Iisalmi, 2013-10-24 07:59 CEST (GLOBE NEWSWIRE) -- OLVI PLC              INTERIM REPORT 24 OCT 2013 at 9:00 am

OLVI GROUP’S INTERIM REPORT, 1 JANUARY TO 30 SEPTEMBER 2013 (9 MONTHS)

Olvi Group’s sales volume, net sales and operating profit developed favourably from January to September. 
 

January-September in brief:

- Olvi Group’s sales volume increased by 5.5 percent to 433.9 (411.2) million litres

- The Group’s comparable net sales increased by 9.2 percent to 257.2 (235.5)*) million euro

- The Group’s comparable operating profit increased by 14.3 percent to 29.6 (25.9) million euro

- Earnings per share improved by 32.4 percent to 1.39 euro per share

- Equity per share improved by 15.3 percent to 7.93 euro per share

KEY RATIOS

*) The previous year’s net sales in Finland have been adjusted for comparability with the year 2013.

**) A new depreciation policy has been applied to the income statement for 2013.

Lasse Aho, Managing Director of Olvi plc, states the following in connection with the disclosure of the accounts:

“Olvi Group’s business has been successful and has developed favourably during 2013. Development was particularly good in Finland, Estonia and Belarus.”

CHANGES IN ACCOUNTING POLICIES STARTING FROM 1 JANUARY 2013

As of the beginning of 2013, the parent company Olvi plc has accounted for marketing subsidies payable to customers as annual discounts under adjustments to sales. The previous year’s net sales figures in this interim report have been adjusted for comparability with the year 2013. These marketing subsidies were previously recognised under other operating expenses. The change did not affect the parent company’s or the Group’s operating profit. After the change, Olvi Group companies have a uniform policy of accounting for marketing subsidies.

As of the beginning of the year, Olvi Group’s depreciation periods for buildings, production machinery and equipment, as well as storage and fermentation tanks, have been extended to better correspond to their actual economic life and the depreciation policies common in the industry. The new depreciation period for buildings is 30 years, and for production machinery and equipment 15 years. The depreciation period for tanks is 20 years. Due to the change, consolidated depreciation in the period under review declined by 8.1 million euro compared to previous depreciation practice.

OLVI GROUP’S SALES VOLUME, NET SALES AND EARNINGS IN JANUARY-SEPTEMBER 2013
 

Olvi Group’s sales from January to September 2013 amounted to 433.9 (411.2) million litres. This represents an increase of 22.7 million litres or 5.5 percent. Sales in Finland increased by 10.1 million litres and in Belarus by 11.2 million litres. Sales in the Baltic states declined by 2.2 million litres. Intra-Group sales declined by 3.6 million litres. 

The Group’s net sales from January to September amounted to 257.2 (235.5)*) million euro. This represents an increase of 21.7 million euro or 9.2 percent. Net sales development outperformed volume growth in all of the Group’s operating areas except Latvia.

Net sales in Finland amounted to 97.1 (86.0)*) million euro, while the aggregate total for the Baltic states was 121.2 (119.7) and the corresponding figure for Belarus was 53.9 (45.4) million euro. Net sales in Finland increased by 11.1 million euro or 12.9 percent, in the Baltic states by 1.5 million euro or 1.2 percent, and in Belarus by 8.5 million euro or 18.8 percent.

Olvi Group’s operating profit for January-September stood at 37.7 **) (25.9) million euro, or 14.7 (11.0) percent of net sales. The operating profit improved by 11.8 million euro or 45.6 percent. The change in depreciation practice improved operating profit by 8.1 million euro, which means that comparable operating profit improved by 14.3 percent on the previous year to 29.6 million euro.

Operating profit in Finland amounted to 11.0 (7.2) million euro. The operating profit improved by 3.8 million euro. Aggregate operating profit in the Baltic states improved by 3.0 million euro to 17.3 (14.3) million euro, and operating profit in Belarus improved by 4.9 million euro to 9.5 (4.6) million euro. The effects of the extended depreciation periods on the operating profits of different Group companies are described in connection with performance by geographical segments.

The Group’s profit after taxes in the period under review improved substantially on the previous year, amounting to 29.5 (22.3) million euro.

