Raisio's Profitability Stronger than Expected

At the beginning of the year, Raisio's profitability was stronger than expected even though the implementation of growth projects impact the Group's profitability. At the beginning of the year, the strong demand for brand products continued.

4 May 2010 --- Raisio has moved to a growth phase that covers the years 2010 and 2011. We expect a considerable increase in net sales in 2010. Our target is to maintain the earlier level of profitability at the beginning of the growth phase even though the costs of growth projects impact the Group's result and the market situation in the Business to Business Division will probably continue to be challenging.

-Raisio's net sales totalled EUR 86.4 million (Q1/2009: EUR 91.2 million).
-EBIT was EUR 4.3 million (EUR 4.5 million) accounting for 5.0 per cent (5.0%) of net sales.
-Glisten became a part of Raisio Group after the review period in April 2010.
-Expenses of approximately EUR 1.1 million resulting from the acquisition of Glisten are included in the first-quarter figures.

Chief Executive's Review                                                       

“In 2010 and 2011 Raisio's main target is to increase its net sales. We are looking for growth through acquisitions in Europe and by expanding into small and growing product categories and new market areas. Raisio's growth phase had a good start when the first acquisition was completed at the beginning of the year. Raisio will continue to seek growth by acquisitions that support the achievement of the company's strategy and create added value to owners.        

The acquisition of the British Glisten offers both the parties good opportunities for growth and expansion into new product categories and new market areas. Raisio has already started the work to launch its products to UK market and Glisten's products to Finnish and neighbouring markets.             

At the beginning of the year, Raisio's profitability was stronger than expected even though the implementation of growth projects impact the Group's profitability. At the beginning of the year, the strong demand for brand products continued. In the challenging market situation, Business to Business Division reported a profitable EBIT even though the production of rapeseed meal, an important protein source of feeds, was not profitable due to the scarcity of domestic rapeseed and to the market situation of oil generated as a by-product.

The ability to see opportunities and to take advantage of them quickly and efficiently will be crucial for Raisio's success also in the future. In addition to its expansionary policy, the Group participates strongly in the developing work of a sustainable food chain and introduces new ecological products and solutions.”                                                                    

RESULT FROM THE GROUP'S CONTINUING OPERATIONS                                  

Net sales                                                                      

Raisio Group's net sales from continuing operations in January-March totalled EUR 86.4 million (Q1/2009: EUR 91.2 million). The net sales of the Brands Division were EUR 43.4 million (EUR 44.5 million), those of Business to Business Division EUR 43.3 million (EUR 49.3 million) and those of other operations EUR 0.2 million (EUR 0.2 million). The Group's sales volumes remained unchanged from the comparison period. The reduction of five per cent in net sales mainly resulted from changes in raw material prices.                                  

Net sales from outside Finland represented 31.9 per cent (29.5%) of the total, amounting to EUR 27.6 million (EUR 26.9 million).                              

Result                                                                         

Raisio's EBIT from continuing operations in January-March was EUR 4.3 million (EUR 4.5 million) accounting for 5.0 per cent (5.0%) of net sales. The EBIT of the Brands Division amounted to EUR 4.8 million (EUR 5.8 million), that of the Business to Business Division EUR 0.1 million (EUR 0.1 million) and that of other operations EUR -0.6 million (EUR -1.1 million). In the international brands, the profitability of Benecol remained at a good level and the sales volume of plant stanol ester, Benecol ingredient, increased. The demand for the products sold under the Elovena, Sunnuntai, Carlshamn and Nordic brands also increased.                                                                     

Depreciation, allocated to operations in the income statement, totalled EUR 3.5 million (EUR 4.1 million) in January-March. In 2010, the first-quarter pre-tax result was EUR 4.3 million (EUR 4.2 million). The Group's net financial items totalled EUR -0.1 million (EUR -0.3 million) in January-March. The Group's post-tax result from continuing operations was EUR 3.0 million (EUR 2.9 million). Earnings per share for January-March were EUR 0.02 (EUR 0.02).                                                              

Balance sheet and cash flow                                                    

Raisio's balance sheet total at the end of March amounted to EUR 447.1 million (31 December 2009: EUR 444.2 million). Shareholders' equity totalled EUR 311.8 million (31 December 2009: EUR 322.0 million), while equity per share was EUR 2.00 (31 December 2009: EUR 2.06).                                             

The Group's interest-bearing debt was EUR 63.0 million at the end of March (31 December 2009: EUR 62.8 million). Net interest-bearing debt was EUR -125.4 million (31 December 2009: EUR -150.2 million). The equity ratio totalled 70.5 per cent (31 December 2009: 73.4%) and net gearing was -40.2 per cent (31 December 2009: -46.6%). Return on investment was 5.1 per cent (31 December 2009: 6.1%).                                                                         

Cash flow from business operations in January-March was EUR -6.3 million (31 December 2009: EUR 5.4 million), which results from the working capital increase characteristic to the period.                                                  

Working capital was released from the previous year mainly because of the depreciation of raw material inventories and the divestment of margarine business and it amounted to EUR 73.1 million (Q1/2009: 90.3 million) at the end of the review period.     

