Glaston Oyj Abp
Interim report (Q1 and Q3)

Glaston Interim Report 1 January-30 June 2011

Helsinki, Finland, 2011-08-11 12:00 CEST --  GLASTON CORPORATION             INTERIM REPORT    11 August 2011 at 13.00

 Glaston Interim Report 1 January-30 June 2011

- Orders received in January-June totalled EUR 75.5 (69.6) million. Orders received in the second quarter totalled EUR 36.7 (36.7) million.
- The order book on 30 June 2011 was EUR 40.0 (30.2) million.
- Consolidated net sales in January-June totalled EUR 75.9 (79.9) million. Second-quarter net sales were EUR 41.6 (41.5) million.
- EBITDA was EUR 4.3 (-0.5) million, i.e. 5.6 (-0.7)% of net sales.
- The operating result in January-June was a profit of EUR 0.4 (4.5 loss) million, i.e. 0.5 (-5.6)% of net sales. The second-quarter operating result was a profit of EUR 1.3 (2.8 loss) million.
- Return on capital employed (ROCE) was 0.4 (-7.3)%.
- January-June share-issue adjusted earnings per share were EUR -0.09 (-0.09).
- Glaston expects that 2011 net sales will be at least at the 2010 level and that the operating result will return to profit.

President & CEO Arto Metsänen:
For Glaston, the first half of the year proceeded according to plan. Our operating profit for the first six months was positive. This is indicative of the effectiveness of our restructuring measures, because we have not received much assistance from the market for our improved financial performance.

In the second quarter, economic uncertainty increased and the market outlook for the latter part of the year is less stable. We are monitoring market development closely and we have faith in our own measures in future, too; we will continue our work to improve profitability and complete our restructuring. We will have strong focus on Services, Software Solutions and Tools, all sectors that do not require significant investments by the customers.

Markets
The cautious recovery continued during the first half of the year, although with significant regional differences. The positive development of the South American markets continued. In Asia the market also developed favourably, while showing signs of levelling off. In North America, the machine market remained subdued, with demand directed at Services segment products. In Europe, the challenging market situation continued.

Machines
In the second quarter, demand in Europe and North America continued to be weak. Uncertain economic development in North America and Europe contributed unfavourably to customers’ willingness to invest. This was evident in extended negotiating times and growing price competition. In Europe, regional differences are significant, however, with markets in Poland, Turkey and Russia developing positively.

The positive development of the South American market continued in the second quarter, and the Aluvi Fair held in Argentina in late May/early June boosted sales. As the South American glass market develops, demand for large glass sizes and Low-E insulating glass has grown. To respond to this customer demand, Glaston launched during the second quarter the locally-manufactured ProE300 Magnum machine.

The Asian market, which has been growing strongly, showed signs of levelling off during the second quarter. The new Solar Line concept, the market’s first integrated complete line, was presented at the China Glass Fair held in Shanghai in May. The concept is directed particularly at Asia’s growing solar energy market.

To improve profitability, the Machines segment’s adjustment measures continued during the second quarter, mainly in Italy and Finland.

In January-June, the Machines segment’s net sales totalled EUR 47.6 (52.9) million.

Services
The positive market development of the Services segment continued in the second quarter.

As customers prepared for summer maintenance shutdowns, sales of spare parts developed favourably. In North and South America, capacity-raising and quality-improving upgrade and modernisation products increased sales. In Asia, the sales emphasis was on control system upgrades and replacements.

In January-June, the Services segment’s net sales totalled EUR 16.9 (15.5) million. The segment’s profitability was improved by lower fixed costs, a higher invoicing rate in service work and growing sales of upgrade products.

Software Solutions
The cautious recovery of the Software Solutions segment market continued during the second quarter. Global customers are initiating software investments aimed at raising the degree of production automation and improving efficiency.

Orders received were at the level of the corresponding period of the previous year, as was the order book. Measures to lighten the cost structure continued, and improved the profitability of the segment.

In January-June, the Software Solutions segment’s net sales totalled EUR 12.2 (12.0) million.

