OLVI PLC PRESS RELEASE 28 APRIL 2005 at 09.00 am 1 of 6
OLVI GROUP’S INTERIM REPORT, 1 JANUARY TO 31 MARCH 2005 (3 MONTHS)
At 30.12 million euro, the Olvi Group’s net sales were 17.4% higher than
in the previous year (25.65 million euro). The Group’s operating profit
for the period amounted to 0.80 million euro (0.26 million euro). The
Group’s gross capital expenditure amounted to 6.40 (3.32) million euro,
and its equity to total assets ratio stood at 44.4 percent (43.4%).
The parent company’s earnings weakened. However, the operations of the
Baltic companies continued to develop favourably.
IFRS reporting
Olvi Group adopted the International Financial Reporting Standards
(IFRS) as of 1 January 2005. The interim report from 1 January to
31 March 2005 has been prepared in accordance with IFRS accounting
principles. Comparison figures related to the transition are provided
as an appendix to this interim report. The comparison figures used
for this report are the IFRS figures for 2004 provided in the appendix.
Net sales and earnings
The Group’s net sales from January to March amounted to 30.12 (25.65)
million euro.
The Group’s primary segment reporting format is based on geographical
segments. The geographical segments include Finland, Estonia, Latvia
and Lithuania. The secondary reporting format is based on business
segments, which include alcoholic and non-alcoholic
products.
Net sales by geographical segments (million euro)
1-3/2005 1-3/2004
Finland 16.70 15.10
Estonia 9.30 7.50
Latvia 2.18 1.79
Lithuania 2.75 2.10
Eliminations -0.81 -0.84
Olvi Group total 30.12 25.65
Owing to the seasonal character of the brewing industry, the
sales volumes for the first quarter of the year are typically
lower than those for the other quarters.
The Group’s operating profit amounted to 0.80 (0.26) million
euro, and the net result for the period under review was 0.27
(0.11) million euro.
2 of 6
Operating profit by geographical segments (million euro)
1-3/2005 1-3/2004
Finland 0.07 0.18
Estonia 1.29 0.88
Latvia -0.34 -0.30
Lithuania -0.17 -0.41
Eliminations -0.05 -0.10
Olvi Group total 0.80 0.25
Sales volumes by market area (million litres)
1-3/2005 1-3/2004
Finland 24.9 20.6
Estonia 21.9 18.0
Latvia 5.6 4.8
Lithuania 6.4 5.1
Eliminations -3.2 -3.6
Olvi Group total 55.6 45.2
Total sales of the parent company Olvi plc amounted to
24.9 million litres, 20.2 percent more than a year earlier.
Olvi’s domestic sales increased by 27.9 percent o 23.9 (18.7) million
litres. Olvi’s tax free and export sales from January to March totalled
1.0 million litres, which was 1.0 million litres less than a year earlier.
The parent company Olvi plc’s operating profit in the period under review
amounted to 0.07 (0.18) million euro.
The total sales of the Estonian subsidiary AS A. Le Coq Tartu Õlletehas
amounted to 21.9 (18.0) million litres. AS A. Le Coq Tartu Õlletehas
recorded a good operating profit.
From January to March, the sales of A/S Cesu Alus operating in Latvia
totalled 5.6 (4.8) million litres. The company’s operating profit remained
in the red. The Latvian agregate beer market diminished by 0.3 percent
during the period. Price competition in beers has remained intense.
From January to March, the sales of AB Ragutis operating in Lithuania
totalled 6.4 (5.1) million litres. The overall beer market increased by
4.3 percent during the period. The beer prices are still persistently low.
The company improved its operating profit but remained in the red.
Investments
During the period under review, the Olvi Group’s gross capital expenditure
amounted to 6.40 million euro (3.32 million euro). The parent company
Olvi plc accounted for 2.77 million euro and the subsidiaries in the
Baltic states for 3.63 million euro of the total. The largest investments
included the boiling room and bottling line at the brewery in Latvia,
as well as an automatic collection system implemented at Iisalmi.
