SUOMINEN CORPORATION FINANCIAL STATEMENT RELEASE 1 JANUARY - 31 DECEMBER 2006
SUOMINEN CORPORATION STOCK EXCHANGE RELEASE
12 FEBRUARY 2007 8.30 A.M.
SUOMINEN CORPORATION FINANCIAL STATEMENT RELEASE
1 JANUARY - 31 DECEMBER 2006 (IFRS)
10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
Net sales, EUR million 54.2 44.6 202.6 195.2
Operating profit, EUR million 0.8 -1.3 1.2 -3.1
Profit/loss for the period, EUR
million, continuing operations -0.1 -1.6 -1.8 -4.7
Earnings/share from continuing
operations, EUR 0.00 -0.07 -0.08 -0.20
Return on invested capital
(ROI), % 2.1 -2.5 0.9 -0.8
Cash flow from operations/
share, EUR 0.21 0.05 0.53 0.01
Suominen recorded an improved result in 2006 compared to 2005, but
again booked a pre-tax loss. Sales developed unevenly during the year,
rising during the latter half. Sales margins improved on 2005, but the
Group was unable to pass on all the higher costs it incurred to
product prices. The cost saving program initiated in autumn 2005 was
completed successfully, and the EUR 6 million in savings achieved were
above-target. The result includes non-recurring costs of EUR 0.7
million associated with the closure of the Kauhava plant.
Net sales during 2007 as a whole are expected to improve on those
recorded in 2006, and the profit for the year is expected to be
positive.
The Board of Directors will propose paying a dividend of EUR 0.06 per
share for the year.
Financial results
Suominen Corporations continuing operations generated net sales of
EUR 54.2 million (44.6 million) during the fourth quarter of the year,
operating profit of EUR 0.8 million (-1.3 million), and loss before
taxes of EUR 0.3 million (-2.1 million).
Net sales from continuing operations for the year as a whole totalled
EUR 202.6 million (195.2), up 4 per cent on 2005. The continuing
operations generated operating profit of EUR 1.2 million (-3.1), loss
before taxes of EUR 2.7 million (-6.8), and loss after taxes of EUR
1.8 million (-4.7).
Sales during the second half of 2006 were higher than during the first
half, as a result of both stronger demand and new products. Net sales
of Wipes and Nonwovens and Flexible Packaging both improved on 2005.
Cost savings of EUR 6 million and improved sales price management
contributed to enhanced performance, while the increase in the cost of
oil-based raw materials and energy had a negative impact. The closure
of Flexible Packagings Kauhava plant resulted in non-recurring costs
of EUR 0.7 during the last quarter. Production volumes were below
sales volumes, which reduced the Groups profit but released working
capital. Suominen has adopted the option in the amendment to IAS 19
Employee benefits, to recognise the actuarial gains and losses
directly in equity. Net of tax, the sum recorded in equity is EUR 1.4
million.
Cost saving and operational enhancement programs
Suominen announced a wide-ranging cost saving program in autumn 2005
designed to improve operational efficiency and profitability. The
program included operational improvements and reductions in personnel,
primarily in the Netherlands. The program also focused on enhancing
procurement and logistics, improving production yields, and
transferring flexible packaging production to Poland. The program
covered numerous areas within different units across the Group.
Overall savings of EUR 6 million were achieved in 2006. It was decided
in summer 2006 to close Flexible Packagings Kauhava plant, and
production previously based there has been transferred to other units.
A decision to introduce a new efficiency and business enhancement
program was taken in autumn 2006. Detailed programs were approved for
the units as part of strategic and operational planning under an
umbrella initiative known as Stairs to Top to develop and improve
operations on a continuous basis and increase sales. While the
previous program primarily focused on cutting costs, efforts in 2007
will address the business from a wider perspective, and focus more
attention on boosting sales and launching new products. Profitability
will be improved by reducing costs and improving efficiency.
Efficiency-enhancement measures will include increasing production
volumes, extending production runs, and improving production speeds,
for example. The aim is to achieve approximately EUR 6 million in
improved efficiency in 2007, of which half will come from cost savings
unrelated to volume performance.
