Olvi Oyj
Financial Statement Release

Olvi Group’s sales volume, net sales and operating profit developed favourably in 2012

Iisalmi, 2013-02-21 08:00 CET -- OLVI PLC              FINANCIAL STATEMENTS BULLETIN 21 FEB 2013 at 9:00 am

OLVI GROUP’S FINANCIAL STATEMENTS JANUARY TO DECEMBER 2012

Olvi Group’s sales volume, net sales and operating profit developed favourably in 2012. The overall market position strengthened in Finland, the Baltic states and Belarus. Earnings per share increased to 1.24 euro. The company’s financial position was good.

January to December 2012 in brief:

- Olvi Group’s sales increased to 526.8 (518.2) million litres

- The Group’s net sales increased to 312.2 (285.2) million euro

- The Group’s operating profit increased to 30.5 (26.7) million euro

- Olvi Group’s earnings per share stood at 1.24 (0.65) euro, and the Board of Directors proposes a dividend of 0.50 (0.50) euro per share

- The equity to total assets ratio increased clearly to 54.8 (50.6) percent

October to December 2012 in brief:

- Sales were almost on a par with the previous year at 115.5 (116.7) million litres

- The Group’s net sales increased to 70.6 (60.9) million euro

- Olvi Group’s operating profit improved from 1.5 million euro to 4.6 million euro

KEY RATIOS

Lasse Aho, Managing Director of Olvi plc, said the following in connection with the disclosure of the accounts: “Olvi Group’s net sales growth in 2012 was good in spite of the declining beverage markets in Finland and Estonia. Our overall market position strengthened again across our entire operating area. Operating profit improved substantially in Belarus, Lithuania and Latvia. Olvi Group’s equity to total assets ratio also improved.”

OLVI GROUP’S SALES VOLUME, NET SALES AND OPERATING PROFIT IN JANUARY-DECEMBER 2012

Olvi Group’s total sales volume was an all-time high in spite of very rainy weather in the peak season. Sales increased  by 8.6 million litres to 526.8 (518.2) million litres. Sales improved substantially in Belarus. The aggregate sales of companies located in the Baltic states increased slightly. Sales in Finland were on a par with the previous year.

The sales volume in Finland was 148.8 (149.1), in the Baltic states 278.0 (276.3) and in Belarus 141.5 (128.0) million litres. Intra-Group sales increased by 18.1 percent to 41.6 (35.2) million litres.

Net sales improved well and clearly outperformed the sales volume growth, amounting to 312.2 (285.2) million euro. This represents an increase of 27.0 million euro or 9.5 percent. The greatest net sales growth was seen in Belarus. Net sales improved clearly in the Baltic states and somewhat also in Finland.

Domestic net sales amounted to 121.0 (119.8) million euro. The Baltic subsidiaries generated net sales of 150.5 (140.6) million euro, while net sales in Belarus amounted to 59.0 (39.6) million euro. Net sales in Finland increased by 1.2 million euro, and net sales in the Baltic states increased by 9.9 million euro or 7.0 percent. Net sales in Belarus improved substantially by 19.4 million euro or 49.0 percent. The Belarusian figures are still subject to hyperinflationary accounting in accordance with IAS 29.

The operating profit for 2012 stood at 30.5 (26.7) million euro, which was 9.8 (9.4) percent of net sales. The operating profit improved by 3.8 million euro or 14.4 percent.

The previous year’s operating profit in Finland included 1.5 million euro of sales gains from the sales of decommissioned production machinery. Operating profit in Finland in 2012 declined by 4.1 million euro to 9.1 (13.2) million euro. Commensurate operating profit declined by 2.7 million euro or 22.9 percent.

Aggregate operating profit in the Baltic states increased clearly by 2.3 million euro to 16.4 (14.1) million euro. Operating profit in Belarus increased very substantially by 4.3 million euro to 5.0 (0.7) million euro. The previous year’s result was burdened by heavy devaluation of the Belarusian rouble and hyperinflationary accounting introduced in December 2011.

The Group’s profit after taxes in the period under review was 26.2 (13.0) million euro.

Earnings per share calculated from the profit belonging to parent company shareholders stood at 1.24 (0.65) euro per share.