Personnel
The Group’s average number of personnel during the period under review
was 1010 (966), 318 (308) of them in Finland, 351 (329) in Estonia,
162 (145) in Latvia and 179 (184) in Lithuania.
Annual General Meeting of 5 April 2005
At their Annual General Meeting held on 5 April 2005, the
shareholders of Olvi plc adopted the closing of the accounts for
the year 2004 and granted discharge from liability to the members of the
Board of Directors and Managing Director as regards
the fiscal year 2004.
In accordance with the Board’s proposal, the shareholders’ meeting decided
that a dividend of 0.65 euro be paid on each K and A share for fiscal 2004.
The dividend to be paid represents 110.7 per cent of the company’s earnings
per share. The dividend payout totals 3.3 million euro.
The dividend was paid on 15 April 2005 to all shareholders recorded
in the company’s register of shareholders maintained by the Finnish
Central Securities Depository Ltd on the record date 8 April 2005 at
the latest.
Board members and auditors
The Annual General Meeting re-elected the current members of the
Board: Mr. Heikki Hortling, Chairman of the Board, M.Sc. (Econ), Iisalmi,
Mr. Esa Lager, Director, LL.M., M.Sc. (Econ), Kauniainen, Dr. Hannele
Ranta-Lassila, Department Manager, LL.D., M.Sc. (Econ), Helsinki, Mr. Lauri
Ratia,
Managing Director, M.Sc. (Eng), Helsinki, and Mr. Heikki Sinnemaa,LL.M.,
Member of the Bar, Iisalmi.
The Annual General Meeting appointed Mr. Pekka Loikkanen, Authorised
Public Accountant, Kuopio, as the company’s auditor. PricewaterhouseCoopers
Ltd, Authorised Public Accountants, were appointed as deputy auditors,
with Ms. Silja Komulainen, Authorised Public Accountant, Sotkamo,
as the auditor in charge.
Organisation of the Board of Directors
At its organising meeting held on 5 April 2005, the Board elected
Mr. Heikki Hortling as the Chairman of the Board and Mr. Esa Lager
as the Vice Chairman of the Board.
Decision regarding the acquisition of own A shares
In accordance with the Board of Directors’ proposal, the Annual General
Meeting decided to revoke all existing unused authorisations to acquire
own shares and authorise the Board of Directors to decide on the
acquisition of the company’s own shares using distributable funds.
The authorisation is valid for one year starting from the Annual General
Meeting and covers a maximum of 245,000 A shares. The Board of Directors
may also propose that any shares acquired on the company’s own account
be cancelled by reducing the share capital.
The authorisation allows the Board of Directors to acquire the company’s
own shares for use as consideration in case of any upcoming corporate
acquisitions, for the funding of investments or cancellation. The shares
would be purchased in accordance with the Board of Directors’ decision in
public trading on the Helsinki Exchanges at the current market price at
the time of acquisition.
The purchase price shall be paid to the sellers within the payment period
determined on the basis of the Rules of the Helsinki Exchanges and
the Finnish Central Securities Depository.
Because the maximum number of A shares to be acquired represents less than
5% of all the shares in the company and 1% of all the votes, the acquisition
would not have any significant effect on the distribution of shareholdings
and voting rights in the company.
Decision regarding the transfer of own A shares
In accordance with the Board of Directors’ proposal, the Annual
General Meeting decided to revoke all existing unused authorisations
for the transfer of own shares and authorise the Board of Directors
to decide on the transfer of any A shares acquired on the company’s
own account within one year of the Annual General Meeting.
The authorisation would comprise the transfer of all
shares purchased on the basis of acquisition authorisations granted
to the Board of Directors.
The authorisation grants the Board of Directors with the power to decide to
whom and in what order the shares held by the company shall be transferred.
The Board of Directors could transfer the company’s own shares for use as
consideration in case of any upcoming corporate acquisitions or for
the funding of investments.
The Board of Directors is authorised to decide on the transfer price of
the company’s own shares and on the bases for determining the transfer price.