Financing
Interest-bearing liabilities as of the end of the year totalled EUR
89.3 million or EUR 9.8 million less than at the beginning of the
year. Liabilities included capital loans of EUR 4 million. Cash flow
before change in working capital was EUR 16.0 million (10.2). A total
of EUR 1.9 million was freed up from working capital (EUR 5.4 million
was tied up in 2005). Net financial costs were EUR 3.9 million (3.7)
equivalent to 1.9 per cent (1.9 %) of net sales. The equity ratio was
32.3 per cent (31.2 %) and the gearing ratio was 154.4 per cent
(167.6 %). Cash flow from operations was EUR 12.5 million (0.1) or EUR
0.53 per share (0.01).
Investments
The Companys gross investments in production totalled EUR 4.3 million
(7.7). Planned depreciation was EUR 14.6 million (15.6). Wet Wipes
accounted for EUR 1.0 million of total investments, Nonwovens EUR 1.2
million and Flexible Packaging EUR 2.1 million. The largest projects
were the construction of the buildings for a new power plant at
Nakkila (EUR 0.6 million) and payments on a new printing machine in
Poland (EUR 0.6 million). Other investments were largely of a
replacement and maintenance nature.
Segment results
Net sales of Wipes and Nonwovens business area totalled EUR 126.9
million in 2006, an increase of 3 per cent on 2005. The Wipes and
Nonwovens business area recorded an operating loss of EUR 0.1 million
(-3.5).
Net sales of Wet Wipes totalled EUR 69.3 million, up 7 per cent on
2005. Deliveries rose in baby wipes and personal care wipes, while
household cleaning wipes deliveries fell. The postponement of new
product projects to the second half of the year, and a slower-than-
expected growth in sales to retail chains, slowed overall sales
growth. The retail chain sales organisation launched at the beginning
of the year was strengthened during the year with the addition of
sales resources covering Germany and France. The increased use of in-
house nonwovens in wet wipe products was based on the Groups own
concepts to an increasing extent. Production efficiency-enhancement
and cost saving programs progressed as planned.
Net sales of Nonwovens remained unchanged on 2005, at EUR 67.3
million. Sales of thermally bonded hygiene product material were lower
compared to 2005. External and internal deliveries of nonwovens for
use in wet wipes increased. A decline in inventories at wet wipe
manufacturers in the lead-up to the summer resulted in a strong
recovery in demand towards the end of the year. This large fluctuation
in demand increased costs. Production volumes fell short of sales
volumes. Higher energy costs increased heating, electricity, and
freight costs. Lower-cost process heat is now available at Nakkila
following the commissioning of Fortums new solid fuel-fired power
plant.
Net sales of Flexible Packaging totalled EUR 76.0 million, an increase
of 6 per cent on 2005, while an operating profit of EUR 2.0 (0.1
million) was recorded. Higher sales were driven by increased sales
prices and changes in the sale mix. Hygiene and food packaging volumes
both rose, while retail packaging deliveries declined, which saw a
slight reduction in total tonnage delivered. Production transfers to
Poland and increased deliveries in Central Europe resulted in higher
output at the business Polish plant. The transfer of production from
Kauhava plant, which had concentrated on bakery packaging, to other
plants proceeded as planned. The closure did cause a drop in overall
production volumes, however. The Kauhava premises were sold at the
beginning of 2007. The closure of the plant resulted in non-recurring
costs of some EUR 0.7 million, but is expected to yield annual savings
in operating expenses of around EUR 0.5 million from 2007 onwards.
Given strong level of demand, it has been decided to increase printing
capacity in Poland. Valued at approximately EUR 2.6 million, this
investment is due to be completed in summer 2007.
Changes in Group organisation and management
Heikki Bergholm served as the President and CEO of Suominen
Corporation until 4 May 2006, when Kalle Tanhuanpää took over the
position.
Esa Palttala, Executive Vice President of the Wipes and Nonwovens
business area, retired on 1 August 2006, following which Vice
President Pekka Rautala, General Manager of the Wet Wipes business
unit, and Vice President Sakari Santa-Paavola, General Manager of the
Nonwovens business unit, now report to Kalle Tanhuanpää, the President
and CEO of Suominen Corporation. Petri Rolig took over as Vice
President and General Manager of Flexible Packaging on 1 October 2006,
when his predecessor, Juha Henttonen, transferred to Group projects.
Suominen decided on 27 September 2006 to revise its organisation and
give Group-level responsibility for developing innovation and product
development to Petri Rolig. Responsibility for developing operational
efficiency has been given to Pekka Rautala, and responsibility for
developing purchasing and logistics to Sakari Santa-Paavola.