Orders received
Glaston’s orders received during the first six months of the year totalled EUR 75.5 (69.6) million. Of orders received, the Machines segment accounted for 62%, the Software Solutions segment 16% and the Software Solutions segment 22%.
 

Orders received during the second quarter of the year totalled EUR 36.7 (36.7) million.

Order book
Glaston’s order book on 30 June 2011 was EUR 40.0 (30.2) million. Of the order book, the Machines segment accounted for EUR 35.4 million, the Services segment EUR 1.1 million and the Services segment EUR 3.5 million.

Net sales and result
Net sales for the review period totalled EUR 75.9 (79.9) million. The Machines segment’s net sales in the first half of the year were EUR 47.6 (52.9) million, the Services segment’s net sales EUR 16.9 (15.5) million and the Software Solutions segment’s net sales EUR 12.2 (12.0) million.

April-June net sales totalled EUR 41.6 (41.5) million. Second quarter net sales were distributed across the business segments as follows: Machines EUR 27.6 (28.5) million, Services EUR 8.5 (7.3) million and Software Solutions EUR 6.2 (6.0) million.

The operating result in January-June was a profit of EUR 0.4 (4.5 loss) million, i.e. 0.5 (-5.6)% of net sales. Cost savings generated by restructuring programmes were the main contribution to the improvement in operating profit. The review period operating profit includes non-recurring items of EUR 0.1 million, which are attributed to the Services and Software Solutions segments. Of the operating profit excluding non-recurring items in the first half of the year, the Machines segment’s contribution was EUR -1.7 (-3.2) million, the Services segment’s contribution EUR 3.8 (1.5) million and the Software Solutions segment’s contribution EUR 1.3 (1.2) million.

The second-quarter operating profit was EUR 1.3 (2.8 loss) million, including non-recurring items of EUR 0.1 million. Of the second-quarter operating profit excluding non-recurring items, the Machines segment’s contribution was EUR 0.2 (-1.7) million, the Services segment’s contribution EUR 2.3 (0.5) million and the Software Solutions segment’s contribution EUR 0.3 (0.5) million.

Glaston’s net financial expenses were EUR -7.6 (-3.1) million. Financial expenses were increased by a EUR 3.4 million expense recognition arising from additional compensation granted in connection with the conversion of a convertible bond. This recognition had no impact on equity or cash flow, however.

The result for the review period was a loss of EUR 8.7 (7.8 loss) million. The result for the second quarter was a loss of EUR 0.6 (3.4 loss) million. Return on capital employed was 0.4 (-7.3)% and share-issue adjusted earnings per share were EUR -0.09 (-0.09). Second-quarter earnings per share were EUR 0.00 (-0.04).

Adjustment measures
In 2011 the business development priorities continue to be improving profitability and completing adjustment measures. During the second quarter, adjustment measures proceeded according to plan, with the focus of measures being on Italy and Finland.

Financial position, cash flow and financing
At the end of the review period, the consolidated asset total was EUR 194.0 (224.5) million. The equity attributable to owners of the parent was EUR 57.7 (63.7) million, i.e. a share-issue adjusted EUR 0.55 (0.78) per share. The equity ratio on 30 June 2011 was 31.9 (30.8)%. The equity ratio on 31 December 2011 was 22.1%. Net gearing was 93.4 (115.4)% (on 31 December 2010, 189.0%)

Return on equity in January-June was -35.7 (-23.3)%.

Cash flow from operating activities, excluding the change in working capital, was EUR -3.9 (-8.7) million in the review period. The most significant reasons for the negative cash flow were financial expenses, such as payment of interest on the convertible bond as well as the settling of provisions recognised in 2010. The change in working capital was EUR 0.6 (-5.5) million. Cash flow from investments was EUR -2.3 (-1.4) million. Cash flow from financing activities in January-June was EUR 10.6 (10.8) million.

Capital expenditure, depreciation and amortisation
Glaston’s gross capital expenditure totalled EUR 2.5 (2.1) million. In the review period, there were no significant individual investments; the largest investments were directed at development expenditure on new products.

