2006 Financial statements

Transcription

1 2006 Financial statements

2 RAUTE CORPORATION 1 (13) RAUTE CORPORATION FINANCIAL STATEMENTS FOR 2006 Net sales, m ( m), decreased by 2%. Operating profit was 4.5 m ( 4.4 m) and profit before tax 4.9 m ( 5.5 m). Profit for the period amounted to 3.6 m ( 4.0 m). The undiluted earnings per share were 0.94 ( 1.09). The order book at the end of the year, 77 m ( 55 m), was very strong. The Board of Directors proposes to the Annual General Meeting that a dividend of 0.70 per share will be paid for Net sales are expected to grow moderately in 2007 and operating profit to improve over KEY FIGURES Q Q Net sales, m Change,% Operating profit, m Profit before tax, m Equity ratio, % Assets total, m Earnings per share (EPS), Order intake, m Order book, m Capital expenditure, m R&D expenses, % of net sales MR TAPANI KIISKI, PRESIDENT AND CEO, COMMENTING ON THE FINANCIAL STATEMENTS FOR 2006: ENTERING 2007 WITH A RECORD ORDER BOOK For Raute, year 2006 had two distinct sides to it. In addition to succeeding on the market, we caught up with the net sales figures of 2005 and achieved a record order book in the last quarter. The good operating profit in the last quarter indicates our capability to make profit and squeeze our production capacity, even though our profitability did not develop in line with our objectives. The postponement of a millscale order agreed in early 2006 to the final part of the year resulted in a dip in third quarter net sales, ruining hopes for improved performance. In the past year our markets were characterized by the demand for investments focusing heavily on mill-scale projects, as customers aimed to increase their production capacity. Under these circumstances, Raute s traditional strength, mill-scale projects, proved to be a valuable asset. We received four orders for millscale projects and increased our order book at the end of the year to a record EUR 77 million. Heavy inputs in product development and previous demonstration of our skills enabled us to maintain our position as a clear market leader in mill-scale projects. Technology services fell short of the previous year s net sales, as well as of our growth targets, due to weaker demand for large-scale modernizations. Growth continued to be good in spare part and maintenance services, which in particular helps our goal of increasing the share of contractual maintenance. Customer feedback and internal operations indicators show that our service capability has improved. We aimed at markedly improved profits compared to 2005, but failed to reach this objective. The biggest single reason came from additional, one time expenses from the market launches, first deliveries, of some new products. These products have proved to be successful and will serve our competitiveness in the future. Another big reason for the profit not reaching targets was the rapidly weakening market situation in North America. Our customers very nearly froze their investments, as well as their inputs in enhancing maintenance. Moreover, the weak dollar had a negative effect on our competitiveness and profitability in these markets. Our primary objective in 2007 continues to be the improvement of profitability. Our record-high order book offers us good opportunities to improve our performance, as well as reach moderate growth. The order book now contains very few projects with firstdelivery risk. We also expect demand to continue at a good level. I wish to thank our customers, staff, partners, and other stakeholders for 2006, and hope our cooperation will continue and get better. Let us make 2007 into a better year for Raute and all of us.