Suominen Corporation's Executive Team comprises the President and CEO,
the Vice President and General Manager of the Flexible Packaging
business area, the Vice President and General Manager of the Wet Wipes
business unit and the Vice President and General Manager of the
Nonwovens business unit, and the Vice President and CFO.
Annual General Meeting of Shareholders
The Annual General Meeting of Shareholders held on 20 March 2006
elected the following members to the Board of Directors: Heikki
Bergholm, Kai Hannus, Pekka Laaksonen, Juhani Lassila, Mikko Maijala
and Heikki Mairinoja. Mikko Maijala has served as chairman and Pekka
Laaksonen as deputy chairman of the Board.
PricewaterhouseCoopers Oy, Authorised Public Accountants, with Heikki
Lassila, APA, as the principal auditor, were elected as auditors of
Suominen Corporation.
The Annual General Meeting decided that no dividend would be paid for
the financial year ending 31 December 2005.
Share capital and shares
The registered share capital of Suominen Corporation totals EUR
11 860 056, and the number of shares issued, 23 720 112, with the book
counter value of EUR 0.50 per share. The volume of Suominen
Corporation's shares traded on the Helsinki Stock Exchange between 1
January and 31 December was 7 000 722 shares, equivalent to 29,5 per
cent of the Companys shares. The trading price of the shares ranged
between EUR 2.80 and 3.85. The final trading price was EUR 2.97,
giving the Company a market capitalisation of EUR 70.3 million on 31
December 2006.
Own shares of the Company
On 1 January 2006, the Company held 15 129 of its own shares, with an
acquisition value of EUR 5.22 per share.
The Annual General Meeting held on 20 March 2006 authorised the Board
of Directors to decide on the conveyance of the Companys own shares.
In accordance with this authorisation, the Company has conveyed 14 008
shares to Board members by way of remuneration at a price of EUR 3.64
per share.
The Annual General Meeting also authorised the Board of Directors to
decide on the acquisition of the Company's own shares within one year
from the Annual General Meeting of Shareholders using assets available
for distribution of profits, provided that the par value of the shares
of the Company and it's subsidiaries thus acquired, combined with the
par value of own shares acquired previously by the Company and its
subsidiaries, does not exceed 5 per cent of the Companys total share
capital at the moment of acquisition. The authorisation in question
can be used in possible business acquisitions, to finance investments,
to carry out incentive programs and for other purposes. The Company
has repurchased 50 000 of its own shares in accordance with this
authorisation at an average price of EUR 3.15 per share.
On 31 December 2006 Suominen Corporation held a total of 51 121 of its
own shares, accounting for 0.2 per cent of the share capital and
votes.
Stock options 2006
Under an authorisation given by the Annual General Meeting, the Board
of Directors decided to grant Suominen Corporations President and CEO
100 000 stock options under the 2006A stock option program, which
covers a total of 300 000 stock options. Waiving the pre-emption right
of shareholders was considered appropriate, as the stock options in
question are intended to form part of the Groups incentive scheme
designed to consolidate recipients commitment to the company. The
subscription price of the shares covered by the 2006A share option
programme is EUR 3.40, equivalent to the average price, weighted by
the volume of trading in the companys shares, on the Helsinki Stock
Exchange in May 2006. The subscription period for the shares concerned
is between 2 May 2008 and 30 October 2009.
Other authorisation for the Board of Directors
The Board of Directors has no current authorisation to issue shares or
to launch a convertible bond or a bond with warrants.
Outlook
Net sales during 2007 as a whole are expected to improve on those
recorded in 2006, and the profit for the financial year is expected to
be positive.
Sales are expected to grow compared to 2006, on the basis of
projections by the Groups customers and the Groups own forecasts.
Profitably is expected to continue to improve as a result of planned
cost savings, efficiency-enhancement efforts, and higher sales. Rapid
fluctuations in the price of oil-based raw materials could affect the
margins.
Expanding operations in Poland in particular will increase investments
in 2007 to an estimated EUR 12 million.
New financial targets
The Board of Directors has established a set of new financial targets
for Suominen between 2007 and 2009. These are:
- To gradually increase operating profit to 7 %.
- To achieve an average annual growth in net sales of more than 5 %.
- To gradually reduce gearing to 120 %.
- To raise the size of the dividend, and ensure the sound growth of
the Company.