Earnings per share calculated from the profit belonging to parent company shareholders in January-September stood at 1.39 (1.05) euro per share. Earnings per share improved by 0.34 euro or 32.4 percent.

OLVI GROUP’S SALES VOLUME, NET SALES AND EARNINGS IN JULY-SEPTEMBER 2013
 

Olvi Group’s sales in the third quarter amounted to a total of 151.9 (149.9) million litres. Sales increased by 2.0 million litres or 1.4 percent. Sales in Finland declined by 1.3 million litres to 38.9 (40.2) million litres, sales in the Baltic states increased by 2,0 million litres to 80.5 (78.5) million litres, and sales in Belarus increased by 1.8 million litres to 44.6 (42.8) million litres.

The Group’s net sales from July to September amounted to 86.5 (86.0)*) million euro.  Net sales improved by 0.5 million euro or 0.6 percent.

Net sales in Finland amounted to 29.5 (29.9)*) million euro, a decline of 0.4 million euro. Net sales in Belarus amounted to 18.6 (18.0) million euro, an increase of 0.6 million euro, and net sales in the Baltic states amounted to 43.9 (43.1) million euro, an increase of 0.8 million euro.

The Group’s operating profit for the third quarter stood at 14.9 (11.2) million euro, or 17.2 (13.1)*) percent of net sales. The operating profit increased substantially on the previous year, by 3.7 million euro or 32.8 percent. Operating profit in Finland amounted to 3.9 (2.1) million euro, in the Baltic states to 7.4 (6.3) million euro and in Belarus to 3.6 (2.8) million euro. Operating profit in Finland increased by 1.7 million euro, in the Baltic states by 1.1 million euro and in Belarus by 0.8 million euro.

SALES VOLUME, NET SALES AND EARNINGS BY GEOGRAPHICAL SEGMENT IN JANUARY-SEPTEMBER AND JULY-SEPTEMBER 2013

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 and the characteristics of each season.

PARENT COMPANY OLVI PLC (Olvi)

January to September 2013

According to statistics by the Federation of the Brewing and Soft Drinks Industry, the Finnish beverage market in January-September diminished by an approximate total of 4 million litres or 0.7 percent compared to the previous year. Sales of alcoholic beverages declined by 0.4 percent while sales of non-alcoholic beverages declined by 1.1 percent. The largest sales decline was seen in long drinks, 6.0 percent. The sales of ciders declined by 1.1 percent, whereas a slight improvement of 0.3 percent was seen in beers. The sales of soft drinks declined by 3.2 percent but the sales of mineral waters improved by more than 7 percent. (Federation of the Brewing and Soft Drinks Industry, September 2013).

Olvi’s sales in January-September amounted to 124.0 (114.0) million litres. Thanks to increased exports and tax-free sales, the volume improved by 10.1 million litres or 8.8 percent. Among the product groups, strongest growth in Finland was seen in soft drinks. The sales of mineral waters also improved but the sales of juice and energy drinks declined on the previous year. In alcoholic beverages, slight growth was seen in beers while the sales of long drinks and ciders declined. However, Olvi is the market leader in retail sales of long drinks.

According to statistics by the Federation of the Brewing and Soft Drinks Industry for January-September 2013, Olvi’s market share in alcoholic beverages (beers, ciders and long drinks) was on a par with the previous year at 24 percent. In mineral waters, Olvi had a market share of 23 (24), and in soft drinks 5 (5) percent. The overall market share in January-September was 18 (18) percent.

In the period under review, Olvi’s exports and tax-free sales increased clearly to 17.6 (4.9) million litres, an increase of 12.7 million litres. Olvi’s export sales were particularly based on exports of soft drinks to nearby regions. Exports and tax-free sales represented 14.2 (4.3) percent of total sales.

The parent company’s net sales growth in January-September was particularly attributable to the development of exports. Net sales stood at 97.1 (86.0)*) million euro, an increase of 11.1 million euro or 12.9 percent.

Olvi’s operating profit stood at 11.0 (7.2) million euro, which was 11.3 (8.3)*) percent of net sales. The operating profit improved by 3.8 million euro.

2.9 million euro of the operating profit improvement was attributable to the extended depreciation periods. Comparable operating profit improved by 13.6 percent on the previous year. Furthermore, Olvi’s earnings for January-September include performance bonuses to employees, as well as write-downs on inventories (including 0.33-litre glass bottles) which were not included in last year’s earnings.

