Interim report for January – September 2008
Net sales totalled EUR 389.2 million (EUR 369.1 million).
Operating profit was EUR 17.7 million (EUR 24.6 million).
The net sales in 2008 are expected to be approximately on the same level as last year, but the operating profit is estimated to be lower than in 2007.
President and CEO, Heikki Allonen, in conjunction with the review:
“The financial performance of the Group for the first nine months was disappointing compared to last year. This was mainly due to the weakened profitability of Land and Armament Business Unit, where certain major long term projects of importance ended in late 2007 and early 2008 and where new projects were still in the ramp-up phase during the review period.
The net sales in 2008 are expected to be approximately on the same level as last year, but the operating profit is estimated to be lower than in 2007. Furthermore, there are risks and uncertainties related to certain delivery projects of the Land & Armament and Aerostructures Business Units, which may have a negative impact on the Group’s operating profit during the remaining part of the year.
I expect the demand for the main part of the Group’s products and services to remain good and I am confident that we can continue to offer attractive and competitive solutions to our existing and new customers. The ongoing crisis in the international financial markets may, however, medium to long term impact the demand and the timing of customers’ new procurements.”
REVIEW FOR JANUARY – SEPTEMBER 2008
New orders and order stock
The value of new orders received by the Group during the review period was EUR 241.9 million (EUR 390.8 million). Defence material and maintenance accounted for 79% (83%) and civilian products for 21% (17%) of the new orders. At the end of the review period, the volume of the Group’s order stock was EUR 749.6 million (EUR 910.6 million).
Net sales and profitability
The Group’s net sales for January – September totalled EUR 389.2 million (EUR 369.1 million). Defence material and maintenance accounted for 86% (86%) and civilian products for 14% (14%) of the net sales. Sales outside Finland accounted for 56% (46%) of the net sales.
The Group’s operating profit for January – September was EUR 17.7 million (EUR 24.6 million), representing 4.6% (6.7%) of the net sales. The consolidated income before taxes amounted to EUR 13.9 million (EUR 22.8 million).
Financing and ownership
The Group’s equity ratio was 44.9% (46.8%) and net gearing 53.7% (41.3%).
Consolidated liquid funds at the end of the review period amounted to EUR 12.4 million (EUR 11.2 million). The Group’s interest-bearing liabilities totalled EUR 119.6 million (EUR 94.7 million) at the end of the review period. The interest-bearing liabilities included finance lease liabilities of EUR 23.0 million (EUR 24.3 million).
The shareholders of Patria Oyj are the State of Finland with a 73.2% stake and the European Aeronautic Defence and Space Company EADS N.V. (EADS) with a 26.8% stake.
Changes in the Group’s structure
Patria Vammas Oy sold its Vammas airport snow removal equipment product rights to Hagie Manufacturing Company (USA) on 10 March.
Patria Weapon Systems Oy was merged with Patria Vehicles Oy, and accordingly Patria Weapon Systems Oy was dissolved on 31 March. Patria Vehicles Oy’s company name was changed to Patria Land & Armament Oy on the same date.
Patria Vammas Oy’s ground support equipment business was sold to Laweco Maschinen- und Apparatebau GmbH (Germany) on 1 September.
Capital expenditure
The Group’s gross capital expenditures, excluding acquisitions, totalled EUR 16.6 million (EUR 8.5 million).
Research and development
The Group’s expenditure on research and development during the review period amounted to EUR 24.5 million (EUR 34.9 million), representing 6.3 % (9.5 %) of the net sales. The most significant research and development areas included development of new generation mortar systems, armoured wheeled vehicles and ammunition.
Personnel
During the review period the Group employed an average of 2 816 (2 624) persons. At the end of the review period the personnel totalled 2 830 (2 736).
Group management
Mr. Jorma Wiitakorpi, M.Sc (Eng), acted as President and CEO of Patria Oyj until 18 August 2008. On 18 August 2008 Mr. Heikki Allonen, M.Sc (Eng), was appointed President and CEO of Patria Oyj as of 18 August 2008. After his appointment, Mr. Heikki Allonen resigned from the Board of Directors of Patria Oyj.
Business Segment Review
Land Solutions Business Segment develops and delivers advanced armoured wheeled vehicles, 120 mm mortar systems and ammunition products as well as their life-cycle support services.
The Business Segment’s net sales for January – September amounted to EUR 286.4 million (EUR 276.2 million). The operating profit was EUR 19.7 million (EUR 26.3 million), representing 6.9% (9.5%) of the net sales. The decrease in operating profit compared to the previous year was due to the Land and Armament Business Unit.
In May the National Bureau of Investigation of Finland started pre-trial investigations concerning former Patria Vehicles Oy’s vehicle deal in Slovenia (2006) and former Patria Vammas Oy’s (later Patria Weapon Systems Oy) howitzer deal in Egypt (1999) due to suspected bribery and other malfeasances. The pre-trial investigations are still ongoing.
Systems and Services Business Segment provides life-cycle support services for aircraft and helicopters mainly for military and governmental customers in the Northern European region. The Business Segment also supplies pilot training and provides systems for command & control and situational awareness as well as systems integration.
The Business Segment’s net sales for January – September amounted to EUR 78.3 million (EUR 68.8 million). The operating profit was EUR 4.5 million (EUR 2.6 million), representing 5.8% (3.7%) of the net sales.
Both the Aviation and Systems Business Units contributed to the increase in net sales, but the higher operating profit resulted from the Systems Business Unit’s improved performance compared to last year.
Other Operations Business Segment includes the Aerostructures Business Unit, which designs and manufactures advanced composite aerospace structures, Millog Oy and the Group support functions.
The Business Segment’s net sales for January – September amounted to EUR 33.7 million (EUR 37.1 million). The operating profit was EUR -6.5 million (EUR -4.3 million). The decrease in operating profit was due to weaker profitability in the Aerostructures Business Unit as well as increased expenses in Millog Oy and the Group support functions.
Outlook
The net sales in 2008 are expected to be approximately on the same level as last year, but the operating profit is estimated to be lower than in 2007. Furthermore, there are risks and uncertainties related to certain delivery projects of the Land & Armament and Aerostructures Business Units, which may have a negative impact on the Group’s operating profit during the remaining part of the year.
Helsinki, 24 October 2008
Patria Oyj
Board of Directors
This review has not been audited.
Contact persons:
Mr Heikki Allonen
President and CEO
Tel. +358 20 469 2001
Mr Kai Nurmio
Executive Vice President, CFO
Tel. +358 20 469 2020
Mobile: +358 40 869 2020
Patria is a defence and aerospace group with international operations delivering its customers competitive solutions based on own specialist know-how and partnerships. Patria is owned by the State of Finland and the European Aeronautic Defence and Space Company EADS N.V.
Interim report figures
Further information: www.patria.fi