OLVI GROUP’S SALES VOLUME, NET SALES AND OPERATING PROFIT IN OCTOBER-DECEMBER 2012

The fourth quarter’s total sales volume was 115.5 (116.7) million litres, almost at the previous year’s level. Sales in Belarus increased clearly by 11.9 percent to 30.2 (27.0) million litres but sales in Finland and the Baltic states declined somewhat. Sales in Finland amounted to 34.8 (36.7) million litres and sales in the Baltic states to 56.9 (58.1) million litres.

The Group’s net sales increased by 15.9 percent in October-December. Net sales amounted to 70.6 (60.9) million euro. Net sales in Finland were almost on a par with the previous year at 28.8 (29.1) million euro. Net sales in the Baltic states amounted to 30.8 (29.5) million euro, an increase of 4.3 percent. Net sales in Belarus almost tripled on the previous year. Net sales in Belarus stood at 13.7 (4.7) million euro.

Olvi Group’s operating profit developed well during the fourth quarter. The operating profit stood at 4.6 (1.5) million euro, which was 6.5 (2.4) percent of net sales. The operating profit improved by 3.1 million euro.

Operating profit in Finland increased by 24.7 percent to 1.9 (1.5) million euro, while operating profit in the Baltic states increased by 30.2 percent to 2.2 (1.7) million euro. Belarus posted an operating profit of 0.4 million euro, while the previous year’s figure was in the red by 1.9 million euro. The operating profit increased by 2.3 million euro.

SALES VOLUME, NET SALES AND OPERATING PROFIT BY GEOGRAPHICAL SEGMENTS

Seasonal nature of the operations

The Group’s business operations are characterised by seasonal variation. The net sales and operating profit from the reported geographical segments do not accumulate evenly but vary according to season, prevailing weather and environmental conditions, and the characteristics of each country.

PARENT COMPANY OLVI PLC (Olvi)

January to December 2012

According to statistics (by the Finnish Federation of the Brewing and Soft Drinks Industry), the Finnish beverage market declined by 51 million litres or 6 percent in January-December 2012 compared to the previous year. A clear decline in sales was seen in all main product groups. The sales of beers declined by 7 percent, ciders by 8 percent and long drinks by 7 percent. Sales of mineral waters declined by 6 percent and soft drinks by 4 percent. The markets went down because of excise tax hikes and rainy weather in the peak season.

In spite of the clear decline in the beverage industry, the parent company Olvi plc’s sales volume was almost on a par on the previous year. Olvi’s sales in January-December amounted to 148.8 (149.1) million litres. Sales declined by 0.3 million litres.

In terms of product groups, the best development was seen in soft drinks, where the sales volume increased by 85 percent thanks to the very popular Angry Birds products and other private label soft drinks. The sales of mineral waters increased by 13 percent and ciders by 5 percent. The sales of juice drinks doubled. On the other hand, the sales of beers declined by 11 percent, and long drinks by 8 percent.

According to the statistics by the Federation of the Brewing and Soft Drinks Industry, Olvi’s domestic market share in mild alcoholic beverages was on a par with the previous year at approximately 24 percent. The market share in non-alcoholic products increased clearly from approximately 6 percent to almost 9 percent due to good sales development in soft drinks and waters.

Olvi’s exports and tax-free sales increased by 50.6 percent to 6.8 (4.5) million litres, mostly attributable to Angry Birds soft drinks. Exports and tax-free sales represented 4.6 (3.0) percent of total sales.

Olvi’s net sales increased to 121.0 (119.8) million euro, an increase of 1.2 million euro.

Olvi’s operating profit for 2012 stood at 9.1 (13.2) million euro, which was 7.5 (11.1) percent of net sales. The previous year’s operating profit included 1.5 million euro of sales gains from the sales of decommissioned production machinery. Olvi’s operating profit declined by 4.1 million euro or 31.5 percent on the previous year. Commensurate operating profit declined by 2.7 million euro or 22.9 percent on the previous year.

Factors contributing to the operating profit decline included increased depreciation due to substantial investments, as well as cost increases that could not be fully covered due to the downtrend of the beverage industry.