Depreciation and amortisation recognised during the review period totalled EUR 3.8 (3.7) million, and impairment losses on tangible and intangible assets were EUR 0.0 (0.3) million.

Organisation and personnel
Uwe Schmid was appointed Senior Vice President, Software Solutions on 8 April 2011. He will assume full business responsibility for the Software Solutions segment as of 1 September 2011.

On 30 June 2011, Glaston Corporation had a total of 907 (1,032) employees. Of the Group’s employees, 19% worked in Finland and 38% elsewhere in the EMEA area, 28% in Asia and 15% in the Americas. The average number of employees was 912 (1,065).

Shares and share prices
On 25 February 2011, Glaston published a stock exchange release outlining the company’s new financial package. As part of the arrangement, Glaston’s convertible bond holders were offered the opportunity to convert their bond holdings into the company's shares. The shares subscribed for in the convertible bond conversion approved by Glaston’s Board of Directors on 28 March 2011, a total of 4,615,367 new shares, were entered into the Trade Register on 4 April 2011 and became available for public trading on the NASDAQ OMX Helsinki Stock Exchange on 5 April 2011.

The Board of Directors of Glaston Corporation decided on 28 April 2011 to implement a directed share issue without payment on the basis of the authorisation granted to it by the Annual General Meeting on 5 April 2011. In the share issue, a total of 3,092,501 new company shares were issued without payment to those investors who had converted into company shares the convertible bonds issued by the company on 16 June 2009 and 18 February 2010. The new shares were entered into the Trade Register on 6 May 2011 and became available for public trading on the NASDAQ OMX Helsinki Stock Exchange on 9 May 2011.

Glaston Corporation’s paid and registered share capital on 30 June 2011 was EUR 12.7 million and the number of issued and registered shares totalled 105,588,636. The company has one series of share. At the end of June, the company held 788,582 of the company’s own shares (treasury shares), corresponding to 0.75% of the total number of issued and registered shares and votes on 30 June 2011. The counter book value of treasury shares is EUR 94,819.

Every share that the company does not hold itself entitles its owner to one vote at the Annual General Meeting. The share has no nominal value. The counter book value of each registered share is EUR 0.12.

On 30 June 2011, the market capitalisation of the company’s shares, treasury shares excluded, was EUR 106.9 (98.9) million. During January-June, a total of around 4.1 million of the company's shares were traded, i.e. around 4.4% of the average number of registered shares. The lowest price paid for a share was EUR 0.87 and the highest price EUR 1.27. The volume-weighted average price of shares traded during January-June was EUR 1.09. The closing price on 30 June 2011 was EUR 1.02.

The share-issue adjusted equity per share attributable to owners of the parent was EUR 0.55 (0.78).

Disclosures under Chapter 2, section 9 of the Securities Markets Act
 

On 29 April 2011, Glaston was informed that the holding in Glaston Corporation of Oy G.W. Sohlberg Ab and its controlled undertaking (GWS Trade Oy) had fallen below 25% as part of the directed share issue without payment included in the financing arrangements described in Glaston’s stock exchange release of 28 April 2011. Oy G.W. Solhlberg Ab’s ownership fell to 12.14% and GWS Trade Oy’s ownership fell to 12.73%.

Decisions of the Annual General Meeting

The Annual General Meeting of Glaston Corporation was held in Helsinki on 5 April 2011. The Annual General Meeting approved the financial statements and consolidated financial statements for 2010 and released the Board of Directors and the President & CEO from liability for the financial year 1 January-31 December 2010.

The Annual General Meeting approved the proposal of the Board of Directors that no dividend be distributed for the financial year ending 31 December 2010.

The Annual General Meeting confirmed the re-election of the following Members of the Board of Directors for a year-long term of office: Claus von Bonsdorff, Carl-Johan Rosenbröijer, Teuvo Salminen, Christer Sumelius and Andreas Tallberg. A new member, Pekka Vauramo, was also elected.

The Annual General Meeting decided to maintain the Chairman of the Board’s annual remuneration at EUR 40,000 and the Deputy Chairman’s annual remuneration at EUR 30,000. It was also decided to maintain the annual remuneration of the other Members of the Board at EUR 20,000.   The Annual General Meeting elected as auditor Public Accountants Ernst & Young, with Harri Pärssinen, APA, as the responsible auditor.

