.5) percent of net sales. The operating profit declined by 2.9 million euro or 41.4 percent. Furthermore, the earnings included 0.7 million euro of write-downs on unsaleable inventories and package scrapping costs. The company was also unable to adapt its costs to the diminished sales volume quickly enough. Olvi’s operating profit in January-June included 0.7 million euro of sales gains arising from the sales of production machinery to the Lithuanian subsidiary. April to June 2014 The parent company’s sales in the second quarter declined by 4.0 million litres or 8.3 percent to 44.6 (48.6) million litres. Net sales amounted to 31.5 (38.0) million euro, representing a decline of 6.5 million euro or 17.0 percent. Operating profit in April-June stood at 2.9 (4.3) million euro, or 9.2 (11.2) percent of net sales. The operating profit declined by 1.4 million euro or 31.8 percent in the second quarter. Reasons for the declines in sales volume, net sales and earnings are described above in connection with accumulated earnings. AS A. LE COQ (A. Le Coq) January to June 2014 In the Estonian beverage market, the consumption of ciders and waters increased during the first half of the year. Also the consumption of beers saw a slight upturn after a long-lasting downward trend. The consumption of long drinks and soft drinks declined slightly and juices saw a drop of more than 11 percent. (Nielsen, April-May 2014). The Estonian subsidiary A. Le Coq’s sales volume from January to June almost matched the previous year at 66.7 (67.0) million litres. Sales declined by 0.3 million litres or 0.4 percent. The sales of A. Le Coq waters increased in the domestic market while the sales of long drinks and soft drinks were on a par with the previous year. The sales of beers declined slightly while the sales of ciders and juices saw a clear drop compared to the previous year. A. Le Coq has still retained its good position in the Estonian beverage market. The company is the clear market leader in long drinks and juices. In the first half of 2014, the company has become the market leader in beers by a slim margin. In ciders and soft drinks the company is the clear number two player. In waters, the company is close to the second position in terms of volume but the clear market leader in terms of value. (Nielsen, April-May 2014). Exports and tourist sales made up 26 percent of the company’s total sales. A. Le Coq’s net sales in the first half of the year amounted to 41.1 (42.1) million euro, a decline of 1.0 million euro or 2.4 percent. In spite of the decline in net sales, the company’s operating profit for January-June improved on the previous year. Operating profit stood at 8.3 (8.0) million euro, which was 20.1 (19.0) percent of net sales. The operating profit improved by 0.3 million euro or 3.3 percent. April to June 2014 A. Le Coq’s second-quarter sales increased slightly by 0.4 million litres or 1.1 percent, ending up at 41.5 (41.1) million litres. Net sales from April to June amounted to 25.3 (26.2) million euro. Net sales declined by 0.9 million euro or 3.5 percent. The company was able to slightly improve its profitability during the second quarter. A. Le Coq’s operating profit was 6.1 (5.9) million euro or 24.1 (22.4) percent of net sales. The operating profit improved by 0.2 million euro or 3.7 percent. A/S CESU ALUS (Cesu Alus) January to June In the Latvian beverage market, there was a healthy upward trend in total sales of beers and long drinks. However, a decline continued in ciders. (Nielsen, April-May 2014). The company’s sales in January-June amounted to 43.2 (39.6) million litres. Sales increased by 3.6 million litres or 9.0 percent. The sales increase was mainly attributable to internal sales to other Olvi Group companies. During the reporting period, Cesu Alus’s domestic sales of beers increased slightly on the previous year. The sales of long drinks and soft drinks (including kvass) increased while the sales of ciders declined clearly. Cesu Alus is the market leader in the declining cider market. The company is also the market leader in long drinks. During the first half of 2014, the company’s market share in beers has gradually increased towards the market-leading position. (Nielsen, May 2014). Cesu Alus’s net sales from January to June amounted to 19.9 (19.1) million euro, representing an increase of 0.8 million euro or 4.1 percent. Operating profit in January-June stood at 1.3 (1.6) million euro, or 6.6 (8.5) percent of net sales. The operating profit declined by 0.3 million euro or 19.1 percent. The decline in operating profit was due to deteriorated profitability caused by the decline in average price of net sales. April to June 2014 Cesu Alus’s second quarter fell short of the previous year due to intensified competition in the Latvian beverage market and the record-breaking cold weather in June. Cesu Alus’s sales in the second quarter amounted to 24.9 (24.1) million litres, representing an increase of 0.8 million litres or 3.5 percent. Net sales amounted to 11.6 (11.9) million euro, representing a decline of 0.3 million euro or 2.7 percent on the previous year. The company’s operating profit in April-June