3 RAUTE CORPORATION 2 (13) MARKET SITUATION Market situation in customer industries The market situation in Raute s customer industries continued to be good throughout the year in the company s main market areas, with the exception of North America. Plywood demand, production, and prices were at a good level all over the world except for North America. In Asia and Russia, the market situation for plywood showed positive development. In the USA, the waning confidence in overall development of the economy affected the demand for and prices of construction materials. In addition, the new production capacity for OSB board (large-flaked particleboard used for construction especially in North America), which was rolled out in 2006, competed with plywood in North America. Positive development continued in the market for LVL (Laminated Veneer Lumber). The production capacity that has come on line in recent years has found demand on the market. The demand for overlaid particleboard and MDF (Medium Density Fiber) board remained good. Especially in Russia and Eastern Central Europe, the strongly growing furniture industry kept production at a high level. Residential construction and modernization continued at a high level, maintaining good demand for parquet and decorative veneer. Demand for wood products technology The demand for investments in the plywood and veneer industry was at a good level, with the exception of North America. Demand was particularly strong in the case of large mill-scale projects, which were initiated in several market areas in Raute still has mill-scale projects in the planning phase for different market areas. The LVL industry enjoyed brisk demand for investments. One new mill-scale project was initiated in the USA last year. In the LVL industry, significant investment plans to increase production capacity are under way in several market areas. Good demand was also seen in Raute s smaller customer groups, which include overlaying of particleboard and MDF, the parquet industry, and the decorative veneer industry. In technology services, demand for spare part and maintenance services remained at a good level. In Europe, the demand for modernizations dropped from the previous year. In North America, modernizations were in less demand due to the plywood industry s general unwillingness to make investments. Order intake and order book Raute s business consists of project deliveries and technology services. Project deliveries encompass complete mills, production lines, and single machines and equipment. Technology services include maintenance, spare part services, modernizations, consulting, training, and sales of reconditioned machinery. The order intake in 2006 amounted to EUR 132 million ( 132 m), of which project deliveries accounted for EUR 105 million ( 109 m) and technology services for EUR 27 million ( 23 m). In project deliveries, Russia accounted for 42 percent, the rest of Europe for 25 percent, and North America for 16 percent of the order intake. South America accounted for most of the remaining order intake of other market areas (17%). Seventy percent of project delivery orders consisted of four mill-scale projects to Chile, the USA, France, and Russia. Production line orders accounted for 26 percent of the order intake, a significant share of it taken up by six peeling lines to Russia. Raute s biggest-ever single order for plywood mill production lines for Vjatsky Fanernyi Kombinat in Russia took effect in the last quarter. The deal is worth EUR 30 million. The machinery deliveries are scheduled for the latter half of A preliminary letter of intent for the project was signed in February The order book grew strongly throughout the year, amounting to EUR 77 million ( 55 m) at the end of the year. Competitive position Raute is generally speaking in a good competitive position and looks particularly strong in its traditional technology fields: the plywood and veneer industry, as well as the LVL industry. The company's position is based on a comprehensive offering of technology and services, leading technology in the field that is maintained by strong product development, and solid references. Several deliveries with reference value were introduced into production use in Examples of these include two peeling lines to Southeast Asia, which marked Raute s first tropical wood peeling deliveries in several years. In addition, a new-generation trim saw line, scarf jointing line, and decorative veneer drying line were rolled out in Finland. The new products will boost Raute s competitiveness in these technology and market areas. In terms of competitiveness, Raute is strongest in millscale deliveries. The four mill-scale orders received in 2006 are a sign of the company s leading position.