The Annual General Meeting approved an amendment to Article 1 of the Articles of Association so that the domicile of the company shall be Helsinki.

Authorisations given by the Annual General Meeting
The Annual General Meeting authorised the Board of Directors to decide on the issue of new shares and/or the conveyance of the own shares held by the company. By virtue of the authorisation, the Board of Directors is entitled to decide on the issuance of a maximum of 20,000,000 new shares and on the conveyance of a maximum of 20,000,000 own shares held by the company. However, the total number of shares to be issued and/or conveyed may not exceed 20,000,000 shares.

The new shares may be issued and own shares held by the company may be conveyed either against payment or without payment.

The new shares may be issued and/or own shares held by the company conveyed to the company’s shareholders in proportion to their existing shareholdings in the company, or by means of a directed share issue, in derogation of the pre-emptive subscription right of the shareholders, if there is a weighty reason for the company to do so, such as the shares are to be used to improve the capital structure of the company or as consideration in future acquisitions or other arrangements that are part of the company’s business or as part of the company’s or its subsidiaries’ incentive schemes.

Shares can be issued or conveyed without payment in derogation the pre-emptive subscription right of shareholders only if there is an especially weighty financial reason for the company to do so, taking the interests of all shareholders into account.

The Board of Directors may decide on a share issue without payment also to the company itself. A decision regarding a share issue to the company itself cannot be made such that the total number of shares held jointly by the company or its subsidiaries would exceed one tenth of all shares of the company.

The subscription price of new shares issued and the consideration paid for the conveyance of the company’s own shares shall be credited to the reserve for invested unrestricted equity.

By virtue of the share issue authorisation, the Board of Directors shall decide on other matters relating to the issuing and conveyance of shares. The share issue authorisation is valid until the end of the 2013 Annual General Meeting.

Glaston’s Board of Directors decided on 28 April 2011 to implement a directed share issue without payment. In the share issue, a total of 3,092,501 new company shares were issued without payment to those investors who had converted into company shares the convertible bonds issued by the company on 16 June 2009 and 18 February 2010. Following the implemented share issue, the Board of Directors still has an authorisation to issue 16,907,499 shares. The Board of Directors has no other authorisations.

Organising meeting of the Board of Directors
At its organising meeting, the Board of Directors elected from among its members Andreas Tallberg to continue as the Chairman of the Board and Christer Sumelius to continue as the Deputy Chairman of the Board.

Uncertainties and risks in the near future
Lately financial uncertainty has increased, particularly in Europe and the United States. In addition, political instability in the Middle East is unfavourably influencing demand for glass processing machines and is therefore reflected in EMEA area sales. Instability in the market may lead to the postponement of orders and changes in delivery schedules. Customers’ difficulties relating to finance arrangements may restrict customers’ investment opportunities. These may be reflected in the development for the rest of the year.

The underlying nature of the sector is expected to remain unchanged, so development in the coming years is expected to be positive. If the recovery of the sector is delayed or slows, this will have a negative effect on Glaston's result. The shift of the geographical focus of activity to areas of higher economic growth will, however, dampen the economic effects of a possibly slower recovery in Western Europe.

Outlook
A modest recovery in Glaston’s market is expected during 2011. Demand in the rapidly growing Asian market, particularly China, would appear to be levelling off. In the South American market, cautious growth of demand is expected in 2011. In North America and Europe, market conditions may continue to be challenging.

The cornerstones of Glaston’s operations remain the architectural glass segment and the solar energy market. Asia, particularly China, has a strongly developing solar energy market and we expect demand for solar energy projects to grow. We will continue purposefully to strengthen our position in China and elsewhere in Asia.

In 2011 the business development priorities are improving profitability and completing the adjustment measures, whose positive effect on the result will be realised towards the end of the year.

We expect that 2011 net sales will be at least at the 2010 level and that the operating result will return to profit.