stood at 1.0 (1.5) million euro, or 8.7 (12.7) percent of net sales. The operating profit declined by 0.5 million euro or 33.9 percent. AB VOLFAS ENGELMAN (Volfas Engelman) January to June In the overall Lithuanian beverage market, the sales of beers increased while the sales of long drinks declined clearly on the previous year. The decline in cider sales was substantial. (Nielsen, April-May 2014). Volfas Engelman’s sales volume, net sales and operating profit developed well also in the second quarter. Sales amounted to 39.0 (32.0) million litres, representing an increase of 7.0 million litres or 22.0 percent. The sales of the company’s beers and long drinks in the domestic market increased substantially. The drop in cider sales was smaller than that of the overall cider market. The sales of soft drinks (including kvass) declined slightly on the previous year. Volfas Engelman has further improved its position in the Lithuanian beverage market. The company is the clear market leader in long drinks and kvass, and it has clearly improved its market share in comparison with the previous year. In the beer market, the company shares the number two position with another player. (Nielsen, April-May 2014). Exports made 3.2 (3.4) percent of the company’s total sales. The company’s net sales from January to June amounted to 18.8 (16.0) million euro. Thanks to good sales development, net sales increased by 2.8 million euro or 17.3 percent. Thanks to good performance in the second quarter, operating profit increased to 0.6 (0.2) million euro compared to the previous year. Operating profit came to 3.3 (1.4) percent of net sales. The improvement in operating profit was attributable to good development in sales volumes and cost-cutting. April to June 2014 Volfas Engelman performed well in the second quarter. The company’s sales volume from April to June amounted to 23.0 (18.6) million litres, representing an increase of 4.4 million litres or 23.5 percent. Second-quarter net sales increased by 1.7 million euro or 17.5 percent to 11.1 (9.4) million euro. The company’s operating profit improved substantially during the second quarter. Operating profit stood at 0.7 (0.4) million euro, which was 6.6 (4.7) percent of net sales. The operating profit increased by 0.3 million euro. OAO LIDSKOE PIVO (Lidskoe Pivo) January to June 2014 The overall beverage market in Belarus saw an upward trend from January to June. The sales of beers remained on the previous year’s level while the sales of juice drinks and waters improved substantially. A good uptrend was also seen in soft drinks during the first half of the year. The sales of kvass and ciders declined. (Nielsen, April-May 2014). In terms of sales volume, Lidskoe Pivo’s year 2014 got a historically good start but the cold weather in early summer had a substantial impact on second-quarter earnings. The company’s sales in January-June amounted to 81.1 (77.8) million litres. Sales increased by 3.3 million litres or 4.3 percent on the previous year. The sales of waters in the domestic market increased substantially. A clear increase was also seen in juice drinks. The sales of beers remained on a par with the previous year but the sales of ciders declined by almost one-fifth. The sales of soft drinks (including kvass) declined clearly. Lidskoe Pivo stepped up to the number two position in the beer market in April-May. The company is clearly the number two player in juice drinks. Its market share in soft drinks declined slightly but it is clearly the market leader in kvass as well as ciders. The company’s market share in waters is gradually increasing. (Nielsen, April-May 2014). Lidskoe Pivo’s exports increased substantially in the review period, by 39.3 percent. Exports accounted for 19.2 (14.4) percent of total sales. The main destination for exports was Russia. The company’s net sales in January-June increased by 1.4 million euro or 4.0 percent on the previous year, amounting to 36.7 (35.3) million euro. Operating profit in January-June was almost on a par with the previous year at 5.7 (5.8) million euro, or 15.5 (16.5) percent of net sales. April to June 2014 Lidskoe Pivo’s sales volume got a good start in the second quarter but the extremely cold weather in June had a substantial impact on quarterly performance. The company’s second-quarter sales increased to 51.2 (50.6) million litres. This represents an increase of 0.6 million litres or 1.1 percent. Net sales stood at 24.0 (22.7) million euro, an increase of 1.3 million euro or 5.5 percent. The increase in net sales outperformed the sales volume growth in April-June. The company’s profitability remained on a healthy level in the second quarter. Operating profit stood at 5.1 (5.7) million euro, which was 21.3 (25.1) percent of net sales. The operating profit declined by 0.6 million euro or 10.6 percent on the previous year. FINANCING AND INVESTMENTS Olvi Group’s balance sheet total at the end of June 2014 was 341.9 (311.3) million euro. Equity per share stood at 8.22 (7.39) euro, an increase of 0.83 euro per share or 11.2 percent. The equity to total assets ratio improved slightly to 50.5 (50.0) percent. The amount of