4 RAUTE CORPORATION 3 (13) DEVELOPMENT OF OPERATIONS Raute continued to develop its sourcing by establishing a subsidiary in Shanghai, China. The new company will strengthen the Group's purchasing organization, handle subcontracting and materials purchases in China, and improve the Group's presence on the Chinese market. Raute (Shanghai) Machinery Co., Ltd obtained the required business licenses in September and started operations in the latter part of The ERP and financial administration systems of Raute's North American operations were harmonized to comply with the information systems used at the main production unit in Nastola. Harmonized systems will enhance bidding processes, project implementation, and cooperation between units. Development also continued on the work distribution and cooperation among Raute s own operations, the goal being to improve customer service and operational efficiency. The consulting and reconditioned machinery services offered by RWS-Engineering Oy were made into an operational part of Raute s technology services managed from Finland. To deal with the weak demand for investments in North America, Raute strengthened its customer service and delivery capacity in technology services in the region, and made the resources related to project deliveries a part of its global project organization. OTHER EVENTS IN THE PERIOD Share-based incentive plan On March 22, 2006, the Board of Directors of Raute Corporation approved a share-based incentive plan for the strategy period The potential reward from the plan will be based on the Group s operating profit and on the Board of Directors assessment of the success of the strategy. The incentive plan encompasses the Group s Executive Board (5 members) and 13 other key employees. Rewards will be paid in shares and in cash. The cash portion is meant for the payment of taxes and tax-related costs. Decisions on the rewards will be made in The shares are subject to a two-year transfer prohibition. On December 31, 2006, the share-based plan accounted for a maximum of 56,000 Raute Corporation s series A shares. Of these, the President and CEO may hold a maximum of 10,000 and the rest of the Executive Board jointly a maximum of 20,000 shares. The fair value of the share-based rewards on December 31, 2006, was EUR 0.3 million. The plan s impact on profit before tax in 2006 was EUR 0.1 million. Dissolution of Eloc Oy and Raute Corporation s pension fund The dissolution of Raute Corporation s pension fund was entered in the Register of Foundations on July 25, NET SALES AND RESULT The Group s net sales were EUR million ( m). Net sales dropped by 2 percent compared to 2005, which was a year of steep growth. The drop in net sales was caused by lower net sales from modernizations and the scheduling of project deliveries. Business activities consisted entirely of the wood products technology business. Project deliveries accounted for 79 percent (78%) and technology services for 21 percent (22%) of net sales. The plywood industry s share of project deliveries was 93 percent (83%), the LVL industry s 4 percent (17%), and that of other, smaller customer industries 2 percent. Net sales from technology services totaled EUR 21.9 million ( 23.5 m), down by 7 percent from the previous year. In modernizations, net sales decreased by 23 percent due to the market situation in Europe. Maintenance services grew by 18 percent in 2006, and spare part services by 12 percent. Technology services have grown by 26 percent since Europe s share of the Group s net sales dropped to 29 percent (40%) and North America's to 16 percent (27%). Russia s share was 12 percent (14%) and Asia s 5 percent (7%). Other market areas increased their share to 38 percent (12%), fueled by two mill-scale project deliveries to Chile. The Group s operating profit remained at the previous year s level, amounting to EUR 4.5 million ( 4.4 m). Profit before tax was EUR 4.9 million ( 5.5 m) and profit for the period EUR 3.6 million ( 4.0 m). Profitability development fell short of targets due to the unanticipated expenses related to the first deliveries of some new products, the cost pressure caused by the good overall economic situation, and North America s weak market situation. Operations in North America were unprofitable. In 2006 net sales and profit benefited from a EUR 0.1 million ( -0.7 m) IFRS-compliant recognition of currency hedges that were used for economic hedging purposes but fell outside the scope of hedge accounting. Profit for the previous year was improved by the release of excess cover totaling EUR 0.4 million in conjunction with the dissolution of the pension fund. Net sales in the last quarter totaled EUR 32.5 million ( 31.5 m) and operating profit EUR 2.3 million ( 0.7 m). The dissolution of Eloc Oy, an associated company, was completed on May 31, 2006.