The Olvi plc share and warrants
Olvi plc’s registered share capital was 10,028,204 euro on 31 March 2005.
The share capital is divided into 933,064 K shares and 4,081,038 A shares.
The share’s nominal value is 2.00 euro.
The Olvi plc A share is quoted on the Main List maintained by the Helsinki
Exchanges. A total of 756,607 Olvi plc shares changed hands from January to
March, totalling 11.45 million euro in trading volume. The traded shares
represented 18.5 percent of the total number of A shares. The average share
price was 15.13 euro, with a low of 13.30 euro quoted in January and a high
of 16.65 euro quoted in March.
The company does not hold any of its own shares, and the company’s Board
of Directors has not exercised its authorisation to sell the company’s
shares.
A total of 99,435 Olvi plc share warrants issued to the personnel and the
parent company’s Board of Directors in 1999 changed hands from January to
March, totalling 1.51 million euro in trading volume.
From January to March, the average price of the warrants was 15.18 euro,
with a low of 11.70 euro and a high of 16.65 euro.
Shareholders
At the end of the period under review, Finnish shareholders accounted for
about 96.5 percent and non-Finnish shareholders for the remaining 3.5
percent of Olvi plc's ownership. On 1 April 2005, Olvi plc had 4,465
shareholders in the book-entry system of securities.
Outlook for the rest of the year
Olvi Group’s market position in the primary product groups strengthened
in 2004. The trend continued in early 2005.
The level of beer prices in Finland is anticipated to remain low due to
intense price competition and the role of beers as a product for
attracting customers to retail stores. Total consumption is expected to
increase slightly in 2005.
We expect positive development in Olvi Group’s operating profit.
Olvi’s organisational reform
Olvi plc will carry out a reform of its organisation in Finland. In
connection with this, Mr. Markus Gotthardt, Director of Sales, and Ms.
Kirsi Kontro, Chief Financial Officer, have resigned.
Olvi plc will disclose its new organisation during this week.
Further information:
Lasse Aho, Managing Director
Phone +358 17 838 5200 or +358 400 203 600
The information in this interim report is unaudited.
OLVI PLC
Board of Directors
APPENDICES
- Income statement
- Balance sheet
- Key financial ratios
- Cash flow statement
DISTRIBUTION
Hex Plc
Key media
www.olvi.fi
APPENDIX 1
OLVI GROUP
INTERIM REPORT, JANUARY-MARCH 2005
1.1.-31.3.05 1.1.-31.3.04 1.1.-31.12.04
EUR 1000 % EUR 1000 % EUR 1000 %
INCOME STATEMENT
Net sales 30119 100 25652 100 128894 100
Other income from
operations 101 0.3 82 0.3 637 0.5
Operating expenses -26801 -89.0 -22982 -89.6 -109974 -85.3
Depreciation and
write-downs -2616 -8.7 -2493 -9.7 -10284 -8.0
Operating profit 802 2.7 258 1.0 9274 7.2
Financial income
and expenses -476 -1.6 -35 -0.1 -1996 -1.5
Earnings after
financial items 326 1.1 223 0.9 7279 5.6
Earnings before tax 326 1.1 223 0.9 7279 5.6
Taxes -136 -0.5 -240 -0.9 -1535 -1.2
Minority interest 79 0.3 122 0.5 225 0.2
Profit/loss
for the period 269 0.9 105 0.4 5968 4.6
KEY RATIOS
Earnings per share, EUR 0.05 0.02 1.20
Earnings per share
adjusted for dilution
from warrants. EUR 0.05 0.02 1.17
Equity per share. EUR 11.94 11.46 12.02
Equity to total assets. % 44.4 43.4 45.10
Gross capital expenditure 6402 3319 18400
APPENDIX 2
OLVI GROUP
31.3.05 31.3.04 31.12.04
EUR 1000 EUR 1000 EUR 1000
BALANCE SHEET
ASSETS
Non-current assets
Intangible assets 2757 3233 2844
Goodwill 8706 8706 8706
Tangible assets 73973 68859 70130
Other investments 253 253 253
Non-current assets 86 236 88
available for sale
Receivables 13 108 39
Total non-current assets 85788 81395 82060
Current assets
Inventories 23312 21564 21987
Receivables 24129 25197 24267
Liquid assets 1863 2881 4436
Current assets total 49304 49642 50690
TOTAL ASSETS 135093 131037 132753
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity held by
parent company shareholders
Share capital 10028 9873 10028
Reserves 10752 10368 10752
Accrued earnings 38799 36208 29858
Net profit for the year 269 105 5969
59848 56554 59607
Minority interest 181 363 260
Total shareholders’ equity 60029 56917 59867
Long-term liabilities
Interest-bearing liabilities 30725 29468 35394
Deferred tax liabilities 1545 2102 1668
Short-term liabilities
Interest-bearing liabilities 15602 16310 8989
Interest-free liabilities 27192 26241 26835
Total liabilities 75064 74120 72886
SHAREHOLDERS’ EQUITY
AND LIABILITIES TOTAL 135093 131037 132753
OLVI GROUP APPENDIX 3
CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY
1000 eur
Share Premium Legal Other Transl. Accr. Minority Sharehol.eq.