July to September 2013

The parent company’s sales in the third quarter amounted to 38.9 (40.2) million litres. Sales declined slightly, mainly due to decreased intra-Group freighted work. Net sales remained almost on the previous year’s level at 29.5 (29.9)*) million euro.  

The company’s operating profit for July-September stood at 3.9 (2.1) million euro, or 13.1 (7.2)*) percent of net sales. The operating profit improved by 1.7 million euro or 80.2 percent in the third quarter. In the previous year, third-quarter earnings included an extraordinarily high amount of costs due to production planning challenges while total consumption declined.

AS A. LE COQ (A. Le Coq)

January to September 2013

With the exception of ciders and mineral waters, the sales of all other product groups declined in the Estonian beverage market in January-September. The sales of mineral waters increased by 15 percent and ciders by 3 percent. The greatest decline was seen in beers, almost seven percent. The decline in long drinks was 2, soft drinks 4 and juices 3 percent. (Nielsen, June-July 2013).

A. Le Coq retained its strong position in the Estonian beverage market. The company’s sales in January-September amounted to 102.4 (105.5) million litres. The sales volume declined by 3.1 million litres or 3.0 percent. The sales decline is due to the fact that intra-Group sales diminished by 6.6 million litres. The company’s domestic sales improved by 2.5 million litres or 2.9 percent in spite of the decline in the overall Estonian market.

The greatest sales increase was seen in mineral waters, 31 percent. The sales of beers, long drinks and ciders also improved by a few percent. The sales of soft drinks (including kvass) and juices declined.

The company is the clear market leader in long drinks and juices. In beers, the company is in a tight struggle for the number one position, and in ciders and soft drinks it is the number two player. The company has increased its market share in mineral waters and is equal in strength among the top three. (Nielsen, June-July 2013).

The company’s exports and tax-free sales increased by 23.5 percent to 4.7 (3.8) million litres. Exports and tax-free sales represented 4.5 (3.6) percent of total sales.

The company’s net sales from January to September amounted to 64.6 (63.1) million euro, representing an increase of 1.5 million euro or 2.3 percent. Net sales growth outperformed volume growth thanks to improved average price.

A. Le Coq’s operating profit improved substantially in January-September. Operating profit stood at 13.6 (10.7) million euro, which was 21.0 (16.9) percent of net sales. The operating profit improved by 2.9 million euro or 27.0 percent. 1.4 million euro of the operating profit improvement was attributable to the extended depreciation periods. In addition to increased average price of net sales, the company has improved its production efficiency.

In a competition arranged by the Estonian Chamber of Commerce and Industry and the Estonian Employers’ Confederation, AS A. Le Coq was on 8 October 2013 awarded as the most competitive food industry company in Estonia. The purpose of the competition is to identify the most competitive companies in Estonia, to provide them with an opportunity of comparison with similar companies, and to assess their success, achievements and sustainability. 

July to September 2013

A. Le Coq’s sales in the third quarter declined by 1.4 million litres or 3.8 percent to 35.4 (36.8) million litres due to diminished intra-Group manufacturing. In spite of the sales decline, net sales were on a par with the previous year at 22.5 (22.2) million euro.

The company’s third-quarter operating profit stood at 5.6 (4.4) million euro, or 24.8 (19.8) percent of net sales. The operating profit improved by 1.2 million euro or 27.5 percent.

A/S CESU ALUS (Cesu Alus)

January to September 2013

The total sales of beer in Latvia declined by three percent in January-September. The cider market saw an even more dramatic decline at more than 21 percent. On the other hand, the sales of long drinks increased by almost four percent.

Cesu Alus improved its sales in January-September by 5.1 million litres or 8.8 percent. Sales amounted to 63.6 (58.5) million litres. The improvement was attributable to increased internal sales to other Olvi Group companies. Domestic sales declined by 4.1 percent.

Among the company’s main product groups, only the sales of juice drinks increased during January-September. Sales of long drinks were on a par with the previous year. There was a decline of a few percent in beers, and slightly more in soft drinks. The greatest sales decline was seen in ciders, 26.6 percent. Fizz cider remains the best-selling cider in Latvia.