5 RAUTE CORPORATION 4 (13) FINANCING The Group's financial position remained strong. At the end of the year, gearing was percent (-41.5%) and equity ratio 60.1 percent (55.7%). The balance sheet totaled EUR 68.5 million ( 55.4 m). The strong fluctuation in balance sheet items and the key ratios based on them results from differences in the timing of customer payments and the cost accumulation from project deliveries, which is typical of project business. Liquid assets grew by EUR 12.6 million to EUR 24.0 million ( 11.4 m) in Operating cash flow was EUR 15.0 million ( 7.7 m) and investing cash flow was EUR -1.5 million ( -3.0 m). The financing cash flow, EUR -0.8 million ( -2.9 m), includes EUR 2.3 million from the payment of year 2005 dividends, as well as EUR 1.4 million in payments received from the stock issue of shares subscribed for with options. Interest-bearing liabilities totaled EUR 0.5 million ( 0.5 m) at the end of the year. Unused credit limits amounted to EUR 15 million on the same date. The company also has a EUR 10 million commercial paper program. RESEARCH AND DEVELOPMENT COSTS AND CAPITAL EXPENDITURE Research and development costs totaled EUR 3.8 million ( 3.6 m), representing 3.5 percent (3.3%) of net sales. The pretax impact on costs was EUR 3.2 million ( 3.9 m). EUR 0.5 million ( 0.2 m) of development costs was capitalized, while depreciation of development costs was EUR 0.2 million ( 0.5 m). Year 2006 saw exceptionally low investments in production. Investments totaled EUR 1.9 million ( 3.8 m), including capitalized development costs worth EUR 0.5 million (0.2 m). Other investments focused mainly on upgrading information technology. PERSONNEL The Group s headcount at the end of the year was 540 (533). Finnish Group companies accounted for 76 percent (76%) and foreign companies for 24 percent (24%) of employees. The number of personnel converted to full-time employees was approximately 547 (536). THE GROUP S EXECUTIVE BOARD AND MANAGEMENT OF SUBSIDIARIES Mr. Tapani Kiiski continued as Chairman of Raute s Executive Board, and the Board s members included Ms. Arja Hakala, CFO; Mr. Petri Strengell, Vice President, Technology and Operations; Mr. Timo Kangas, Vice President, Technology Services; and Mr. Bruce Alexander, Vice President, North American Operations and President of Raute s North American companies. The President of Raute Corporation s subsidiary Mecano Group Oy is Mr. Pasi Kenola, MSc (Eng.) and emba, who has held the post since March 1, The President of Raute Corporation s subsidiary RWS-Engineering Oy is Mr. Timo Kangas, Group Vice President, Technology Services, and member of the Group s Executive Board, who took up the post on March 10, ANNUAL GENERAL MEETING Raute Corporation s Annual General Meeting held on March 22, 2006, adopted the financial statements for 2005, released those accountable from liability, and decided to distribute a dividend of EUR 0.60 per share. Mr. Jarmo Rytilahti was elected Chairman of the Board, Ms. Sinikka Mustakallio was elected Vice-Chairman, and Mr. Mika Mustakallio, Mr. Panu Mustakallio, Mr. Pekka Paasikivi, and Mr. Jorma Wiitakorpi were elected Board members. Mr. Kari Miettinen and Ms. Sari Airola, Authorized Public Accountants, were re-elected as auditors, and PricewaterhouseCoopers Oy, an authorized public accounting company, as deputy auditor. The Annual General Meeting authorized the Board to decide on the acquisition of the company s own series A shares using distributable funds, as well as on the disposal of own shares. CORPORATE GOVERNANCE All of the Board members are independent of the company. Chairman Jarmo Rytilahti and two of the members (Pekka Paasikivi and Jorma Wiitakorpi) are independent of major shareholders. The chairman of the Appointment Committee is Mr. Jarmo Rytilahti, while Ms. Sinikka Mustakallio and Mr. Ville Korhonen, a representative of a major shareholder, act as its members. The Working Committee is chaired by Mr. Jarmo Rytilahti and its members are Ms. Sinikka Mustakallio and Mr. Pekka Paasikivi. SHARES Raute Corporation's series A shares are listed on the Nordic list of the Helsinki Stock Exchange. The trading code is RUTAV. The shares have a nominal value of two euro. Raute Corporation has signed a market making agreement with Nordea Bank Finland plc in compliance with the Liquidity Providing (LP) requirements issued by the Helsinki Stock Exchange.