Investments                                                                    

The Group's investments have now stabilised at the current lower level. Raisio aims to use existing capacity by controlling it more efficiently on the basis of customer information, as well as to raise utilisation rates. Raisio's partners assume responsibility for production and related investments on their own behalf. In the first quarter the gross investments, excluding investments in securities, were EUR 1.5 million (EUR 1.2 million) accounting for 1.7 per cent (1.3%) of net sales and being in line with the comparison period. The gross investments of the Brands Division amounted to EUR 0.6 million (EUR 0.4 million), that of the Business to Business Division EUR 0.6 million (EUR 0.6 million) and that of other operations EUR 0.3 million (EUR 0.2 million).                            

Research and development                                                       

Raisio follows a consumer- and customer-oriented approach. R&D cooperates closely with the Group's other operations so that the company's strong know-how and ecological thinking combined with the latest research findings can be used when launching innovative new products and solutions.                          

In the Brands Division, the focus is on the new product applications and research evidence of the plant stanol ester, Benecol ingredient, as well as on the development and technology of oat-, soy­- and barley-based products. R&D in feeds develops new mixes and feeding solutions that improve the efficiency and profitability of livestock production, ensure the animals' well-being and health and reduce the environmental load of livestock production.                     

The Group's research and development inputs in the review period totalled EUR 1.2 million (EUR 1.4 million), or 1.4 per cent (1.3%) of net sales. The R&D expenses of the Brands Division were EUR 0.9 million (EUR 1.1 million) and those of the Business to Business Division EUR 0.4 million (EUR 0.3 million).        

The joint research published by Raisio and HK Ruokatalo in February 2010 showed reliably that correctly dosed rapeseed oil makes pork extremely good. When using a new feeding concept, the fat of a pig turns into a form recommended by National nutrition authority. The new feeding concept is also environmentally friendly since the pigs are able to use the nitrogen of the feed more efficiently.                                                                   

TAXATION ISSUE OF SALES PROFIT ENDED TO RAISIO'S FAVOUR                        

The proceedings concerning the sales profit from the divestment of Raisio's chemical business in 2004 have concluded favourably for Raisio on 9 February 2010 when The Tax Administration's Tax Recipients' Legal Services Unit was not  granted the leave to appeal by the Supreme Administrative Court. Since the divestment of the chemical business operations, Raisio has considered the sales profit of some EUR 220 million to be free of tax and has handled it accordingly in its accounting.                                                             

SEGMENT INFORMATION                                                            

BRANDS DIVISION                                                                

The January-March net sales for the Brands Division totalled EUR 43.4 million (EUR 44.5 million) accounting for around half of the Group's net sales.        

The first-quarter EBIT in the Brands Division amounted to EUR 4.8 million (EUR 5.8 million) including the expenses of EUR 1.1 million resulting from the Glisten acquisition. The EBIT is 11.2 per cent (13.1%) of net sales. The EBIT was boosted year-over-year by the volume growth in Benecol, by profitability remaining at a good level and by continuing strong demand for Elovena, Sunnuntal and Carlshamn products.                                                        

International brands - Benecol                                                 

The net sales of Benecol reached a new, higher level of EUR 13.0 million (EUR 11.6 million).  Volume growth in the current markets and the launches in the new markets contributed to the increase of net sales. The volatility of net sales is characteristic in the launch phase. Deliveries of new partnership agreements were cumulated in the first quarter, which may cause volatility in volumes.    

Solid sales growth of Benecol products continued in Spain, Greece and Belgium. Instead, the strong growth in Poland and Great Britain has evened out at least momentarily. Thailand and Indonesia are Raisio's fairly new partners. The sales of Benecol products in these countries have developed well considering the time needed for the launching and creating the awareness of products and brand.     

Local brands                                                                   

Local main brands Elovena, Sunnuntai and Carlshamn have further strengthened their position during the first quarter of the year and sales volumes have increased in the company's major market areas. Instead, the effects of the recession can still be seen in public sector, restaurants and staff canteens. The volume in bakery sales increased considerably year-over-year and the Group's market position strengthened.                                                  

Healthy snacks, inexpensive everyday food and home baking are still a growing trend in Finland. The sales in Elovena products have increased by over 10 per cent from the comparison period. The growth has been fastest in the sales of Elovena snack drinks and Hetki instant porridges. Consumers have shown interest in the promotions and campaigns of the Elovena jubilee year. The sales in Sunnuntai products also grew, and Raisio has reached plenty of new consumers through its visible internet campaign.                                         

Sales of non-dairy products are still growing in Finland and Sweden. In Finland, especially the sales of non-dairy soygurts have developed well. Raisio has managed in short time to establish a firm foothold in Sweden with non-dairy products. The market share of non-dairy soygurts sold under the Carlshamn brand has already increased to nearly 20 per cent in Sweden. In Ukraine, the sales have developed well and net sales have increased with enhancement of operations and renewal of distribution network.