interest-bearing liabilities was 72.6 (61.0) million euro, including current liabilities of 36.7 (27.4) million euro. During the period under review, Olvi Group’s gross capital expenditure amounted to 23.5 (13.3) million euro. The parent company Olvi accounted for 10.5 million euro and the subsidiaries in the Baltic states for 6.9 million euro of the total. Lidskoe Pivo’s gross capital expenditure in the first quarter was 6.1 million euro. The largest investments in Finland in 2014 are an extension and performance improvement in automated picking, the completion of the new high-rise storehouse and installations of related equipment, an extension to the dispatch area, development of packaging options at the production lines, as well as acquisitions of additional product conveyors. Olvi’s investments include 0.7 million euro of shares acquired from minority shareholders of Lidskoe Pivo in April 2014. In the Baltic states, A. Le Coq’s largest investments consist of new PET bottle formats, a reception, storage and handling system for glucose syrup, an extension to the cold storage rooms of the juice factory, and replacement of conveyor systems for logistics. Cesu Alus’s largest investments consist of the replacement of the bottle-blowing machine, the acquisitions of pre-mixing equipment for the juicing facility and a machine for laying PET bottles on pallets, as well as investments related to logistics performance improvements. The largest investments in Volfas Engelman consist of the acquisitions of a bottle-blowing machine and a new canning line. Lidskoe Pivo’s investments in 2014 include extensions to storage and production facilities, the construction of a new boiling room, replacement of pipelines in fermentation and yeast tanks, the acquisition of new pressure tanks, mixing equipment for fermentation tanks, as well as the acquisition of buffer conveyors and new formats. PRODUCT DEVELOPMENT Research and development includes projects to design and develop new products, packages, processes and production methods, as well as further development of existing products and packages. The R&D costs have been recognised as expenses. The main objective of Olvi Group’s product development is to create new products for profitable and growing beverage segments. NEW PRODUCTS Finland In December 2013, Olvi entered into a co-operation agreement with the German company Warsteiner Brauerei Haus Cramer KG established in 1753. Under the agreement, Olvi introduced high-quality German beers to the market in the beginning of April: Warsteiner Premium Fresh (0.0%), Warsteiner Premium Verum (4.7%) and KÖnig Ludwig Weissbier (5.5%). In April, the Sandels beer range saw the introduction of the first top-fermented beer made by Olvi, the unfiltered Sandels Wheat Beer. Olvi also introduced beers from Estonia: A. Le Coq Imperial Gold (4.8%) and A. Le Coq Imperial Ale (5.0%). A. Le Coq Cocktails Pina Colada and Cuba Libre were also launched in Finland. A new introduction to long drinks just before the Football World Cup was the Samba long drink. Fruit Circus was a new addition to the Olvi Cider product range, and a sweet apple cider was introduced to Sherwood ciders. The well-known Simpsons characters can now be found also in soft drinks made by Olvi: Simpsons JaffaX and Simpsons JaffaX Light. Angry Birds soft drinks saw the introduction of Angry Birds Go with a mango flavour. A new introduction to TEHO was the Boost Lite energy drink. OLVI Raikas juice drinks were reintroduced to the juice range. During the September product range period, several novelties will be launched, with the focus on non-alcoholic products. KevytOlo mineral waters will be complemented with the new Grapefruit flavour with natural grapefruit aroma. All KevytOlo products are naturally flavoured. KevytOlo Raikas will be available in new multi-packs of 6 * 0.45 L piccolo bottles. Pineapple Light will be introduced in Olvi soft drinks. Angry Birds soft drinks will see the new flavour Stella in cans. In ciders, the Sherwood brand will be expanced with Oaky Apple and Perry products, both available in cans as well as long neck glass bottles. In beers, OLVI Halko beer will be accompanied by OLVI Hiili, a dark lager. A. Le Coq Kvass and OLVI Kotikalja home-style ale will be reintroduced. Subsidiaries A. Le Coq introduced the light beer Radler (2.9%) containing lemon juice. A. Le Coq Extra Ginger is a beer flavoured with ginger. A new introduction to long drinks was Sangrina, which is aromatised to achieve the familiar sangria flavour. The Cocktail range saw the introduction of Margarita with a watermelon flavour. A new introduction in ciders was strawberry and rhubarb-flavoured FIZZ Summer Love, which was simultaneously launched also in Latvia and Lithuania. Soft drinks saw the introduction of the More Hito mint-lime and Ginger Ale beverages under the Blue Sheep brand. A novelty in the kvass range was Imperial Kvass, a darker version. Two new products were launched in vitaminised waters: Power grapefruit-lemon grass and Mental lingonberry-green tea. Cesu Alus launched the strong and dark beer Miezitis Tumšais (7.1%), the inexpensive Garais Pilzenes beer in 2.35 L PET bottles