October to December 2012

In the fourth quarter, Olvi’s sales declined by 5.2 percent or 1.9 million litres to 34.8 (36.7) million litres. Sales in the previous year were boosted by purchases made into stocks due to the excise tax hikes in the beginning of 2012. Net sales stood at 28.8 (29.1) million euro, a decline of 0.3 million euro or 1.1 percent.

Olvi’s operating profit increased substantially in October-December. Operating profit amounted to 1.9 (1.5) million euro, an increase of 0.4 million euro or 24.7 percent on the previous year. The operating profit represented 6.6 (5.3) percent of net sales.

AS A. LE COQ (A. Le Coq)

January to December 2012

The Estonian company A. Le Coq’s sales amounted to 134.0 (133.4) million litres. Sales increased by 0.6 million litres or 0.5 percent.

The Estonian beer and soft drinks markets declined by 4 to 5 percent, and the juice market by almost 9 percent in 2012. Only the sales of ciders increased clearly, by almost 8 percent. The long drink and mineral water markets remained on the previous year’s level.

A. Le Coq’s market position remained strong in all of the main product groups. A. Le Coq is the market leader in beers, long drinks, ciders and juices. A. Le Coq’s market share in beers was 40 (42) percent, in long drinks 55 (56) percent and in ciders 44 (40) percent. Fizz is Estonia’s largest cider brand.

The market share in soft drinks at the end of November 2012 was 29 (27) percent, and in mineral waters 16 (15) percent. In the sales of juices and juice drinks, A. Le Coq had a market share of 36 (30) percent in tetrapacks and 30 (50) percent in other packages (all market shares by Nielsen, October-November 2012).

Sales of the company’s beers and ciders remained at the previous year’s level, while the sales of long drinks declined by 5 percent. Mineral waters were the best-developing product group with an increase of 13 percent. The sales of juices increased by 2 percent, while the sales of soft drinks (including kvass) declined by 7 percent on the previous year.

The company’s exports and tax-free sales declined by 13.4 percent on the previous year to 5.1 (5.9) million litres.

A. Le Coq’s net sales in 2012 amounted to 80.0 (76.0) million euro, representing an increase of 4.0 million euro or 5.4 percent. 

Operating profit was on a par with the previous year at 13.0 (13.0) million euro. The operating profit represented 16.3 (17.1) percent of net sales.

October to December 2012

The company’s fourth-quarter sales amounted to 28.5 (28.1) million litres, an increase of 0.4 million litres or 1.5 percent on the previous year. Net sales amounted to 16.9 (16.0) million euro. Net sales improved by 0.9 million euro or 5.5 percent.

A. Le Coq’s operating profit stood at 2.3 (1.9) million euro, an improvement of 0.4 million euro or 21.1 percent on the previous year. The operating profit represented 13.8 (12.0) percent of net sales.

A/S CESU ALUS (Cesu Alus)

January to December 2012

The sales of Cesu Alus operating in Latvia amounted to 72.4 (75.4) million litres. Sales declined by 3.0 million litres or 4.0 percent.

The Latvian beer market diminished slightly in 2012, and the cider market saw a decline of more than 13 percent. On the other hand, the sales of long drinks saw an uptrend of more than 13 percent.

Due to an increase in the level of profitability in beers, the company’s market share in beers declined to 24 (37) percent. However, the company retained its number two position in the beer market. In ciders, Cesu Alus is the clear number one player with a market share of 51 (54) percent. In the long drink market, the company has a market share of 44 (45) percent. There are two almost equal players in the Latvian long drinks market. In the sales of energy drinks, Cesu Alus’s market share clearly increased from 30 percent to 37 percent (Nielsen, October-November 2012).

77.5 (80.5) of the company’s domestic sales is attributable to beer. The sales of beer declined by approximately 12 percent in 2012. The greatest proportional sales growth was seen in energy drinks, 38 percent. The sales of long drinks increased by 22 percent and the sales of soft drinks (including kvass) was on a par with the previous year. The sales of ciders declined by 24 percent, and the sales of juices declined by 25 percent.

The company’s net sales stood at 36.2 (35.2) million euro, an increase of 1.0 million euro or 2.8 percent.