Proposal for the distribution of profit
The parent companys distributable assets as of the end of 2006
totalled EUR 22 652 822.21, of which the profit for the year was EUR
249 405.75.
The Board of Directors will propose at the Annual General Meeting to
be held on 29 March 2007 that these funds should be distributed as
follows:
A dividend of EUR 0.06 be paid on each of the
23 668 991 shares, EUR 1 420 139.46
Leaving on the retained earnings account, EUR 21 232 682.75
SUOMINEN CORPORATION CONSOLIDATED 1 JANUARY - 31 DECEMBER 2006 (IFRS)
Suominen has adopted the IFRS 2 standard, Share-based payments.
Changes to published accounting standards and interpretations,
together with the new accounting standards that came into force on 1
January 2006, are presented in the financial statements for 2005.
Suominen has adopted the amendment to the IAS 19 standard, which makes
it possible to recognise the actuarial gains and losses of defined
benefit plans directly in equity. The treatment of foreign exchange
differences has been changed, and gains and losses from sales are now
recognised in net sales, and other foreign exchange rate differences
attributable to business operations are netted to expenses. Gains and
losses from foreign exchange derivatives are recorded in other
operating expense and income. The accounting principles are consistent
in other respects with those of the annual financial statements for
2005. Adjustments have been made to the principles of revenue
recognition that change comparative information. The restated figures
according to the amended IAS 19 standard, revenue recognition, and
changes in the principles used for presenting foreign exchange
differences are included in the figures for 2006 and 2005 of this
review. The IAS 19 amendment has increased equity by EUR 1.4 million
net. The amendment has changed the result of the comparative year by
EUR 0.4 million net of taxes. The effect of other changes on the
financial results and shareholder's equity is minor. The figures in
this financial statement release have not been audited.
STATEMENT OF INCOME
EUR 1 000 10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
NET SALES 54 228 44 589 202 627 195 161
Cost of goods sold -50 199 -42 737 -189 522 -185 628
GROSS PROFIT 4 029 1 852 13 105 9 533
Other operating income 296 1 091 724 1 754
Sales and marketing expenses -893 -1 142 -3 567 -4 419
Research and development -537 -835 -2 009 -2 468
Administration expenses -1 583 -1 773 -6 292 -6 595
Other operating expenses -531 -465 -771 -936
OPERATING PROFIT 781 -1 272 1 190 -3 131
Interest and other financial
income and expenses -1 081 -954 -4 024 -3 864
Fair value gains and losses 16 88 97 199
PROFIT BEFORE INCOME TAXES -284 -2 138 -2 737 -6 796
Income taxes 232 572 954 2 051
PROFIT/LOSS FOR THE PERIOD,
CONTINUING OPERATIONS -52 -1 566 -1 783 -4 745
Profit/loss from discontinued
operations 1 075
PROFIT/LOSS FOR THE PERIOD -52 -1 566 -1 783 -3 670
Earnings/share from continuing
operations, EUR 0.00 -0.07 -0.08 -0.20
Earnings/share from
discontinued operations, EUR 0.05
Earnings/share from continuing
and discontinued operations,
EUR 0.00 -0.07 -0.08 -0.15
KEY FIGURES ON STATEMENT OF INCOME
10-12/ 10-12/ 1-12/ 1-12/
2006 2005 2006 2005
Net sales, change, % * 21.6 3.8
Gross profit, % ** 7.4 4.2 6.5 4.9
Operating profit, % ** 1.4 -2.9 0.6 -1,6
Financial income and -1,9
expenses, % ** -2.0 -1.9 -1.9
Profit before income
taxes, % ** -0.5 -4.8 -1.4 -3.5
Profit from continuing
operations, % ** -0.1 -3.5 -0.9 -2.4
Profit from discontinued
operations, % ** 0.6
Profit for the period, % ** -0.1 -3.5 -0.9 -1.9
* Compared with the corresponding period of the previous year.