and the light Radler beer containing lemon juice already familiar from Estonia (2.5%). The Beer Shake range saw the introduction of Shandy as a new product. New introductions in long drinks included Mojito and Margarita with a watermelon flavour, and in ciders strawberry and rhubarb-flavoured FIZZ Summer Love and plum-flavoured FIZZ Plum. Also in Latvia, Sangrina was launched, and the Blue Sheep range saw the introduction of More Hito and Pina Lada soft drinks. Two new flavours were introduced to soft drinks, Lielbata green tea-pomegranate and Lielbata green tea-peach. Volfas Engelman launched the FORTAS Max Radler (4.0%) and FORTAS Meister beers. The Beer Shake range saw the introduction of Shandy, and long drinks were complemented with Sangria, as in the other Baltic states. In ciders, the Sherwood brand was expanded with the Blue Plum flavour and the FIZZ brand with the Summer Love flavour. The A. Le Coq Coctail range saw the introduction of Margarita Watermelon. Soft drinks saw the introduction of Blue Sheep More Hito, and cocktails under the Beach brand were complemented with two flavours Margarita and Irish Cream. Dynami:t energy drinks were expanded with the new flavour of Mojito, and a dark version of kvass was introduced. Both carbonated and non-carbonated mineral waters were launched under the Tiche brand. Lidskoe Pivo of Belarus introduced two flavours of ciders under the FIZZ brand (grape and cherry), and Mojito under cocktails. A new flavour of kvass, Kvass Lidskij White, was introduced. Soft drinks saw the introduction of orange-flavoured Limpa, and three flavours Mojito, Kinotto and orange were launched under the Lids brand. New introductions in waters included Aura Aloe Vera, as well as vitaminised waters with grapefruit + ACE vitamins. PERSONNEL Olvi Group’s average number of personnel in January-June 2014 was 1,985 (2,030). The Group’s average number of personnel decreased by 45 people or 2.2 percent. The total number of personnel at the end of June was 2,110 (2,183). Olvi Group’s average number of personnel by country: Finland 378 (412) Estonia 333 (318) Latvia 222 (225) Lithuania 213 (216) Belarus 839 (859) Total 1,985 (2,030) GROUP STRUCTURE In the beginning of April 2014, Olvi acquired 2,256 shares from the minority in Lidskoe Pivo, after which Olvi’s holding in the company increased to 94.57 percent. At the end of June 2014, Olvi Group’s holding in A. Le Coq was 100.0 percent, in Cesu Alus 99.76 percent and in Volfas Engelman 99.58 percent. Furthermore, A. Le Coq has a 49.0 percent holding in AS Karme and a 20.0 percent holding in Verska Mineraalvee OÜ in Estonia. OLVI A SHARE AND SHARE MARKET Olvi’s share capital at the end of June 2014 stood at 20.8 million euro. The total number of shares was 20,758,808, of these 17,026,552 or 82.0 percent being Series A shares and 3,732,256 or 18.0 percent Series K shares. Each Series A share carries one (1) vote and each Series K share carries twenty (20) votes. Series A and Series K shares have equal rights to dividends. The Olvi A share was quoted on Nasdaq OMX Helsinki (Helsinki Stock Exchange) at 24.81 (26.86) euro at the end of June 2014. In January-June, the highest quote for the Series A share was 29.90 (27.00) euro and the lowest quote was 23.30 (19.70) euro. The average price was 26.50 (22.42) euro. In January-June , a total of 1,088,396 (1,257,113) Olvi A shares were traded, representing 6.4 (7.4) percent of the total number of Series A shares. The value of trading was 28.8 (28.1) million euro. At the end of June 2014, the market capitalisation of Series A shares was 422.4 (457.3) million euro and the market capitalisation of all shares was 515.0 (557.6) million euro. The number of shareholders at the end of June 2014 was 9,973 (9,419). Foreign holdings plus foreign and Finnish nominee-registered holdings represented 20.8 (20.7) percent of the total number of book entries and 4.7 (6.8) percent of total votes. Foreign and nominee-registered holdings are reported in Table 5, Section 9 of the tables attached to this interim report, and the largest shareholders are reported in Table 5, Section 10. TREASURY SHARES There were no changes in the number of treasury shares held by Olvi in January-June 2014. At the end of June 2014, Olvi held 1,124 of its own Series A shares. Treasury shares held by Olvi plc are reported in the tables section of this interim report, in Table 5, Section 6. BUSINESS RISKS AND THEIR MANAGEMENT Risk management is a part of Olvi Group’s everyday management and operations. It increases corporate security and contributes to the achievement of operational targets. The objective of risk management is to operate proactively and create operating conditions in which business risks are managed comprehensively and systematically in all of the Group companies and all levels of the organisation. In addition to the company itself, risk management benefits its personnel, customers, shareholders and other related groups. The objective of risk management is to ensure the realisation of the company’s strategy and secure the continuity of business. Olvi Group identifies, assesses, manages and monitors its crucial risks regularly. With