6 RAUTE CORPORATION 5 (13) The number of shares at the end of the year totaled 4,004,758, of which 991,161 were series K shares (20 votes/share) and 3,013,597 series A shares (1 vote/share). A total of 190,150 series A shares subscribed for through the exercise of B options pertaining to the 1998 option scheme were entered in the Trade Register in A total of 1,088,288 (1,529,700) series A shares worth EUR 15.4 million ( 17.1 m) were traded in The share price at the end of the year was EUR ( 14.24). The highest quotation of series A shares was EUR ( 16.42) and the lowest EUR ( 7.60), while the average price was EUR ( 11.24). The company's market capitalization at the end of 2006 was EUR 51.5 million ( 54.3 m), with series K shares valued at the closing price on December 29, 2006 of series A shares, that is EUR ( 14.24). Raute Corporation s 1998 option scheme expired on September 30, 2006, for B options. The scheme accounted for a total of 212,500 options, of which 190,150 were exercised. The highest trading price in 2006 for B options was EUR 9.58 ( 9.20) and the lowest EUR 4.48 ( 1.00). A total of 330,650 B options were traded in 2006 (197,500). The total value of trading was EUR 2,452,176 ( 701,207). The company's Board of Directors is authorized to buy back and dispose of a maximum of 400,475 of the company's series A shares. The Board of Directors has not exercised this authorization. SHAREHOLDERS The number of shareholders totaled 974 at the beginning of 2006 and 1,144 at the end of the year. Series K shares are held by 46 private individuals (46). The management held 4.5 percent (4.7%) of company shares and 9.0 percent (8.9%) of votes. Nomineeregistered shares accounted for 1.3 percent (1.3%) of shares. The company was given one flagging notification in The holding of Varma Mutual Pension Insurance Company (200,000 series A shares) dropped below the disclosure threshold of one-twentieth (1/20), when the increase in Raute Corporation s share capital, due to option subscriptions, was entered in the Trade Register on November 2, DIVIDEND FOR 2005 The Annual General Meeting decided to distribute a dividend of EUR 0.60 per share for A total of EUR 2.3 million was paid in dividend on April 3, ACCOUNTING PRINCIPLES The company s financial statements have been prepared according to International Financial Reporting Standards (IFRS). The figures for 2006 have not been audited. Figures in parentheses refer to the corresponding figures in the comparison year. The Group has adopted the changes that IASB made to IAS 39 in 2004 and The Group has also adopted hedge accounting in compliance with IAS 39. The share-based incentive scheme complies with IFRS 2. Exchange differences for intra-group borrowings that have been treated as net investments in foreign units have been recognized as translation differences in equity (IAS 21). In other respects, the Group has followed the accounting principles described in the financial statements for 2005 when preparing the financial statements for The changes in accounting principles have not had a material impact on the figures for the report period. BUSINESS RISKS Impact of economic fluctuations on business operations Raute supplies technology and services to mills in the wood products industry. Business is characterized by sensitivity to economic fluctuations due to changes in the investment activity of customer industries. The impact that the cyclical nature of project deliveries has on the Group s performance is mitigated by systematically increasing the share of technology services, by developing the subcontracting network, and by focusing on core competence. In the long term, the Group s growth opportunities are increased and the impact of economic fluctuations balanced by developing operations in customer industries where the company s market share is still small, and by creating products for new customer groups, such as the decorative veneer industry. The Group is prepared for fluctuations in the working capital tied up in project operations. Raute Corporation has an EUR 10 million domestic commercial paper program, which allows it to issue commercial papers maturing in less than one year. The company also has bilateral non-current credit regulation agreements worth EUR 15 million. Delivery and technology risks The majority of Raute s business operations consists of different kinds of project deliveries, which always expose the company to risks caused by, for example, the customer s end product, production methods, or customer-specific solutions related to raw materials. At the quotation and negotiation phase, the company has to make estimates of the achievement of promised