The company’s operating profit for the year increased substantially by 1.0 million euro or 124.4 percent to 1.7 (0.7) million euro, which is 4.6 (2.1) percent of net sales.

The improvement in operating profit was made possible by a clear increase in the average price of net sales and strict control of costs.

October to December 2012

Cesu Alus’s sales volume amounted to 13.9 (15.8) million litres, which was 1.9 million litres or 12.2 percent less than in the previous year. However, net sales only declined by 0.3 million euro or 4.5 percent to 6.7 (7.0) million euro.

The company’s operating profit in the fourth quarter was -0.16 (-0.14) million euro. 

AB VOLFAS ENGELMAN (Volfas Engelman)

January to December 2012

The sales of Volfas Engelman operating in Lithuania increased by 4.2 million litres or 6.1 percent to 71.7 (67.5) million litres.

With the exception of long drinks, the Lithuanian beverage markets in 2012 were declining in all main product groups. The beer market declined by 5 percent, ciders by 2 percent and kvass by 16 percent. The sales of long drinks increased by as much as 30 percent.

Volfas Engelman’s overall position in the Lithuanian beverage market has become stronger. The company had a market share of 14 (13) percent in beers, which is the largest product group. The company is the market leader in ciders with a market share of 34 (36) percent and in long drinks with a market share of 33 (30) percent. The company is also the clear market leader in the kvass market with a market share of 27 (32) percent (Nielsen, October-November 2012).

The sales of the company’s beers increased by 10 percent, and long drinks by 26 percent. The sales of ciders declined by 8 percent. The sales of soft drinks (mostly kvass) declined by 17 percent on the previous year.

During 2012, the company’s exports increased by 74.0 percent. Exports accounted for 2.3 (1.4) percent of total sales. 

The company’s net sales stood at 34.2 (29.5) million euro, an increase of 4.7 million euro or 16.1 percent. Growth in net sales clearly outperformed the growth in sales volume thanks to improved average price of net sales.

The company’s operating profit increased clearly to 1.8 (0.4) million euro, which is 5.1 (1.4) percent of net sales. The operating profit increased by 1.4 million euro. The improvement in operating profit was attributable to clear increases in the profitability of the product portfolio and the average price of sales, as well as good control of costs.

October to December 2012

Volfas Engelman’s sales in the fourth quarter amounted to 14.5 (14.2) million litres, which is 1.9 percent more than in the previous year.

Net sales increased by 0.7 million euro or 11.0 percent to 7.2 (6.5) million euro.

From October to December, the company posted earnings of 0.1 million euro more than in the previous year. The operating profit was 0 (-0.1) million euro. 

OAO LIDSKOE PIVO (Lidskoe Pivo)

January to December 2012

The economic situation in Belarus has improved, and the competitive ability has become better during the last year. After the devaluations in 2011, the exchange rate of the Belarusian rouble has stabilised and inflation has decelerated. The Belarusian beer market declined by 9 percent and the soft drinks market by almost 7 percent, but on the other hand, the sales of juices increased on the previous year.

The financial reporting of Lidskoe Pivo is subject to the IAS 29 standard “Financial Reporting in Hyperinflationary Economies” for the time being, as long as Belarus is listed as a hyperinflationary economy.

Lidskoe Pivo’s operations have developed well in 2012. The company’s sales increased by 13.5 million litres or 10.5 percent to 141.5 (128.0) million litres.

The company is a clear market leader in ciders, kvass and juice drinks. Its market share in ciders is 62 (59), in kvass 67 (58) and in juice drinks 33 (31) percent. The market share in beers is 15 (10) percent (Nielsen, October-November 2012).

The sales of beers increased by 4, mineral waters by 36 and soft drinks (including kvass) by 10 percent. There was a 13 percent decline in the sales of juice drinks. Sales of cider were on a par with the previous year.

The company’s exports in the reporting period increased by 63.9 percent on the previous year.  Exports made 10.1 (6.8) percent of the company’s total sales. The main destinations for exports were Russia and Lithuania.

Lidskoe Pivo’s net sales increased substantially in 2012. Net sales stood at 59.0 (39.6) million euro, an increase of 19.4 million euro or 49.0 percent. Factors contributing to net sales growth included favourable development of sales volumes and a sustained good average price of net sales.