The company is a clear market leader in ciders and long drinks (Nielsen June-July 2013). Cesu Alus has improved its position in the Latvian beer market and remains the number two player (Nielsen, July 2013).

The company’s net sales from January to September amounted to 30.3 (29.5) million euro, representing an increase of 0.8 million euro or 2.8 percent.

Operating profit in the period stood at 2.7 (1.8) million euro, which was 8.8 (6.1) percent of net sales. The extended depreciation periods had an effect of 1.4 million euro on the operating profit. 

July to September 2013

Cesu Alus’s sales in the third quarter amounted to 24.0 (20.7) million litres, representing an increase of 3.3 million litres or 16.1 percent. The increase was attributable to increased intra-Group sales. Net sales amounted to 11.1 (10.5) million euro, representing an increase of 0.6 million euro or 6.5 percent on the previous year.

The company’s operating profit in July-September stood at 1.0 (0.8) million euro, or 9.3 (7.9) percent of net sales. The operating profit improved by 0.2 million euro or 25.6 percent.

AB VOLFAS ENGELMAN (Volfas Engelman)

January to September 2013

The Lithuanian beverage markets declined in the first half of the year mainly due to stricter alcohol laws and new regulations concerning package sizes: the maximum strength of mild brewery beverages is now limited to 7.5% and the largest single package size to one-litre bottles. The only growth was seen in the sales of long drinks, five percent. The total market in beers declined by more than nine percent, in ciders as much as 18, and in kvass approximately eight percent.

Volfas Engelman’s sales in January-September amounted to 53.0 (57.2) million litres. Sales declined by 4.2 million litres or 7.2 percent. 75 percent of the sales decline accumulated in the second quarter. The sales of long drinks and soft drinks (including kvass) increased clearly while the sales of beers and ciders drinks declined correspondingly.

However, Volfas Engelman has retained its market position in the declining Lithuanian beverage market. In the largest product group, beers, the company is the number three player and has succeeded in slightly increasing its market share on the previous year. The company had a market share of 16.7 percent in beers (Nielsen, August-September 2013). The company is the market leader in kvass. In ciders, the company is among the top two, and also in long drinks it struggles for market leadership (Nielsen, July-September 2013).

The company’s net sales stood at 26.3 (27.1) million euro, a decline of 0.8 million euro or 2.9 percent. The decline in net sales was smaller than the decline in sales volume thanks to improved average price.

Operating profit in January-September declined by 0.7 million euro on the previous year to 1.0 (1.7) million euro. Operating profit came to 3.9 (6.5) percent of net sales. The extended depreciation periods had an effect of 0.7 million euro on the operating profit. The company was unable to adapt its operating expenses to the declined sales volume or make sufficient efficiency improvements.

July to September 2013

The company was able to stop the decline in sales volumes in the third quarter. Sales in July-September were on a par with the previous year at 21.1 (21.0) million litres. Third-quarter net sales stood at 10.3 (10.5) million euro, representing a decline of 0.2 million euro or 1.8 percent.

However, the company’s operating profit declined also in the third quarter compared to the previous year. The operating profit stood at 0.8 (1.1) million euro, which was 7.8 (10.6) percent of net sales. 

OAO LIDSKOE PIVO (Lidskoe Pivo)

January to September 2013

The Belarusian beer market declined in January-September by approximately four percent compared to the previous year. The imports of beer have increased all the time, and its share of the total market in June-July was as much as 25.8 (18.2) percent. The sales of ciders has declined by approximately 20 percent in 2013. The sales of soft drinks increased by more than five and the sales of waters by almost nine percent, while the sales of kvass declined by almost six percent. The sales of juices are strongly growing, almost 59 percent on the previous year. (Nielsen, June-July 2013).

Lidskoe Pivo’s operations developed favourably in January-September. The company’s sales amounted to 122.4 (111.3) million litres, representing an increase of 11.1 million litres or 10.0 percent. Among the main product groups, the greatest sales increase was seen in mineral waters, approximately 56 percent. Clear growth was also seen in the sales of beers even though the overall market declined slightly. There was a clear decline in the sales of ciders as well as juice drinks. The sales of soft drinks (including kvass) were almost on a par with the previous year.