capital account reserve reserv. diff. earn. inter. total
Shareh. eq.1 Jan 04
9873 10097 127 143 36364 496 57100
Change in tr. diff.
-155 -155
Change in minority
interest
-133 -133
Profit for the period
105 105
Shareh. eq.31 Mar 04
9873 10097 127 143 -155 36469 363 36469
EUR
Share Premium Legal Other Transl. Accr. Minority Sharehol.eq.
capital account reserve reserv. diff. earn. inter. total
Shareh. eq.1 Jan 04
10028 10481 127 143 -155 38983 260 59867
Change in tr. diff.
-29 -29
Change in minority
interest
-79 -79
Profit for the period
269 269
Shareh. eq.31 Mar 04
10028 10481 127 143 -184 36252 181 60028
1.1.-31.3.05 1.1.-31.3.04 1.1.-31.12.04
Number of shares
- average 5014102 4936502 4958491
- at end of period 5014102 4936502 5014102
PERSONNEL
Finland
Full-time 253 248 270
Part-time 65 60 64
Total 318 308 334
Estonia 351 329 354
Latvia 162 145 164
Lithuania 179 184 180
Total 692 658 698
OLVI Group total 1010 966 1032
APPENDIX 4
CONTINGENT LIABILITIES, 1,000 euro
31.3.05 31.3.04 31.12.04
Pledges and
contingent liabilities
For own commitments:
Mortgages on land
and buildings 1135 1135 1135
Leasing liabilities:
due next year 1729 1639 1696
due later 2103 1733 1735
Total leasing liabilities 3832 3372 3431
Package liabilities 2576 6848 3676
Debts for which assets have
been pledged as collateral:
Loans from
financial institutions 10737 6182 12132
DERIVATIVES CONTRACTS, 1,000 euro
31.3.2005
Nominal value Market value Book value
Derivatives 12,970 12,884 0
The business significance of the derivatives is minor. Some of the
derivatives contracts will expire in 2007, some in 2008.
APPENDIX 5
CASH FLOW STATEMENT, 1,000 euro
1.1.-31.3.05 1.1.-31.3.04 1.1.-31.12.04
Cash flow from operations 324 223 7279
Depreciation and
other adjustments 2980 2193 11873
Change in net
working capital -309 -2175 -754
Net financial expenses
and taxes paid -927 -975 -4276
Cash flow from operations(A) 2068 -734 14124
Investments -6594 -3252 -12646
Disposals of fixed assets 8 38 550
Cash flow from investments (B) -6586 -3214 -12096
Change in debt capital and
other financial items 1944 3138 2124
Dividends paid -3409
Cash flow from financing(C) 1944 3138 -1285
Increase (+)/decrease (-)
in liquid assets (A+B+C) -2574 -810 745
Liquid assets 1 January 4436 3691 3691
Liquid assets 31 Mar/31 Dec 1863 2881 4436
APPENDIX 6
COMPARISON DATA FOR IFRS FINANCIAL STATEMENTS 2004
Olvi plc adopted the International Financial Reporting Standards
(IFRS) as of 1 January 2005. Olvi Group’s first IFRS financial
statements will be prepared for the fiscal year ending on 31 December
2005, and the first interim report in accordance with IFRS accounting
principles will be prepared for the quarter ending on 31 March
2005. The following describes the transition to IFRS and provides
reconciliation alculations regarding the effects of IFRS on shareholders’
equity 1 January and 31 December 2004 and the earnings for 2004.