7 RAUTE CORPORATION 6 (13) performance figures and of the costs of implementation. Contract, product liability, implementation, cost, and capacity risks are managed using project management procedures that comply with the company s certified quality system. Raute emphasizes product development and continuously develops new technology in order to offer solutions for customers expanding needs. The functionality and capacity of new solutions cannot be fully verified until the solutions can be tested under production conditions in conjunction with first customer deliveries. Technology risks are reduced by the conditions of delivery contracts and by restricting the number of simultaneous first deliveries. Hedging of foreign currency receivables Items related to business payments and denominated in foreign currency are hedged with currency derivatives when contracts take effect. Forward contracts in Canadian and US dollars related to the economic hedging of payments from binding sales agreements had a nominal value of EUR 0.2 million ( 3.1 m) at the end of the year. The measurement of these forward contracts in compliance with IFRS improved the company's net sales and operating profit by EUR 0.1 million ( -0.7 m) compared to the Finnish Accounting Standards. Forward contracts in Canadian and US dollars related to fair value hedging had a nominal value of EUR 7.0 million ( 0 m) at the end of the report period. Hedge accounting had a positive impact of EUR 20 thousand on the period s result. Forward contracts in Canadian dollars related to the economic hedging of financing items had a nominal value of EUR 2.0 million ( 6.8 m) at the end of the year. SOCIETY AND THE ENVIRONMENT The environment is one of the values that guide Raute s operations. Raute has been systematically developing the environmental soundness of its products and services and aims to reduce the environmental impact of its operations. The Group abides by the principles of good corporate citizenship, taking into consideration nature and its protection, as well as the operating methods of the surrounding society, and by showing respect to local cultures. Raute s operations mainly affect the environment indirectly when the company s technology is used in the production processes of the wood products industry. Raute s technology enables the wood products industry to substantially reduce the environmental load caused by its operations, for example, through more efficient use of raw materials, additives, and energy. The Group s own operations do not involve considerable environmental risks that might have a direct impact on the Group's business operations or financial position. The Nastola and Jyväskylä plants manage environmental matters in compliance with a certified environmental system. At the Canadian plant, environmental surveys are carried out regularly by an outside assessor. The operations and ethical principles of the partner and subcontractor networks are also subjected to systematic inspection. Raute aims to continuously reduce energy use, decrease the volume of waste, and develop the working environment. In 2006, a survey of potential soil contamination was conducted at the Canadian plant. According to the survey, the soil does not call for cleansing measures for the current industrial purposes. THE BOARD S PROPOSALS TO THE ANNUAL GENERAL MEETING Raute Corporation s Annual General Meeting will be held in Lahti on March 21, 2007 at 6:00 p.m. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.70 per share will be paid for series A and K shares, that is, a total of EUR 2.8 million, on April 2, The record date for dividend payments is March 26, The Board of Directors proposes to the Annual General Meeting that the meeting authorize the Board to decide on the repurchase of a maximum of 400,000 Raute Corporation series A shares with assets from the company s non-restricted equity to be used for the development of the company s capital structure, as consideration for funding or carrying out acquisitions or other arrangements, or to be otherwise disposed of or cancelled. The proposed number of shares is less than ten percent (10%) of the company s overall shares. The authorization includes the right to acquire shares in deviation from the proportion of existing shareholdings. The Board of Directors will decide on the other conditions related to share repurchases. The authorization is effective until the end of the next Annual General Meeting. Furthermore, the Board proposes that the Annual General Meeting authorize the Board to decide on a directed issue of Raute Corporation s series A shares, as well as on all of the related conditions, including the recipients and the sum of consideration to be paid. The Board of Directors may decide to issue either new shares or company shares held by Raute. The maximum number of shares issued is 400,000 series A shares. The authorization is effective until the end of the next Annual General Meeting. As proposed, the authorization will be used to fund or carry out acquisitions or other arrangements or for other purposes decided by the Board of Directors.

8 RAUTE CORPORATION 7 (13) OUTLOOK FOR 2007 The market situation in Raute s customer industries is expected to remain good, except for North America. However, developments in raw material and energy prices will keep competition tough in the wood products industry, forcing players in the field to focus on continuously developing their production. This offers Raute business opportunities. Investments in the wood products industry will continue at a good level in the near future. Raute s customers still have mill-scale projects in the planning phase for different market areas. Demand for smaller production line projects and modernizations is picking up after 2006, which was less active in this respect. Raute s competitiveness is good thanks to modern technology and the investments carried out. The share of first deliveries is smaller than the year before. The potential further weakening of the US and Canadian dollars against the euro create challenges to the competitiveness of North American project deliveries. Thanks to a strong order book and good continued demand the outlook for 2007 is promising. Net sales are expected to grow moderately in 2007 and operating profit to improve over 2006.

9 RAUTE CORPORATION FINANCIAL STATEMENTS 1 January - 31 December (13) (Figures EUR ) CONSOLIDATED INCOME STATEMENT NET SALES Other operating income Operating expenses Depreciation, amortization and impairment charges OPERATING PROFIT % of net sales 7 % 2 % 4 % 4 % Financial income Financial expenses PROFIT BEFORE TAX % of net sales 7 % 3 % 5 % 5 % Income tax *) PROFIT FOR THE PERIOD % of net sales 5 % 3 % 3 % 4 % BREAKDOWN OF PROFIT Minority interest Owners of the parent company EARNINGS PER SHARE, EUR Basic 0,44 0,24 0,94 1,09 Diluted 0,44 0,24 0,94 1,07 NUMBER OF SHARES Weighted average, pcs Diluted, pcs *) Income tax include the tax liability estimated for the report period. BALANCE SHEET ASSETS FIXED ASSETS AND OTHER NON-CURRENT ASSETS - intangible assets property, plant and equipment available-for-sale investments receivables deferred tax assets Fixed and other non-current assets total CURRENT ASSETS - inventories accounts receivable and other financial assets financial assets at fair value through profit or loss cash and cash equivalents Current assets total TOTAL ASSETS SHAREHOLDERS' EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY - share capital other shareholders' equity Owners of the parent company Minority interest Total shareholders' equity LIABILITIES Non-current liabilities - provisions deferred tax liabilities interest-bearing long-term liabilities Current liabilities - provisions income tax liabilities pension obligations interest-bearing short-term liabilities customer deposits trade and other payables Total liabilities TOTAL EQUITY AND LIABILITIES