regard to identified risks, the effects, scope and probability of realisation are assessed together with the means of eliminating or reducing the risk. Furthermore, risk management aims to identify and utilise any business opportunities that may arise. Strategic and operational risks Olvi Group’s strategic risks refer to risks related to the characteristics of the company’s business and strategic choices. The Group’s operations are located in several countries that differ substantially in terms of their social and economic situations and the phases and directions of development. For example, strategic risks relate to changes in tax legislation and other regulations, the operating environment and foreign exchange markets. If realised, strategic risks can substantially hamper the company’s operational preconditions. The Group’s most substantial identified strategic risks relate to Belarus, particularly the situation in the country’s economy and politics. The Group’s most substantial identified operational risks relate to the procurement and quality of raw materials, the production process, markets and customers, information security and systems, as well as changes in foreign exchange rates. Financing risks Olvi Group operates internationally, and its business involves risks arising from exchange rate fluctuations. Foreign exchange risks arise from the cash flows of purchases and sales in foreign currency, as well as investments in foreign subsidiaries and the conversion of their balance sheet items into euro. Foreign exchange risk is reduced by the fact that most of the Group’s product sales and raw material purchases are denominated in euro. The objective of financing risk management is to minimise the adverse effects of changes in the financial markets on the Group’s financial performance, shareholders' equity and liquidity. The general principles of the Group’s risk management are approved by the Board of Directors of the parent company, and the parent company’s management together with the management of subsidiaries is responsible for their practical implementation. Responsibility for Olvi Group’s financing tasks is centralised in the parent company Olvi. The objectives of centralisation include optimisation of cash flows and financing costs, as well as efficient risk management. There have not been any significant changes in Olvi Group’s business risks since the closing of the accounts 2013. A more detailed description of the risks is provided in the Board of Directors’ report and the notes to the financial statements. Financing risks are also described in more detail in the Investors section of the corporate Web site. BUSINESS RISKS AND UNCERTAINTIES IN THE NEAR TERM The economic situation in Europe has turned more positive even though instability is still seen in individual countries. However, the unemployment rate is still high. Weakened consumer purchasing power leads to a choice of less expensive products. Demand in Finland is also held back by the highest excise tax rates within the European Union. The continuation of the Ukrainian crisis and increased tension affect the development of the Russian rouble and therefore exports to Russia. Olvi is putting effort to increasing exports into Russia particularly from Belarus, which is in a customs union with Russia. Another substantial factor hampering the predictability of Olvi Group’s business still relates to Belarus and its economic outlook for the next few years. The IAS 29 standard “Financial Reporting in Hyperinflationary Economies” will be applied at least until the end of 2014. NEAR-TERM OUTLOOK The full-year sales volumes and net sales in 2014 are expected to grow slightly in the current accounting period. The operating profit for 2014 is expected to be on a par with the healthy level of 2013. OLVI PLC Board of Directors Further information: Lasse Aho, Managing Director, Olvi plc Phone +358 290 00 1050 or +358 400 203 600 TABLES: - Statement of comprehensive income, Table 1 - Balance sheet, Table 2 - Changes in shareholders’ equity, Table 3 - Cash flow statement, Table 4 - Notes to the interim report, Table 5 DISTRIBUTION: NASDAQ OMX Helsinki Ltd Key media www.olvi.fi OLVI GROUP TABLE 1 INCOME STATEMENT EUR 1,000 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2014 2013 2014 2013 2013 Net sales 98307 102705 159310 170700 327256 Other operating income 640 138 743 321 983 Operating expenses -79494 -81597 -133631 -141367 -271391 Depreciation and impairment -3575 -3427 -7078 -6823 -13627 Operating profit 15878 17819 19344 22831 43221 Financial income 962 -255 2105 1831 3105 Financial expenses -928 271 -2033 -1734 -4501 Share of earnings of associates 0 0 0 0 -11 Earnings before tax 15912 17835 19416 22928 41814 Taxes *) -4758 -5291 -5534 -5988 -7628 NET PROFIT FOR THE PERIOD 11154 12544 13882 16940 34186 Other comprehensive income items: Translation differences related to foreign subsidiaries -950 -1563 -1954 318 -2858 TOTAL COMPREHENSIVE INCOME FOR THE 10204 10981 11928 17258 31328 PERIOD Distribution of profit: - parent company shareholders 10938 12142 13639 16479 33520 - non-controlling interests 216 402 243 461 666 Distribution