Reconciliation calculations associated with shareholders’ equity
and earnings in the interim report 31 March 2004 are presented
above in connection with the information for the first quarter
2005. Reconciliations associated with the other interim reports
for 2004 will be presented in connection with interim reports to
be published later during the current fiscal year.
Olvi has applied the IFRS 1 standard, First-time adoption of IFRS,
and the following easements allowed by that standard: business
combinations, fair value or revalued amount as deemed cost,
employee benefits and accumulated translation reserves. The following
financial information has been prepared in accordance with the IAS/IFRS
standards valid at the time of preparation.
Before the introduction of IFRS standards, Olvi’s financial statements
were based on Finnish Accounting Standards (FAS). The accounting
principles in accordance with FAS are included in Olvi plc’s financial
statements published for 2004, which constitute the last financial
statements in accordance with FAS. Deviations from these principles
due to the introduction of IFRS are described in the notes to the
following reconciliation calculations. The comparison figures
presented in the reconciliation calculations are consistent
with previously disclosed information.
Effects of IFRS transition on income statement 2004
In accordance with FAS, earnings after financial items amounted
to 4.2 million euro in 2004. Under IFRS, earnings after financial
items amounted to 7.3 million euro. Earnings per share amounted
to 0.59 euro under FAS and 1.20 euro under IFRS.
Effects of IFRS transition on balance sheets 1 January
and 31 December 2004
The total of the FAS balance sheet 1 January 2004 was 128.4
million euro. Changes due to IFRS reduced the total of the
opening balance sheet by 1.0 million euro to 127.4 million euro.
The FAS balance sheet total at the end of the year was 132.4
million euro, and the IFRS balance sheet total was 132.8 million euro.
APPENDIX 7
IFRS RECONCILIATION CALCULATIONS
1. INCOME STATEMENTS
1.1 Reconciliation of consolidated profit (loss) for the period 1 January to 31
March 2004
1000 euro FAS IFRS IFRS
1-3,2004 adjustments 1-3 2004
Net sales 25652 25652
Other operating income 82 82
Materials and services -8207 -8207
Personnel expenses -4413 -4413
Depreciation
and write-downs (2) (6) -2858 364 -2493
Other operating expenses (3) -10376 13 -10363
Operating profit (loss) -119 377 258
Financial income and
expenses (1) -579 544 35
Earnings before tax -698 921 223
Income taxes -240 -240
Minority interest 122 122
Profit (loss) for the period -817 921 105
FAS IFRS IFRS
1-12 2004 adjustments 1-12 2004
Earnings per share -0.17 0.02
1.2 Reconciliation of consolidated profit (loss) for the period 1
January to 31 December 2004
1000 euro FAS IFRS IFRS
1-12 2004 adjustments 1-12 2004
Net sales 128894 128894
Other operating income 637 637
Materials and services -44560 -44560
Personnel expenses -19375 -19375
Depreciation and
write-downs (2) (6) -11727 1443 -10284
Other operating
expenses (3) -45945 -94 -46039
Operating profit (loss) 7925 1349 9274
Financial income and
expenses (1) -3703 1707 -1996
Earnings before tax 4222 3056 7279
Income taxes -1535 -1535
Minority interest 225 225
Profit (loss) for the period 2912 3056 5968
FAS IFRS IFRS
1-12 2004 adjustments 1-12 2004
Earnigs per share -0.17 0.02