Lidskoe Pivo has retained its overwhelming market leadership in ciders and kvass. The company has also become the market leader in juice drinks. In beers, the company’s market share has gone up a couple of percentage points on the previous year. The company’s market share in soft drinks and mineral waters is approximately 3 percent. (Nielsen, June-July 2013). 

The company’s exports increased by 5.8 million litres in January-September. Exports made 14.0 (10.3) percent of the company’s total sales. The main destinations for exports were Russia, Ukraine and Germany. 

The company’s net sales stood at 53.9 (45.4) million euro, an increase of 8.5 million euro or 18.8 percent. Factors contributing to net sales growth included favourable development of sales volumes and an improved average price of net sales.

Operating profit increased substantially on the previous year. Operating profit from January to September amounted to 9.5 (4.6) million euro, representing an increase of 4.9 million euro or 107.4 percent. The operating profit represented 17.6 (10.1) percent of net sales. 1.7 million euro of the operating profit improvement was attributable to the extended depreciation periods. Factors contributing to improved operating profit included growth in sales volumes, improved average price of net sales and successful cost control.

July to September 2013

Lidskoe Pivo’s sales in the third quarter increased to 44.6 (42.8) million litres. This represents an increase of 1.8 million litres or 4.3 percent.

Net sales stood at 18.6 (18.0) million euro, an increase of 0.6 million euro or 3.4 percent.

The company’s third-quarter operating profit increased to 3.6 (2.8) million euro, or 19.6 (15.3) percent of net sales. The operating profit improved by 0.8 million euro or 32.6 percent.

FINANCING AND INVESTMENTS

Olvi Group’s balance sheet total at the end of September 2013 was 286.6 (270.4) million euro. Equity per share in January-September stood at 7.93 (6.88) euro, an increase of +1.05 euro per share or 15.3 percent on the previous year. The equity ratio of 58.3 (53.4) percent improved clearly on the previous year, by 4.9 percentage points.

The amount of interest-bearing liabilities was 51.0 (63.5) million euro, including current liabilities of 18.6 (19.5) million euro.

During the period under review, the Group’s gross capital expenditure amounted to 21.1 (22.8) million euro. The parent company Olvi accounted for 13.1 million euro and the subsidiaries in the Baltic states for 4.5 million euro of the total. Lidskoe Pivo’s gross capital expenditure in January-September was 3.5 million euro.

The largest investments in Finland in 2013 include improving the efficiency of internal logistics, automated warehouse operations and automatic picking, increasing the capacity of the juicing facility and improving the pre-treatment of waste water.

In the Baltic states, A. Le Coq’s largest investments include procurements related to improving canning line efficiency, extensions to conveyor systems and acquisition of a can storage hall. Cesu Alus’s investments mainly consist of extensions to the tank cellar and filtering department, and the acquisition of a light-duty storage hall. Volfas Engelman’s largest investments consist of an extension to the boiling room and the associated control equipment, an extension to the tank cellar and the introduction of a PET bottle format.

Lidskoe Pivo’s largest investments in 2013 will be the second phase of the fermentation cellar extension, extensions to cooling systems, and the acquisition of a light-duty storage hall.

RESEARCH AND 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

New products for the third quarter were already presented in the Q2/2013 interim report.

Subsidiaries

In addition to the new products already presented in the Q2/2013 interim report, Volfas Engelman launched the Angry Birds Space Comet soft drink in 0.33-litre cans and the Šnekorių dark 7,5% beer in one-litre plastic bottles.

PERSONNEL

Olvi Group’s average number of personnel in January-September was 2,034 (2,000). The Group’s average number of personnel increased by 34 people or 1.7 percent. The number of personnel was either unchanged or slightly increased in all of the Group’s operating countries. At the end of September, Olvi Group employed a total of 1,934 (1,928) people.

Olvi Group’s average number of personnel by country:

                    1-9/2013   1-9/2012

Finland                                   414        (411)

Estonia                 317        (317)

Latvia                                    222        (221)

Lithuania                               218        (211)

Belarus                    863        (840)

Total                   2034       (2000)

GROUP STRUCTURE

In August-September 2013, Olvi plc acquired a total of 24 shares in Cesu Alus, corresponding to 0.01 percent of the company’s share capital. At the end of September 2013, Olvi’s holding in Cesu Alus was 99.68 percent, in A. Le Coq 100.0 percent, in Volfas Engelman 99.57 percent and in Lidskoe Pivo 91.58 percent. Furthermore, A. Le Coq has a 49.0 percent holding in Karme AS and 20.0 percent holding in Verska Mineraalvee OÜ in Estonia.