The company’s operating profit for the period improved extremely well and amounted to 5.0 (0.7) million euro, which was 8.4 (1.9) percent of net sales. The operating profit improved by more than six-fold on the previous year with an increase of 4.3 million euro. The operating profit increase was attributable to improved efficiency made possible by the commissioning of substantial investments, improved profitability in all product groups, as well as successful new product launches.

October to December 2012

Lidskoe Pivo’s sales volume in the fourth quarter was 30.2 (27.0) million litres, an increase of 3.2 million litres or 11.9 percent.

The company’s net sales in the fourth quarter amounted to 13.7 (4.7) million euro, an increase of 9.0 million euro.

The company’s operating profit amounted to 0.4 (-1.9) million euro. The operating profit improved by 2.3 million euro.

The changes in fourth-quarter net sales and operating profit in comparison to the previous year are affected by the implementation of IAS 29 in December 2011. At that time, inflation adjustments were made retroactively for the entire year, and their effect was seen solely in the fourth quarter of 2011.

FINANCING AND INVESTMENTS

Olvi Group’s balance sheet total at the end of December 2012 was 269.2 (253.6) million euro. Equity per share at the end of 2012 stood at 7.01 (6.11) euro. The equity to total assets ratio clearly exceeded Olvi Group’s long-term target of 50 percent. The actual figure at the end of December was 54.8 (50.6) percent. The gearing ratio declined clearly on the previous year to 35.8 (43.2) percent. The Group’s liquidity also improved clearly in 2012. The current ratio was 1.3 (1.0).

The amount of interest-bearing liabilities at the end of 2012 was 58.5 (59.2) million euro, including current liabilities of 16.0 (28.3) million euro.

Olvi Group’s gross capital expenditure in 2012 amounted to 29.8 (43.2) million euro. The parent company Olvi accounted for 14.9 million euro, the Baltic subsidiaries for 4.8 million euro and Lidskoe Pivo for 10.1 million euro of the total.

The largest investments in Finland in 2012 included the commissioning of a new can filling line, the completion of a tank cellar extension, as well as modernisation of beer filtering.

In the Baltic states, A. Le Coq’s largest investments comprised extensions to storage facilities and the pressure tank cellar, as well as a labelling machine for glass bottles. Cesu Alus’s major investments were associated with conveyors for the glass bottle line, as well as other production machinery and equipment. Volfas Engelman’s investments consisted of a general renovation of the brewery, a glass bottle reform, wine and kvass mixing equipment and other smaller purchases of machinery and equipment.

The first stage of Lidskoe Pivo’s extensive investment programme is mainly completed. It included, among other things, storage, filling department and tank cellar buildings, filling line machinery and equipment, an extension to the kvass cellar, a new beer filter and air compressor.

PRODUCT DEVELOPMENT AND NEW PRODUCTS

Research and development includes projects to design and develop new products, packages, processes and production methods, as well as further development of existing products and packages. The R&D costs have been recognised as expenses. The main objective of Olvi Group’s product development is to create new products for profitable and growing beverage segments.

Finland

In November, the company launched the TEHO Sport protein and energy bars, as well as caffeine bars and powders having the TEHO energy drink flavour. In January 2013, two new Angry Birds soft drinks were launched in 1.5-litre bottles.

February 2013 saw the introduction of a total novelty, the Angry Birds Berry & Fruity Shake snack drinks. The products are manufactured by Osuuskunta Maitomaa in Suonenjoki and packaged in the advanced Tetra Prisma Aseptic Dream Cap 330 ml package. In March 2013, the company will launch TEHO Sport milk-based recovery drinks in two flavours for strength and endurance training, also manufactured by Maitomaa.

April 2013 will see the novelties for the summer. In alcoholic products, these inclue the Unknown Soldier beer, OLVI Cider Red Berries, FIZZ Apple Garden cider and OLVI Mexico Long drink. In non-alcoholic products, the KevytOlo mineral water/juice mix range will see a new variant of Birch Sap containing 5 percent of genuine birch sap. A new sub-brand of the KevytOlo family will be introduced. Functional mineral waters will be combined under the name of Balanssi (Balance). A new Amazon flavour will be added to the Angry Birds soft drinks range.