of comprehensive profit: - parent company shareholders 9991 10703 11779 16795 30886 - non-controlling interests 213 278 149 463 442 Earnings per share calculated from the profit belonging to parent company shareholders, EUR - undiluted 0.53 0.58 0.66 0.79 1.61 - diluted 0.53 0.58 0.66 0.79 1.61 *) Taxes calculated from the profit for the review period. OLVI GROUP TABLE 2 BALANCE SHEET EUR 1,000 30.6.2014 30.6.2013 31.12.2013 ASSETS Non-current assets Tangible assets 182189 154804 165783 Goodwill 18081 18141 17805 Other intangible assets 2647 2628 2701 Interests in associates 1077 1077 1077 Financial assets available for sale 549 549 549 Loan receivables and other non-current 349 401 349 receivables Deferred tax receivables 189 214 87 Total non-current assets 205081 177814 188351 Current assets Inventories 47110 45480 41178 Accounts receivable and other receivables 83224 81063 57705 Income tax receivable 338 50 848 Other non-current assets available for sale 4 163 124 Liquid assets 6192 6761 7507 Total current assets 136868 133517 107362 TOTAL ASSETS 341949 311331 295713 SHAREHOLDERS’ EQUITY AND LIABILITIES Shareholders’ equity held by parent company shareholders Share capital 20759 20759 20759 Other reserves 1092 1092 1092 Treasury shares -8 -8 -8 Translation differences -22180 -17371 -20321 Retained earnings 171018 148828 167420 170681 153300 168942 Share belonging to non-controlling interests 1927 2486 2597 Total shareholders’ equity 172608 155786 171539 Non-current liabilities Financial liabilities 35875 33559 28483 Other liabilities 0 250 0 Deferred tax liabilities 4864 3896 3761 Current liabilities Financial liabilities 36683 27435 24348 Accounts payable and other liabilities 91011 88751 66704 Income tax liability 908 1654 878 Total liabilities 169341 155545 124174 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 341949 311331 295713 OLVI GROUP TABLE 3 CHANGES IN OLVI GROUP’S CONSOLIDATED SHAREHOLDERS’ EQUITY EUR 1,000 Share Other Treasury Translat Retained Share of Total capita reserv shares ion earnings non-contr l es account differen olling ces interests Shareholders’ 20759 1092 -8 -17687 141317 1939 147412 equity 1 Jan 2013 Adjustments for 1411 130 1541 hyperinflation Adjusted 20759 1092 -8 -17687 142728 2069 148953 shareholders ’ equity 1 Jan 2013 Comprehensive income: Net profit for the 16479 461 16940 period Other comprehensive income items: Translation 316 2 318 differences Total comprehensive income for the 316 16479 463 17258 period Transactions with shareholders Payment of dividends -10379 -46 -10425 Total transactions with shareholders -10379 -46 -10425 Shareholders’ 20759 1092 -8 -17371 148828 2486 155786 equity 30 June 2013EUR 1,000 Share Other Treasu Translation Retained Share of Total capita reserv ry differences earnings non-contr l es shares olling accoun interests t Shareholders’ 20759 1092 -8 -20321 167420 2597 171539 equity 1 Jan 2014 Adjustments for 2781 160 2941 hyperinflation Adjusted 20759 1092 -8 -20321 170201 2757 174480 shareholders ’ equity 1 Jan 2014 Comprehensive income: Net profit for the 13639 243 13882 period Other comprehensive income items: Translation -1859 -94 -1953 differences Total comprehensive income for the -1859 13639 149 11929 period Transactions with shareholders: Payment of dividends -13492 -72 -13564 Total transactions with shareholders -13492 -72 -13564 Changes in holdings in subsidiaries: Acquisition of shares from non-controlli -237 -237 ng interests Change in share belonging to non-controlling interests 907 -907 0 Total changes in holdings in subsidiaries 670 -907 -237 Shareholders’ 20759 1092 -8 -22180 171018 1927 172608 equity 30 June 2014 Other reserves include the share premium account, legal reserve and other reserves. OLVI GROUP TABLE 4 CASH FLOW STATEMENT EUR 1,000 1-6/2014 1-6/2013 1-12/2013 Net profit for the period 13882 16940 34186 Adjustments to profit for the period 12169 13137 24214 Change in net working capital -7742 -5892 2451 Interest paid -1872 -1092 -4246 Interest received 130 195 530 Taxes paid -1344 -2324 -7126 Cash flow from operations (A) 15223 20964 50009 Investments in tangible and intangible assets -22412 -12053 -31975 Sales gains from tangible and intangible assets 42 326 220 Expenditure on other investments -250 0 0 Cash flow from investments (B) -22620 -11727 -31755 Withdrawals of loans 27751 9587 5541 Repayments of loans -8024 -7063 -11180 Dividends paid -13532 -10549 -10541 Increase (-) / decrease (+) in current interest- bearing business receivables -15 -1 1 Increase (-) / decrease (+) in long-term loan receivables 0 8 55 Cash flow from financing (C) 6180 -8018 -16124 Increase (+)/decrease (-) in liquid assets -1217 1219 2130 (A+B+C) Liquid assets 1 January 7507 5698 5698 Effect of exchange rate changes -98 -155 -321 Liquid assets 30 June/31 December 6192 6762 7507 OLVI GROUP TABLE 5 NOTES TO THE INTERIM REPORT The accounting policies used for this interim report are the same as those used for the annual financial statements 2013. The accounting policies are presented in the Annual Report 2013 which was published on 20 March 2014. The information disclosed in the interim report is unaudited. The information