10 RAUTE CORPORATION FINANCIAL STATEMENTS 1 January - 31 December (13) CONSOLIDATED CASH FLOW STATEMENT CASH FLOW FROM OPERATING ACTIVITIES Payments received: - receipts from sales receipts from other operating income Payments made: - expenses interests and other financial expenses paid Interests and other financial income received Dividend income received Income taxes paid Net cash from (+) / used in (-) operating activities (A CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure: - capital expenditure in tangible and intangible assets purchases of available-for-sale as financial assets -49 Subsidiary shares: - acquisition of subsidiary shares Proceeds: - proceeds from sale of tangible and intangible assets proceeds from sale of investments Net cash from (+) / used in (-) investing activities (B) CASH FLOW FROM FINANCING ACTIVITIES Change: - change in short-term loans change in long-term loans change in long-term and short-term receivables 95 Proceeds from issuance of shares Dividends paid Net cash from (+) / used in (-) financing activities (C) NET CHANGE IN CASH AND CASH EQUIVALENTS (A+B increase (+)/decrease (-) CASH AND CASH EQUIVALENTS*) - at the beginning of the period at the end of the period *) Cash and cash equivalents comprise of trading assets as well as cash and bank receivables

11 RAUTE CORPORATION FINANCIAL STATEMENTS 1 January - 31 December (13) CONSOLIDATED STATEMENT OF CHANGES Share Share Other Exchange Retained Total IN SHAREHOLDERS' EQUITY capital premium funds rate earnings difference Other increase / decrease Increase in share capital (warrants) 0 Dividends paid Profit for the period CONSOLIDATED STATEMENT OF CHANGES Owners Minority TOTAL IN SHAREHOLDERS' EQUITY of the interest parent company Other increase / decrease Increase in share capital (warrants) 0 Dividends paid Profit for the period CONSOLIDATED STATEMENT OF CHANGES Share Share Other Exchange Retained Total IN SHAREHOLDERS' EQUITY capital premium funds rate earnings difference Other increase / decrease Increase in share capital (warrants) Share-based payment Foreign currency gains/losses from the net investment Dividends paid Profit for the period CONSOLIDATED STATEMENT OF CHANGES Owners Minority TOTAL IN SHAREHOLDERS' EQUITY of the interest parent company Other increase / decrease *) 584 Increase in share capital (warrants) Share-based payment Foreign currency gains/losses from the net investment Dividends paid Profit for the period *) Associated company Eloc Oy, dissolution THE DEVELOPMENT OF Q4 Q3 Q2 Q QUARTERLY RESULTS NET SALES Other operating income Operating expenses Depreciation, amortization and impairment charges OPERATING PROFIT % of net sales 7 % -2 % 5 % 4 % 4 % 4 % Financial income Financial expenses Share of the associated companies' result PROFIT BEFORE TAX % of net sales 7 % -1 % 5 % 5 % 5 % 5 % Income tax PROFIT FOR THE PERIOD % of net sales 5 % -2 % 5 % 3 % 3 % 4 % BREAKDOWN OF PROFIT Minority interest Owners of the parent company EARNINGS PER SHARE, EUR Basic 0,44-0,08 0,34 0,24 0,94 1,09 Diluted 0,44-0,08 0,33 0,24 0,94 1,07 NUMBER OF SHARES Weighted average, pcs Diluted, pcs