Subsidiaries

In October, the Estonian A. Le Coq introduced the Angry Birds Paradise soft drink in cans. November saw the introduction of A. Le Coq Christmas Porter 6.5% alc., as well as two beers from Warsteiner of Germany: Warsteiner Premium Verum and Warsteiner alcohol-free beer.

Cesu Alus of Latvia did not launch any new products in the period under review.

Volfas Engelman of Lithuania launched the Angry Birds Paradise can in October, which means that Angry Birds is now available in all of the Group’s countries.

Lidskoe Pivo of Belarus launched the energy drink Dynami:t Blue in October.

PERSONNEL

Olvi Group’s average number of personnel in January-December was 1,977 (2,032). The Group’s average number of personnel decreased by 55 people or 2.7 percent. Personnel decreases were seen in Belarus, while in the other operating areas, the number was either unchanged or increased slightly. The total number of personnel at the end of December 2012 was 1,905 (1,905).

Olvi Group’s average number of personnel by country:

Finland               401  (383)
Estonia               313  (311)
Latvia                217  (217)
Lithuania             212  (205)
Belarus               834  (916)
Total                1,977 (2,032)

CHANGES IN CORPORATE STRUCTURE IN 2012

In the spring of 2012, A. Le Coq acquired 49.0 percent of the stock of AS Karme. Karme owns the Karks brewery that produces beers, ciders and wine. Thanks to the acquisition, A. Le Coq got access to Karks’s wine production capacity for the manufacture of ciders and other fermented beverages.

In May 2012, A. Le Coq acquired 20.0 percent of the water manufacturer Oü Verska Mineraalvee with the aim of gaining a better position in the Estonian mineral water market. Both companies are accounted as associated companies in Olvi’s consolidated financial statements.

During the reporting period in January-December, Olvi acquired a total of 407 shares in Cesu Alus, corresponding to 0.14 percent of the company’s share capital.

At the end of December 2012, Olvi’s holding in Cesu Alus was 99.67 percent, in A. Le Coq 100.0 percent, in Volfas Engelman 99.57 percent and in Lidskoe Pivo 91.58 percent.

OLVI A SHARE AND SHARE MARKET

The total number of Olvi plc shares at the end of December 2012 was 20,758,808, of these 17,026,552 or 82.0 percent being publicly traded Series A shares and 3,732,256 or 18.0 percent Series K shares.

Each Series A share carries one (1) vote and each Series K share carries twenty (20) votes. Olvi held 1,124 of its own Series A shares on 31 December 2012 as treasury shares. Treasury shares held by the company itself are ineligible for voting. Olvi’s share capital at the end of December 2012 stood at 20.8 million euro. Detailed information on Olvi’s shares, share capital and treasury shares can be found in the tables attached to this financial statements bulletin, in Table 5, Sections 4 and 5.

The total trading volume of Olvi A shares on Nasdaq OMX Helsinki in 2012 was 1,793,149 (3,208,911) shares, which represented 10.5 (18.8) of all Series A shares. The value of trading was 32.8 (62.3) million euro.

The Olvi A share was quoted on Nasdaq OMX Helsinki (Helsinki Stock Exchange) at 19.65 (14.75) euro at the end of 2012. In January-December, the highest quote for the Series A share was 20.43 (19.86) euro and the lowest quote was 14.75 (13.49) euro.

At the end of December 2012, the market capitalisation of Series A shares was 334.5 (251.1) million euro and the market capitalisation of all shares was 407.9 (306.2) million euro.

The number of shareholders at the end of December 2012 was 9,091 (9,146). Foreign holdings plus foreign and Finnish nominee-registered holdings represented 17.9 (17.5) percent of the total number of book entries and 6.2 (6.1) percent of total votes.

Foreign and nominee-registered holdings are reported in Table 5, Section 8 of the tables attached to this financial statements bulletin, and the largest shareholders are reported in Table 5, Section 9.

FLAGGING NOTICES

During 2012, Olvi received three flagging notices in accordance with Chapter 2, Section 10 of the Securities Markets Act: from The Family Kamprad Foundation on 10 January 2012 and from Ilmarinen Mutual Pension Insurance Company on 11 May 2012 and 13 December 2012.