APPENDIX 8
2. RECONCILIATION OF CONSOLIDATED BALANCE SHEET
2.1. Consolidated balance sheet 1 January 2004
(1000 euro) FAS IFRS IFRS
adjustments
ASSETS
Non-current assets
Intangible assets 3239 3239
Goodwill 706 8706
Tangible assets (3) 68819 -897 67922
Other investments 256 256
Non-current assets
available for sale (6) 223 223
Receivables 83 83
Total non-current
assets 81103 -674 80429
Current assets
Inventories (3) 19299 -293 19006
Receivables 24264 24264
Liquid assets 3691 3691
Total current assets 47253 -293 46960
TOTAL ASSETS 128356 -967 127390
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity held by parent company shareholders
Share capital 9873 9873
Reserves 10368 10368
Accrued earnings
(1)(3)(4)(5)(6) 35364 -3159 32205
Net profit for
the period 4159 4159
59764 -3159 56605
Minority intest 496 496
Total shareholders’
equity 60260 -3159 57101
Long-term liabilities
Interest-bearing
liabilities 30988 30988
Deferred tax
liabilities 2196 42 2238
Short-term liabilities
Interest-bearing
liabilities 11810 11810
Interest-free
liabilities (1)(4) 23103 2151 25254
Total liabilities 68096 2193 70289
TOTAL SHAREHOLDERS’
EQUITY AND LIABILITIES 128356 -967 127390
2.2 Consolidated balance sheet 31 December 2004
ASSETS
Non-current assets
Intangible assets 2844 2844
Goodwill (2) 7304 1402 8706
Tangible assets (3) 71044 -913 70130
Other investments 253 253
Non-current assets
available for sale (6) 88 88
Receivables 39 39
Total non-current
assets 81484 577 82061
Current assets
Inventories (3) 22181 -195 21987
Receivables 24267 24267
Liquid assets 4436 4436
Total current assets 50885 -195 50690
TOTAL ASSETS 132369 383 132753
SHAREHOLDERS’ EQUITY AND LIABILITIES
Shareholders’ equity held by parent company shareholders
Share capital 10028 10028
Reserves 10752 10752
Accrued earnings
(1)(3)(5)(6) 36018 -1453 29858
Net profit for the
period (2) 2912 1350 5969
59710 -103 59607
Minority interest 260 260
Total shareholders’
equity 59970 -103 59867
Long-term liabilities
Interest-bearing
liabilities 35394 35394
Deferred tax
liabilities 1626 42 1668
Short-term liabilities
Interest-bearing
liabilities 8989 8989
Interest-free
liabilities 26391 444 26835
Total liabilities 72399 486 72886
TOTAL SHAREHOLDERS’
EQUITY AND LIABILITIES 132369 383 132753
APPENDIX 9
3. RECONCILIATION OF SHAREHOLDERS’ EQUITY
EUR 1000
1.1.2004 31.3.2004 31.12.2004
Shareholders’
equity under FAS 60260 59154 59970
IAS 2 Inventories -797 -784 -891
IAS 19 Employee
benefits -600 -600 -600
IAS 21 The effects
of changes in foreign
exchange rates 1707 -1163 -
IAS 12 Income taxes 114 114 114
IFRS 1 First-time
adoption of IFRS -243 -243 -243
IFRS 1 First-time
adoption of IFRS 73 87 115
IFRS 3 Business
combinations 351 1402
Shareholders’ equity
under IFRS 57101 56917 59867
NOTES TO RECONCILIATION CALCULATIONS
(1) Conversion of items in foreign currency
The figures indicating the earnings and financial position
of Group companies are measured in the currency of each unit’s
primary operating environment. The consolidated financial
statements are presented in euro, which is the operating
and presentation currency of the Group’s parent company.
Transactions denominated in foreign currency have been
converted into euro at the exchange rate valid on the transaction
date. Monetary items in foreign currency have been converted
into euro at the exchange rates valid on the balance sheet date.