OLVI A SHARE AND SHARE MARKET

Olvi’s share capital at the end of September 2013 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 Ltd (Helsinki Stock Exchange) at 25.89 (18.15) euro at the end of September. In January-September, the highest quote for the Series A share was 27.93 (19.94) euro and the lowest quote was 19.70 (14.75) euro. The average price was 23.58 (17.58) euro.

In January-September, a total of 1,820,943 (1,160,708) Series A shares were traded, representing 10.7 (6.8) percent of the total number of Series A shares. The value of trading was 43.0 (20.5) million euro.

At the end of September 2013, the market capitalisation of the entire stock was 537.4 (376.8) million euro and the market capitalisation of Series A shares was 440.8 (309.0) million euro.

The number of shareholders at the end of September 2013 was 9,492 (9,052). Foreign holdings plus foreign and Finnish nominee-registered holdings represented 20.7 (17.7) percent of the total number of book entries and 6.8 (6.1) percent of total votes. Foreign and nominee-registered holdings are reported in Table 5, Section 8 of the tables attached to this interim report, and the largest shareholders are reported in Table 5, Section 9.

TREASURY SHARES

There were no changes in the number of treasury shares held by Olvi in January-September 2013. At the end of the reporting period, Olvi plc held 1,124 Series A shares as treasury shares. Treasury shares held by Olvi plc are reported in the tables section of this interim report, in Table 5, Section 5.

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 targets set. 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.

The Group’s strategic risks refer to risks related to the characteristics of the Group’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 environment as well as the financial 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, personnel, information security and systems, as well as changes in foreign exchange rates.

Raw materials

General economic development and annual fluctuations in crop yield affect the prices and availability of major raw materials used within Olvi Group. Disruptions in raw material deliveries may hamper customer relations and business operations. Purchases of major raw materials are made under procurement contracts standardised at the Group level. The predictability of purchase prices for the most critical raw materials is improved through long-term procurement agreements and potentially derivatives. All units emphasise the significance of the quality of raw materials and other production factors in the overall production chain.

Production process

The aim is to minimise production risks through clear documentation of processes, increasing the degree of automation, compliance with quality management system and the pursuit of clear operating methods in relation to decision-making and supervision. The efficiency and applicability of processes and methods are monitored using internal indicators. The monitoring and development of production efficiency includes, among other things, the reliability and utilisation rate of production machinery, development of the working environment and factors related to people’s work. The Group has a property and loss-of-profits insurance programme covering all of the operating areas, and its coverage is reviewed annually.

Markets and customers

The Group’s business operations are characterised by substantial seasonal variation. The net sales and operating profit from the reported geographical segments do not accumulate evenly but vary substantially according to the time of the year and the characteristics of each season.

Negative changes in the economy may impact consumers’ purchasing behaviour and hamper the liquidity of hotel and restaurant customers in particular. All Group companies employ efficient credit controls as a major method for minimising credit losses.

Legislative changes and other changes due to the operations of authorities, such as changes in excise taxes and marketing restrictions, may affect the demand for the Group’s products and their relative competitive position.

Personnel

Risks related to personnel include, among others, risks in obtaining labour, employment relationship risks, key person risks, competence risks and risks arising from insufficient well-being and accidents at work.

Crucial focal points in HR management include maintaining and developing a good employer image, as well as ensuring the availability and commitment of personnel. Other focal points include maintaining and developing well-being and safety at work, the functionality of management, training and incentive schemes, as well as the construction and maintenance of backup personnel systems.

Information security and IT

Olvi Group employs an information security policy pertaining to all of the companies. It defines the principles for implementing information security and provides guidelines for its development.

Risks related to information technology and systems are manifested as operational disruptions and deficiencies, for example. The availability and correctness of data is ensured through the choice of operating methods and various technical solutions. The Group’s operations in Finland and the Baltic states utilise a common enterprise resource planning system. A risk analysis pertaining to information security and the operation of information systems is carried out annually.  