BUSINESS RISKS AND THEIR MANAGEMENT

Risk management is a part of Olvi Group’s everyday management and operations. It increases corporate security and contributes to the achievement of operational targets. The objective of risk management is to operate proactively and create operating conditions in which business risks are managed comprehensively and systematically in all of the Group companies and all levels of the organisation. In addition to the company itself, risk management benefits its personnel, customers, shareholders and other related groups.

The objective of risk management is to ensure the realisation of the company’s strategy and secure the continuity of business. Olvi Group identifies, assesses, manages and monitors its crucial risks regularly. With regard to identified risks, the effects, scope and probability of realisation are assessed together with the means of eliminating or reducing the risk. Furthermore, risk management aims to identify and utilise any business opportunities that may arise.

Olvi Group’s strategic risks refer to risks related to the characteristics of the company’s business and strategic choices. The Group’s operations are located in several countries that differ substantially in terms of their social and economic situations and the phases and directions of development. For example, strategic risks relate to changes in tax legislation and other regulations, the environment and foreign exchange markets. If realised, strategic risks can substantially hamper the company’s operational preconditions. The Group’s most substantial identified strategic risks relate to Belarus, particularly the situation in the country’s economy and politics.

The Group’s most substantial identified operational risks relate to the procurement and quality of raw materials, the production process, markets and customers, personnel, information security and systems, as well as changes in foreign exchange rates.

Raw materials

General economic development and annual fluctuations in crop yield affect the prices and availability of major raw materials used within Olvi Group. Disruptions in raw material deliveries may hamper customer relations and business operations. Purchases of major raw materials are made under procurement contracts standardised at the Group level. The Group aims to secure the predictability of purchase prices for critical raw materials through long-term procurement contracts. The company has a hedging policy concerning raw materials and their prices. All units emphasise the significance of the quality of raw materials and other production factors in the overall production chain.

Production process

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

Markets and customers

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

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

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

Personnel

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

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

Information security and IT

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

Risks related to information technology and systems are manifested as operational disruptions and deficiencies, for example. The availability and correctness of data is ensured through the choice of operating methods and various technical solutions. The Group’s operations in Finland, the Baltic states and Belarus utilise a common enterprise resource planning system. The system was introduced into use in Belarus during the financial year 2012. A risk analysis pertaining to information security and the operation of information systems is carried out annually.

Financing risks

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

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

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

BUSINESS RISKS AND UNCERTAINTIES IN THE NEAR TERM

The financial situation in Europe has become more positive, and it is generally estimated that the euro crisis is becoming a thing of the past. However, an increase in the unemployment rate and the resulting decline in consumer purchasing power may have a negative effect on the demand for the company’s products.

The most substantial factor hampering the predictability of Olvi Group’s business still relates to Belarus and its economic outlook for the next few years.

The IAS 29 standard “Financial Reporting in Hyperinflationary Economies” will probably be applied at least until 2014.

NEAR-TERM OUTLOOK

The full-year sales volumes and net sales in 2013 are expected to develop favourably in the current accounting period. The operating profit for 2013 is expected to improve on the previous year.

BOARD OF DIRECTORS’ PROPOSAL FOR THE DISTRIBUTION OF PROFIT

The parent company Olvi plc had 45.1 (42.9) million euro of distributable funds on 31 December 2012, of which profit for the period accounted for 12.6 (13.1) million euro.

Olvi plc’s Board of Directors proposes to the Annual General Meeting that distributable funds be used as follows:

1) A dividend of 0.50 (0.50) euro shall be paid for 2012 on each Series K and Series A share, totalling 10.4 (10.4) million euro. The dividend represents 40.3 (76.9) percent of Olvi Group’s earnings per share. The dividend will be paid to shareholders registered in Olvi plc's register of shareholders held by Euroclear Finland Ltd on the record date of the dividend payment, 15 April 2013. It is proposed that the dividend be paid on 22 April 2013.

No dividend shall be paid on treasury shares.

2) 34.7 million euro shall be retained in the parent company’s non-restricted equity.