Gains and losses originatingfrom business transactions in foreign
currency and the conversion of monetary items are recognised on
the income statement. Foreign exchange gains and losses from
operations are included in the corresponding items above operating
profit. Foreign exchange gains and losses on loans denominated
in foreign currency are included in financial income and expenses.
The income statements of non-Finnish consolidated companies have
been converted into euro at the weighted average exchange rate of the
period, and their balance sheets have been converted at the exchange
rate quotedon the balance sheet date. The different exchange rates
applicable to the conversion of profit on the income statement and
balance sheet result in a translation difference recognised in
shareholders’ equity. Translation differences arising from the
elimination of the acquisition cost of foreign Group companies
are recognised in shareholders’ equity. When a Group company is
divested, accumulated translation differences are recognised on the
income statement as part of the sales gain or loss. Translation
differences incurred before 1 January 2004 have been recognised
as accrued earnings in connection with the IFRS transition and
will not be recognised on the income statement later in
connection with the divestment of a subsidiary.
Exchange rate differences on intra-Group long-term loans have
been accrued over the loan period in accordance with the practice
allowed by Finnish Accounting Standards. According to IAS 21,
these items must be recognised as affecting earnings in
the period during which they originate, with the exception of
items considered as net investment in a foreign unit.
All previouslyaccrued exchange rate differences have been
recognised as expenses in the FAS financial statements as well.
(2) Goodwill
Goodwill is not regularly amortised. Instead of planned
amortisation, goodwill is subjected to impairment testing. If
the amount of cash accrued by a cash generating unit is lower
than the unit’s book value including goodwill, the impairment
loss is recognised on the income statement as an expense. Olvi’s
goodwill items have been tested on 1 January 2004. The change in
the goodwill amortisation practice reduced the Group’s
depreciation and amortisation and improved the 2004 IFRS
earnings after financial items by 1.4 million euro.
(3) Inventories
Inventories are valued at acquisition cost or a lower net
realisable value. The acquisition cost of finished and unfinished
products comprises raw materials, direct expenses due to work
performed, other direct expenses, as well as a proportion of the
variable and fixed overheads of manufacturing at the normal utilised
capacity. Net realisable value refers to estimated sales price available
through normal business operations, deducted by estimated costs
of finishing the product and costs of sale.
Changes in inventories are due to the transition from a previous
valuation method based on variable manufacturing costs to IFRS-compliant
valuation. Furthermore, valuation principles for inventories have
been unified within the Group, resulting in the valuation of
certain inventories in foreign Group companies at a net realisable
value lower than acquisition cost.
(4) Pension liabilities
When determining pension liabilities in the transition phase, the
disability part of Finnish EPA (TEL) pension schemes was considered a
defined benefit plan in accordance with IAS 19, and a disability pension
liability of 0.6 million euro was recorded on thebalance sheet on the date
of transition. The Ministry of Social Affairs and Health approved certain
changes in the calculation criteria of disability pension liabilities
within the Finnish employment pension scheme in December 2004. The
changes will enter into force on 1 January 2006, after which the TEL
disability pension part will be treated as a defined contribution plan
in IFRS financial statements.
(5) Income taxes
In accordance with IAS 12, deferred tax liabilities and receivables
must generally be recognised for all taxable temporary differences.
Deferred taxes are calculated at tax rates enacted by the balance sheet
date. Deferred tax receivables are recognised up to the probable amount
of taxable income in the future against which the temporary difference
can be utilised.
The changes in accounting principles upon the transition to IFRS
reporting increased Olvi’s deferred (net) tax receivables on the
opening balance sheet. The most significant change is due to the
recognition of pension liability.
(6) Assets available for sale
Assets available for sale are valued at the lower of the
following: book value or fair value deducted by cost of sale.
Depreciation of these assets will be discontinued at the
time of classification.
Segment information
The Group’s primary segment reporting format is based on
geographical segments. The geographical segments include Finland,
Estonia, Latvia and Lithuania. The secondary reporting format
is based on business segments, which include alcoholic and non-alcoholic
products.
Cash flow statement
There are no substantial differences between the cash flow
statement under IFRS and FAS.