Helsinki, 11 August 2011

Glaston Corporation Board of Directors

Further information: Arto Metsänen, President & CEO, tel. +358 10 500 6100

Sent by: Agneta Selroos Director, Communications and Marketing Glaston Corporation Tel. +358 10 500 6105 

Glaston Corporation Glaston Corporation is an international glass technology company and a pioneer in glass processing technology. Its product range and service network are the widest in the industry. Glaston’s notable brands are Bavelloni in pre-processing machines and tools, Tamglass and Uniglass in safety glass machines, and Albat+Wirsam in glass industry software. Glaston's share (GLA1V) is listed on the NASDAQ OMX Helsinki Small Cap List.

Distribution: NASDAQ OMX, key media, www.glaston.net

GLASTON CORPORATION

CONDENSED FINANCIAL STATEMENTS AND NOTES 1 JANUARY - 30 JUNE 2011

These interim financial statements are not audited. As a result of rounding differences, the figures presented in the tables may not add up to the total.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPEREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

KEY RATIOS

⁽¹ EBITDA = Operating profit / loss + depreciation, amortization and impairment.

DEFINITIONS OF KEY RATIOS

Definitions of key ratios are presented in 2010 financial statements as well as in January – March 2011 interim report.

ACCOUNTING POLICIES

The consolidated interim financial statements of Glaston Group are prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as approved by the European Union. They do not include all of the information required for full annual financial statements. 

The accounting principles applied in these interim financial statements are the same as those 

applied by Glaston in its consolidated financial statements as at and for the year ended 

31 December, 2010, with the exception of certain new or revised or amended standards and 

interpretations which have been applied from 1 January, 2011. These amended standards and 

interpretations are presented in 2010 financial statements as well as in January – March 2011 

interim report. 

SEGMENT INFORMATION

The reportable segments of Glaston are Machines, Services and Software Solutions. The reportable segments apply Glaston Group's accounting and measurement principles. Glaston follows the same commercial terms in transactions between segments as with third parties.                             

The reportable segments consist of operating segments, which have been aggregated in accordance with the criteria of IFRS 8.12. Operating segments have been aggregated, when the nature of the products and services is similar, the nature of the production process is similar, as well as the type or class of customers. Also the methods to distribute products or to provide services are similar.                           

The reportable Machines segment consists of Glaston's operating segments manufacturing glass processing machines and related tools. The Machines segment includes manufacturing and sale of glass tempering, bending and laminating machines sold under Tamglass and Uniglass brands, glass pre-processing machines sold under the Bavelloni brand as well as manufacturing and sale of tools.                                    

Services segment includes maintenance and service of glass processing machines, machine upgrades and sale of spare parts.   

Software Solutions segment’s product offering, sold under the Albat+Wirsam brand, covers enterprise resource planning systems for the glass industry, software for window and door glass manufacturers, and software for glass processors’ integrated line solutions.                             

The unallocated operating result consists of head office operations of the Group and in 2010 also unallocated share of joint venture's result.

In segment reporting net working capital consists of inventory, external trade receivables and trade payables and advances received.

QUARTERLY NET SALES, OPERATING RESULT, ORDER INTAKE AND ORDER BOOK

CONTINGENT LIABILITIES

Pledged assets include EUR 122.2 million shares in group companies and EUR 54.3 million receivables from group companies.

Glaston Group has international operations and can be a defendant or plaintiff in a number of legal proceedings incidental to those operations. The Group does not expect the outcome of any unmentioned legal proceedings currently pending, either individually or in the aggregate, to have material adverse effect upon the Group's consolidated financial position or results of operations.

DERIVATIVE INSTRUMENTS

Derivative instruments are used only for hedging purposes. Nominal values of derivative 

instruments do not necessarily correspond with he actual cash flows between the 

counterparties and do not therefore give a fair view of the risk position of the Group. 

The fair values are based on market valuation on the date of reporting.

PROPERTY, PLANT AND EQUIPMENT

At the end of June 2011 Glaston had EUR 0.1 (-) million of contractual commitments for the acquisition of property, plant and equipment.

SHAREHOLDER INFORMATION

Largest shareholders 30 June, 2011