12 RAUTE CORPORATION FINANCIAL STATEMENTS 1 January - 31 December (13) PERSONNEL Personnel - effective on average in books on average in books at the end of the period SEGMENT INFORMATION *) BY GEOGRAPHICAL LOCATION 2006 % 2005 % *) Raute's primary reporting segment is the business segment. All continuing operations are categorized in the wood products technology segment. The secondary reporting segment is geographical location. NET SALES Europe Russia North America Asia Rest of the world TOTAL ASSETS Europe Russia North America Asia Rest of the world TOTAL CAPITAL EXPENDITURE Europe Russia North America Asia Rest of the world TOTAL NET SALES BY MARKET AREA 2006 % 2005 % Finland Rest of Europe Russia North America Asia South America Oceania Other TOTAL OFF BALANCE SHEET COMMITMENTS AND DERIVATIVES COMMITMENTS Security of own debts - mortgages Security for Group's liabilities - guarantees Other own liabilities Leasing and rent liabilities: - for the current accounting period for the following accounting periods CURRENCY DERIVATIVES Currency derivatives are used for hedging purposes. Nominal values of forward contracts in foreign currency Economic hedging - related to financing related to hedging of net sales Hedge accounting - related to the hedging of net sales Fair values of forward contracts in foreign currencies Economic hedging - related to financing related to the hedging of net sales Hedge accounting - related to the hedging of net sales -50 Purchased currency options - nominal values fair values 13 No loans or pledges given or other commitments made on behalf of the company's management, shareholders or associated companies.

13 RAUTE CORPORATION FINANCIAL STATEMENTS 1 January - 31 December (13) GROUP KEY RATIOS Return on investment, ROI 18,6 % 20,7 % Return on equity, ROE 13,1 % 15,8 % Quick ratio 2,7 2,0 Gearing -80,3 % -41,5 % Equity ratio 60,1 % 55,7 % Order book, m Order intake, m Exported portion of net sales 90,2 % 72,0 % Change in net sales % -2,2 % 49,0 % Gross capital expenditure, m 1,9 3,8 Gross capital expenditure of net sales 1,7 % 3,5 % Research and development m 3,8 3,6 - capital expenditure, m 0,5 0,2 - expenses, m 3,2 3,4 Research and development of net sales 3,5 % 3,3 % SHARE RELATED KEY RATIOS Earnings per share (EPS), EUR - basic 0,94 1,09 - diluted 0,94 1,07 Equity to share, EUR 7,32 6,80 Dividend per share, EUR 0,70 *) 0,60 Dividend per profit, % 74,5 % 55,1 % Effective dividend return, % 5,4 % 4,2 % Share price at the end of period, EUR 12,85 14,24 Number of shares -weighted average, pcs diluted, pcs *) The Board of Directors' proposal THE LARGEST REGISTERED SHAREHOLDERS Number of Number of Total on 31 December 2006 K-shares A-shares number of (20 votes ( 1 vote shares per share) per share) 1. Sundholm Göran Varma Mutual Pension Insurance Company Suominen Jussi Matias Suominen Tiina Sini-Maria Mustakallio Kari Pauli Kirmo Kaisa Marketta Suominen Pekka Matias Siivonen Osku Pekka Keskiaho Leena Särkijärvi Riitta Mustakallio Risto Mustakallio Ulla Sinikka Mustakallio Mika Op Suomi Pienyhtiöt Mutual Fund Mustakallio Marja Helena Mustakallio Kai Henrik Kirmo Lasse Särkijärvi Timo Juha Särkijärvi-Martinez Anu Riitta Suominen Jukka Matias TOTAL percentage of total amount of shares 70,3 % 50,1 % 55,1 % percentage of total voting rights 67,7 % Administrative registered OTHER SHAREHOLDERS TOTAL MANAGEMENT'S STAKE percentage of total amount of shares 10,0 % 2,7 % 4,5 %

14 RAUTE CORPORATION 13 (13) RAUTE CORPORATION Board of Directors FURTHER INFORMATION: Mr. Tapani Kiiski, President and CEO, Raute Corporation, , mobile phone Ms. Arja Hakala, CFO, Raute Corporation, , mobile phone RAUTE IN BRIEF: Raute is a technology company serving the wood products industry worldwide. Its most important customers are the plywood and LVL industries. The company is the world market leader as a supplier of mill-scale projects to these customer industries. The full-service concept also includes technology services, with which Raute supports its customers throughout the entire life cycle of their investment. Raute s head office and main production plant are in Nastola, Finland. Its other production plants are in the Vancouver area of Canada and in Jyväskylä and Kajaani, Finland. Net sales in 2006 were EUR 106 million and the number of personnel 540. More information about the company can be found at DISTRIBUTION: Helsinki Exchanges, Main media,