** As of net sales.
BALANCE SHEET
EUR 1 000 12/2006 12/2005
ASSETS
Non-current assets
Goodwill 34 195 34 195
Intangible assets 944 1 022
Tangible non-current assets 77 168 88 129
Available-for-sale financial assets 766 878
Held-to-maturity investments 100
Deferred tax assets 882 1 372
Non-current assets, total 114 055 125 596
Current assets
Inventories 27 840 30 214
Trade receivables 25 583 21 765
Loan receivables 270
Other current receivables 6 240 5 897
Income tax receivables 918 925
Cash at bank and in hand 1 220 1 166
Current assets, total 61 801 60 237
Assets, total 175 856 185 833
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders equity
Share capital 11 860 11 860
Share premium account 24 681 24 681
Fair value and other reserves 1 185 368
Translation differences 738 760
Other shareholders' equity 18 279 20 260
Shareholders equity, total 56 743 57 929
Liabilities
Non-current liabilities
Deferred tax liabilities 6 768 7 639
Pension liabilities 314 342
Provisions 85 200
Capital loans 2 000 4 000
Interest-bearing liabilities 63 133 68 864
Other non-current liabilities 13 30
Non-current liabilities, total 72 313 81 075
Current liabilities
Interest-bearing liabilities 22 202 24 277
Provisions 115 200
Capital loans 2 000 2 000
Income tax liabilities 67 472
Trade payables and other current
liabilities 22 416 19 880
Current liabilities, total 46 800 46 829
Liabilities, total 119 113 127 904
Shareholders' equity and liabilities,
total 175 856 185 833
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
EUR 1 000 1-12/2006 1-12/2005
Foreign currency translation difference for
foreign operations 240 275
Cash flow hedges
Hedge result deferred in equity 1 932 1 867
Transferred from equity to statement of income -711 -665
Defined benefit plan actuarial gains (losses) -99 -1 743
Income tax on income and expense recognised -547 140
directly in equity
Income and expense recognised directly in equity 815 -126
Profit for the period -1 783 -3 670
Total recognised income and expense for the period -968 -3 796
According to IAS 1.96 standard the income and expense recognised in
equity are stated in the consolidated statement of income. Statement
of changes in shareholders equity is presented in the notes to the
financial statements.
KEY FIGURES 12/2006 12/2005
Earnings/share, EUR, continuing operations -0.08 -0,20
Earnings/share, EUR, discontinued operations 0.00 0,05
Earnings/share, EUR, continuing and
discontinued operations -0.08 -0.15
Equity/share, EUR 2.40 2.44
Cash flow from operations/share, EUR 0.53 0.01
Return on equity, % (ROE) -3.1 -6.2
Return on invested capital, % (ROI) 0.9 -0.8
Equity ratio, % 32.3 31.2
Gearing, % 154.4 167.6
Gross investments, EUR 1 000 4 337 7 714
Depreciation and impairment losses, EUR 1 000 14 694 15 561
CASH FLOW STATEMENT
EUR 1 000 1-12/2006 1-12/2005
Operations
Operating profit 1 190 -3 131
Total adjustments 14 856 13 320
Cash flow before change in working capital 16 045 10 188
Change in working capital 1 879 -4 895
Financial items -4 835 -4 156
Taxes paid -605 -994
Cash flow from operations 12 483 144
Investments
Investments in tangible and intangible assets -3 135 -8 087
Cash flow from investing activities
of discontinued operations 5 748
Proceeds from disposal of fixed assets
and other proceeds 667 399
Cash flow from investing activities -2 468 -1 940
Financing
Repurchase of own shares -157
Non-current loans drawn 5 000 15 000
Repayments of non-current loans -10 792 -17 368
Capital loans -2 000 -2 000
Change in current loans -2 014 4 964
Cash flow from financing -9 963 596
Change in cash and cash equivalents 52 -1 200
SEGMENT REPORTING
WIPES AND NONWOVENS
EUR 1 000 1-12/2006 1-12/2005 Change, %
Net sales
- Wet Wipes 69 299 64 911 6.8
- Nonwovens 67 296 67 476 -0.3
- eliminations -9 687 -8 947 8.3
Total 126 908 123 440 2.8
Operating profit -149 -3 452
% of net sales -0.1 -2.8
Assets 116 715 122 746
Liabilities 13 943 11 105
Net assets 102 772 111 641
Investments 2 150 4 893
Depreciation and impairment
losses 8 768 9 682
Average personnel 455 532
FLEXIBLE PACKAGING