Financing risks

The Group operates in an international market and is therefore exposed to foreign exchange risk due to changes in exchange rates. Foreign exchange risk consists of sales, purchases and balance sheet items in foreign currency (transaction risk), as well as investments and loans in foreign subsidiaries (valuation risk). Foreign exchange risk is reduced by the fact that most of the Group’s product sales and purchases of raw materials are denominated in euro.

The objective of financing risks management is to protect the Group against unfavourable changes in the financial markets and to secure the Group’s earnings development, liquidity and equity. The parent company’s financial management bears central responsibility for the Group’s financing, liquidity and the management of financing risks in accordance with principles confirmed by the Group’s Board of Directors. The objectives of centralisation include optimisation of cash flows, cost savings and efficient risk management. 

Financing risks are described in more detail in the Investors section of the corporate Web site.

BUSINESS RISKS AND UNCERTAINTIES IN THE NEAR TERM

A slight economic upturn has already happened in the euro zone but growth is still minor. In spite of the upturn, there are great risks involved in the development of the euro zone. The unemployment rate is still high. Weakened consumer purchasing power and changes in consumption patterns may have a negative impact on demand for the Group’s products. Demand in Finland is also held back by the highest excise tax level in the European Union, as well as increasing private imports.

The most substantial factor hampering the predictability of Olvi Group’s business relates to Belarus and its economic outlook for the next few years. The IAS 29 standard “Financial Reporting in Hyperinflationary Economies” will probably be applied at least until the end of 2014.

NEAR-TERM OUTLOOK

Sales volumes and net sales are expected to continue favourable development during the rest of the year.

Comparable operating profit is expected to improve on the previous year.

OLVI PLC
Board of Directors

Further information:

Lasse Aho, Managing Director

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 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 2012, with the following changes implemented as of 1 January 2013:          

1) As of the beginning of 2013, marketing subsidies payable to customers on the basis of litres sold have been accounted for as annual discounts under adjustments to sales. These marketing subsidies were previously recognised under other operating expenses. Due to the change, the consolidated net sales and other operating expenses for the previous year’s January-to-September period have declined by the amount of the marketing subsidies, 6.2 million euro. The change concerned the parent company Olvi.        

2) As of the beginning of 2013, Olvi Group’s depreciation periods for buildings, production machinery and equipment, as well as storage and fermentation tanks, have been extended to better correspond to their actual economic life. The depreciation period for buildings was extended from 20 to 30 years and the depreciation period for production machinery and equipment from 8 years to 15 years. The depreciation period for tanks was extended from 8 years to 20 years. Due to the change, depreciation in January-September 2013 declined by 8.1 million euro.  

Other accounting policies are presented in the Annual Report 2012 which was published on 18 March 2013. The information disclosed in the interim report is unaudited. 

The interim report information 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 2013:        

-  Amendment to IAS 12 “Income Taxes” concerning deferred taxes

-  Amendment to IAS 1 “Presentation of Financial Statements” concerning other comprehensive income items

-  Amendment to IAS 19 “Employee Benefits”

-  Amendment to IFRS 7 “Financial Instruments: Disclosures” concerning the offset of assets and liabilities

-  IFRS 13 “Fair Value Measurement”

Votes per Series A share                    1

Votes per Series K share                    20

The registered share capital on 30 September 2013 totalled 20,759 thousand euro.

Olvi plc’s Series A and Series K shares received a dividend of 0.50 euro per share for 2012 (0.50 euro per share for 2011), totalling 10.4 (10.4) million euro. The dividends were paid on 22 April 2013. The Series K and Series A shares entitle to equal dividend.

The Articles of Association include a redemption clause concerning Series K shares.

5. TREASURY SHARES

Olvi plc held a total of 1,124 of its own Series A shares on 1 January 2013.

Olvi plc has not acquired more treasury shares or transferred them to others in January-September 2013, which means that the number of Series A shares held by the company was unchanged on 30 September 2013. 

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 10 April 2013, 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-September 2013, the Board of Directors of Olvi plc has not exercised the authorisations granted by the General Meeting.

*) Treasury shares deducted.

9. LARGEST SHAREHOLDERS ON 30 SEPTEMBER 2013

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)