FINANCIAL REPORTS IN 2013

Olvi Group’s financial statements, Board of Directors’ report and Corporate Governance Statement 2012 will be published on 18 March 2013. The notice to convene Olvi plc’s Annual General Meeting, which will be held on 10 April 2013 in Iisalmi, will be published on 18 March 2013. The financial statements, Board of Directors’ report and notice to convene the AGM will be available on Olvi plc’s Web site on the same day.

The following interim reports will be released in 2013:

Interim Report for January-March on 25 April 2013,
Interim Report for January-June on 15 August 2013 and
Interim Report for January-September on 24 October 2013.

Further information:
Lasse Aho, Managing Director, Olvi plc, phone +358 17 838 5200 or +358 400 203 600

OLVI PLC
Board of Directors

TABLES:
- Statement of comprehensive income, Table 1
- Balance sheet, Table 2
- Changes in shareholders’ equity, Table 3
- Cash flow statement, Table 4
- Notes to the financial statements, Table 5

DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Key media
www.olvi.fi

NOTES TO THE FINANCIAL STATEMENTS                                TABLE 5

The financial statements for 1 January to 31 December 2012 have been prepared in compliance with the International Financial Reporting Standards (IFRS), observing the IAS and IFRS standards as well as the official SIC and IFRIC interpretations valid on 31 December 2012.

The accounting policies used for the preparation of the financial statements 2012 are the same as those used for the annual financial statements 2011, with the exception of the following changes due to new and revised IFRS standards and IFRIC interpretations:

-  IFRS 7 (Amendment), Financial Instruments: Disclosures – Derecognition

-  IAS 12 (Amendment), Income taxes – Deferred tax

The above changes in standards and their interpretations have not had any substantial effect on the income statement, balance sheet or notes.

The information in the financial statements bulletin is presented in thousands of euros (EUR 1000). For the sake of presentation, individual figures and totals have been rounded to full thousands, which causes rounding differences in additions. The ratios are calculated from exact amounts in euros.

The registered share capital on 31 December 2012 totalled 20,759 thousand euro.
Olvi plc’s Series A and Series K shares received a dividend of 0.50 euro per share for 2011 (0.50 euro per share for 2010), totalling 10.4 (10.4) million euro. The dividends were paid on 23 April 2012. The Series K and Series A shares entitle to equal dividend.
The Articles of Association include a redemption clause concerning Series K shares.

5. TREASURY SHARES

Olvi plc held a total of 1,124 of its own Series A shares on 1 January 2012.

Olvi plc has not acquired more treasury shares or transferred them to others in January-December 2012, which means that the number of Series A shares held by the company was unchanged on 31 December 2012.

The purchase price of the Series A shares held as treasury shares totalled 8.5 thousand euro.

Series A shares held by Olvi plc as treasury shares represented 0.005 percent of the share capital and 0.001 percent of the aggregate number of votes. The treasury shares represented 0.007 percent of all Series A shares and associated votes.

On 11 April 2012, the General Meeting of Shareholders of Olvi plc decided to revoke any unused authorisations to acquire treasury shares and authorise the Board of Directors of Olvi plc to decide on the acquisition of the company’s own shares using distributable funds. The authorisation is valid for one year starting from the General Meeting and covers a maximum of 500,000 Series A shares.

The Annual General Meeting also decided to revoke all existing unused authorisations for the transfer of own shares and authorise the Board of Directors to decide on the issue of a maximum of 1,000,000 new Series A shares and the transfer of a maximum of 500,000 Series A shares held as treasury shares.

In January-December 2012, the Board of Directors of Olvi plc has not exercised the authorisations granted by the General Meeting.

12. CALCULATION OF FINANCIAL RATIOS

Equity to total assets, % = 100 * (Shareholders’ equity held by parent company shareholders + non-controlling interests) / (Balance sheet total – advances received)

Earnings per share = Profit belonging to parent company shareholders / Average number of shares during the period, adjusted for share issues 

Equity per share = Shareholders’ equity held by parent company shareholders / Number of shares at end of period, adjusted for share issues

Gearing, % = 100 * (Interest-bearing debt – cash in hand and at bank) / (Shareholders’ equity held by parent company shareholders + non-controlling interests)