EUR 1 000 1-12/2006 1-12/2005 Change, %
Net sales 75 987 71 837 5.8
Operating profit 1 958 72
% of net sales 2.6 0.1
Assets 55 127 59 552
Liabilities 11 228 7 901
Net assets 43 899 51 651
Investments 2 122 2 784
Depreciation and impairment
losses 5 873 5 812
Average personnel 593 607
CONSOLIDATION ITEMS
EUR 1 000 1-12/2006 1-12/2005
Net sales -268 -116
Operating profit -619 249
Assets 4 014 2 839
Liabilities 93 942 107 917
Investments 65 37
Depreciation and impairment
losses 53 67
Average personnel 12 11
NET SALES BY MARKET AREA
EUR 1 000 1-12/2006 1-12/2005
Finland 33 208 34 649
Scandinavia 21 539 20 299
The Netherlands 40 348 23 302
Other Europe 82 421 98 932
Other Countries 25 111 17 979
Net sales, continuing
operations, total 202 627 195 161
QUARTERLY FIGURES
EUR 1 000 I/2006 II/2006 III/2006 IV/2006 I-IV/
2006
NET SALES
Wipes and Nonwovens
- Wet Wipes 16 813 16 773 17 826 17 887 69 299
- Nonwovens 16 922 15 281 17 031 18 062 67 296
- eliminations -2 991 -2 824 -2 034 -1 838 -9 687
Total 30 744 29 230 32 823 34 111 126 908
Flexible Packaging 18 596 18 491 18 768 20 132 75 987
Consolidation items
and eliminations -38 -65 -150 -15 -268
Net sales, continuing
operations, total 49 302 47 656 51 441 54 228 202 627
OPERATING PROFIT
Wipes and Nonwovens -355 -452 -34 692 -149
% of net sales -1.2 -1.5 -0.1 2.0 -0.1
Flexible Packaging 991 362 475 130 1 958
% of net sales 5.3 2.0 2.5 0.6 2.6
Consolidation items
and eliminations -52 -402 -124 -41 -619
Operating profit from
continuing operations 584 -492 317 781 1 190
% of net sales 1.2 -1.0 0.6 1.4 0.6
NET FINANCIAL
EXPENSES -927 -966 -969 -1 065 -3 927
PROFIT BEFORE INCOME
TAXES, CONTINUING
OPERATIONS -343 -1 458 -652 -284 -2 737
CONTINGENT LIABILITIES
EUR 1 000 12/2006 12/2005
FOR OWN DEBT
Real estate mortgages 5 046
Corporate mortgages 1 177 1 177
OTHER OWN COMMITMENTS
Leasing payments and commitments 8 555 2 268
Rent commitments 15 767 10 206
Guarantee commitment for financial lease
of discontinued operations 1 642 1 721
NOMINAL VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS
EUR 1 000 12/2006 12/2005
CURRENCY DERIVATIVES
Held for trading 9 750 11 791
INTEREST RATE DERIVATIVES
Held for hedge accounting 55 633 62 600
Held for trading 5 000 5 000
ELECTRICITY DERIVATIVES
Held for hedge accounting 5 353 3 441
Held for trading 285 1 974
FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS
EUR 1 000 12/2006 12/2005
CURRENCY DERIVATIVES
Held for trading -5 -84
INTEREST RATE DERIVATIVES
Held for hedge accounting 1 082 -304
Held for trading -7 -104
ELECTRICITY DERIVATIVES
Held for hedge accounting 781 909
Held for trading 10 282
Suominen uses derivatives only to hedge against operating risks. In
line with IAS standards, derivatives are divided into contracts that
qualify for hedge accounting and into other derivatives i.e.
derivatives held for trading. The Company applies cash flow hedge
accounting to interest swap contracts to fix the interest flow of
floating rate loans in accordance with IAS 39. Cash flow hedge
accounting is also applied to the procurement of electricity, whereby
the fluctuations in the price of electricity are fixed for the desired
period. Hedging must be effective in both prospective and
retrospective testing. The effectiveness of the hedge is documented at
the inception of the hedge transaction and tested during the hedging
period. The effective portions of interest rate derivatives and
electricity derivatives are recognised in fair value reserve under
equity.
Suominen Corporation does not apply hedge accounting according to IAS
39 for its currency risk hedging. The outstanding currency forward
deals are valued at fair value, and changes in fair value are entered
in the statement of income as other operating income and expenses.
The fair values of all derivative contracts are recognised in the
balance sheet under receivables and payables.
Helsinki, 12 February 2007
SUOMINEN CORPORATION
Board of Directors
Additional information:
Mr. Kalle Tanhuanpää, President and CEO, tel. +358 (0)10 214 300.
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