in the interim report is presented in thousands of euros (EUR 1,000). For the sake of presentation, individual figures and totals have been rounded to full thousands, which causes rounding differences in additions. The Group has adopted the following new or revised standards and interpretations in 2014: -- Amendment to IFRSs 10, 11 and 12 on transition guidance -- IFRS 10 “Consolidated Financial Statements” -- IFRS 11 “Joint Arrangements” -- IFRS 12 “Disclosures of Interests in Other Entities” -- IAS 27 (Revised 2011) “Separate Financial Statements” -- IAS 28 (Revised 2011) “Investments in Associates and Joint Ventures" -- Amendment to IAS 32 “Financial Instruments: Presentation” concerning the offset of assets and liabilities -- Amendment to IAS 36 “Impairment of Assets” concerning the disclosure of recoverable amounts -- Amendment to IAS 39 “Financial Instruments: Recognition and Measurement” concerning the novation of derivatives The above changes in standards and their interpretations have no substantial effect on the income statement or balance sheet. Some changes in standards may affect the scope of disclosure of notes. 1. SEGMENT INFORMATION SALES BY GEOGRAPHICAL SEGMENT (1,000 litres) 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2014 2013 2014 2013 2013 Olvi Group total 171670 171300 278920 282004 557232 Finland 44612 48628 72429 85125 159909 Estonia 41545 41080 66669 66960 129314 Latvia 24931 24087 43174 39592 79724 Lithuania 22956 18580 38988 31953 69554 Belarus 51164 50603 81125 77763 156523 - sales between segments -13538 -11678 -23465 -19389 -37792 NET SALES BY GEOGRAPHICAL SEGMENT (EUR 1,000) 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2014 2013 2014 2013 2013 Olvi Group total 98307 102705 159310 170700 327256 Finland 31547 38028 52464 67535 123608 Estonia 25301 26210 41058 42080 81261 Latvia 11623 11940 19931 19147 37571 Lithuania 11074 9425 18751 15987 34139 Belarus 24002 22746 36734 35306 68319 - sales between segments -5240 -5644 -9628 -9355 -17642 OPERATING PROFIT BY GEOGRAPHICAL SEGMENT (EUR 1,000) 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ 2014 2013 2014 2013 2013 Olvi Group total 15878 17819 19344 22831 43221 Finland 2912 4269 4168 7112 12844 Estonia 6096 5876 8258 7994 15998 Latvia 1006 1522 1322 1634 2458 Lithuania 733 447 623 221 1264 Belarus 5113 5716 5689 5838 10665 - eliminations 18 -11 -716 32 -8 2. PERSONNEL ON AVERAGE 1-6/2014 1-6/2013 1-12/2013 Finland 378 412 401 Estonia 333 318 314 Latvia 222 225 215 Lithuania 213 216 216 Belarus 839 859 853 Total 1985 2030 1999 3. RELATED PARTY TRANSACTIONS Employee benefits to management Salaries and other short-term employee benefits to the Board of Directors and Managing Director EUR 1,000 1-6/2014 1-6/2013 1-12/2013 Managing Director 185 170 340 Chairman of the Board 41 43 85 Other members of the Board 64 66 130 Total 290 279 555 4. SHARES AND SHARE CAPITAL 30.6.2014 % Number of A shares 17026552 82.0 Number of K shares 3732256 18.0 Total 20758808 100.00 Total votes carried by A shares 17026552 18.6 Total votes carried by K shares 74645120 81.4 Total number of votes 91671672 100.00 Votes per Series A share 1 Votes per Series K share 20 The registered share capital on 30 June 2014 totalled 20,759 thousand euro. Olvi plc’s Series A and Series K shares received a dividend of 0.65 euro per share for 2013 (0.50 euro per share for 2012), totalling 13.5 (10.4) million euro. The dividends were paid on 30 April 2014. The Series K and Series A shares entitle to equal dividend. The Articles of Association include a redemption clause concerning Series K shares. 5. SHARE-BASED PAYMENTS Olvi plc’s Board of Directors decided on 29 April 2014 on a share-based incentive scheme for Olvi Group’s key personnel. The purpose of the scheme is to combine the objectives of shareholders and key personnel to improve the Company’s value, make key personnel committed to the Company and provide them with a competitive bonus scheme based on earning shares in the company. The scheme has one vesting period of three calendar years, the years 2014 to 2016. Any bonus from the scheme for the vesting period 2014 to 2016 is based on the Group’s accumulated operating profit (EBIT). Furthermore, the share-based incentive scheme has a three-year vesting period starting on 1 July 2014 and ending on 30 June 2017. Receiving a bonus for this vesting period requires that the key person purchases shares in the company to the amount decided by the Board of Directors. Furthermore, entitlement to a bonus is bound to the validity of the key person’s employment or service contract at the time the bonus is paid. The bonuses for both vesting periods will be paid in 2017 partially in Olvi plc Series A shares and partially in cash. The purpose of the cash portion is to cover taxes and other statutory fees levied on the key person due to the bonus. If the key person’s employment or service contract terminates before the payment of the bonus, the principal rule is that no bonus will be paid. The members of the company’s Management Group must hold one-half of the shares received on the basis of the vesting period 2014-2016 for the duration of their employment or service contract. The target group of the share-based incentive scheme includes approximately 50 people. The total bonuses paid on the basis of the scheme amount to an approximate maximum of 40,000 Olvi plc Series A shares and the amount of cash required to pay the taxes and other statutory fees arising from the shares. No accounting entries associated with the 2014-2016 vesting period were recognised in January-June 2014. Olvi Group has no warrants or options. 6. TREASURY SHARES Olvi plc held a total of 1,124 of its own Series A shares on 1 January 2014. Olvi plc has not acquired more treasury shares or transferred them to others in January-June 2014, which means that the number of Series A shares held by the company was unchanged on 30 June 2014. The purchase price of the Series A shares held as treasury shares totalled 8.5 thousand euro. Series A shares held by Olvi plc as treasury shares represented 0.005 percent of the share capital and 0.001 percent of the aggregate number of votes. The treasury shares represented 0.007 percent of all Series A shares and associated votes. On 16 April 2014, the General Meeting of Shareholders of Olvi plc decided to revoke any unused authorisations to acquire treasury shares and authorise the Board of Directors of Olvi plc to decide on the acquisition of the company’s own shares using distributable funds. The authorisation is valid for one year starting from the General Meeting and covers a maximum of 500,000 Series A shares. The Annual General Meeting also decided to revoke all existing unused authorisations for the transfer of own shares and authorise the Board of Directors to decide on the issue of a maximum of 1,000,000 new Series A shares and the transfer of a maximum of 500,000 Series A shares held as treasury shares. In January-June 2014, the Board of Directors of Olvi plc has not exercised the authorisations granted by the General Meeting. 7. NUMBER OF SHARES *) 1-6/2014 1-6/2013 1-12/2013 - average 20757684 20757684 20757684 - at end of period 20757684 20757684 20757684 *) Treasury shares deducted. 8. TRADING OF SERIES A SHARES ON THE HELSINKI STOCK EXCHANGE 1-6/2014 1-6/2013 1-12/2013 Trading volume of Olvi A shares 1088396 1257113 2601699 Total trading volume, EUR 1,000 28834 28119 63938 Traded shares in proportion to all Series A shares, % 6.4 7.4 15.3 Average share price, EUR 26.50 22.42 24.26 Price on the closing date, EUR 24.81 26.86 28.60 Highest quote, EUR 29.90 27.00 28.75 Lowest quote, EUR 23.30 19.70 19.70 9. FOREIGN AND NOMINEE-REGISTERED HOLDINGS ON 30 JUNE 2014 Book entries Votes Shareholders qty % qty % qty % Finnish total 16447495 79.23 87360359 95.29 9907 99.34 Foreign total 435476 2.10 435476 0.48 58 0.58 Nominee-registered (foreign) 14313 0.07 14313 0.02 3 0.03 total Nominee-registered (Finnish) 3861524 18.60 3861524 4.21 5 0.05 total Total 20758808 100.00 91671672 100.00 9973 100.00 10. LARGEST SHAREHOLDERS ON 30 JUNE 2014 Series Series A Total % Votes % K 1. Olvi Foundation 2363904 890613 3254517 15.68 48168693 52.54 2. Hortling Heikki 903488 103280 1006768 4.85 18173040 19.82 Wilhelm *) 3. The Heirs of Hortling 187104 25248 212352 1.02 3767328 4.11 Kalle Einari 4. Hortling Timo Einari 165824 35308 201132 0.97 3351788 3.66 5. Hortling-Rinne Laila 102288 2100 104388 0.50 2047860 2.23 Marit 6. Pohjola Bank plc, nominee 1902900 1902900 9.17 1902900 2.08 register 7. Nordea Bank Finland plc, 1318624 1318624 6.35 1318624 1.44 nominee register 8. Ilmarinen Mutual Pension 849218 849218 4.09 849218 0.93 Insurance Company 9. Skandinaviska Enskilda Banken Ab (Publ) Helsinki branch, nominee register 586848 586848 2.83 586848 0.64 10. Varma Mutual Pension Insurance 511586 511586 2.46 511586 0.56 Company Others 9648 10800827 10810475 52.08 10993787 11.99 Total 3732256 17026552 20758808 100.00 91671672 100.00 *) The figures include the shareholder’s own holdings and shares held by parties in his control. 11. PROPERTY, PLANT AND EQUIPMENT EUR 1,000 1-6/2014 1-6/2013 1-12/2013 Increase 22475 12503 34509 Decrease -2659 -335 -1087 Total 19816 12168 33422 12. CONTINGENT LIABILITIES EUR 1,000 30.6.2014 30.6.2013 31.12.2013 Pledges and contingent liabilities For own commitments 3152 5150 2715 Leasing and rental liabilities: Due within one year 1209 1136 1238 Due within 1 to 5 years 880 737 637 Due in more than 5 years 5 7 6 Leasing and rental liabilities total 2094 1880 1881 Package liabilities 3349 4121 2781 Other liabilities 2000 2000 2000 12. CALCULATION OF FINANCIAL RATIOS Equity to total assets, % = 100 * (Shareholders’ equity held by parent company shareholders + non-controlling interests) / (Balance sheet total – advances received) Earnings per share = Profit belonging to parent company shareholders / Average number of shares during the period, adjusted for share issues Equity per share = Shareholders’ equity held by parent company shareholders / Number of shares at end of period, adjusted for share issues Gearing, % = 100 * (Interest-bearing debt – cash in hand and at bank) / (Shareholders’ equity held by parent company shareholders + non-controlling interests) Copyright © 2014 OMX AB (publ).


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