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Sawmills restricted Vapo’s result

The turnover of the Vapo Group in the first half of 2009 totalled EUR 313.9 million, down from EUR 337.7 million a year earlier. Operating profit was EUR 25.5 million, 8.1% of turnover (19.9 million, 5.9%).
The demand for local fuels (peat, wood and energy crops) has remained good and new peat contracts worth several TWh are being negotiated. Peat sales were restricted by a regional shortage of peat and profitability was hampered by the higher production costs and lower heat value of the peat due to two consecutive rainy production seasons. Production in summer 2009 has started normally and stock levels are returning to normal.
The Pellet business results continued to develop positively, although the first half of the year still showed a loss. The oversupply situation is levelling out and price levels have rebounded. Raw material shortages are now becoming a growth limiting factor. Production cutbacks in the sawmilling industry are slowing down improvements in profitability.
In the Heat and Power business, falling power consumption by industrial customers reduced the growth in sales of energy products. Pellet heating increased in popularity. Five new pellet heating plants started up in the first half of the year and eight more are under construction. Agreements for four new pellet heating plants have been signed in Poland.
The Garden and Environment business saw an improved result due to good sales of consumer and landscaping products. On the other hand, growth was impeded by a shortage of raw materials and the weakened greenhouse grower market due to the general economic situation.
The market situation in the sawmilling industry continued to be very poor. Sales prices of sawn timber remained a fifth below 2008 levels in the first half of the year. Demand from traditional export markets has declined. The reduced roundwood supply has restricted production levels. Roundwood prices have continued to fall slightly, although the prices are still too high in view of the financial situation of the sawmills. There is no sign of a turn for the better and substantial production cutbacks will remain in force.
The average number of employees in the first half of the year was 1,503 (1,780).
The demand for biofuels is expected to remain good, although the general economic situation may have an effect. The turnover and profit for 2009 will essentially depend on the success of peat production this summer.
A development programme was launched in March 2009 to reduce the Group’s general cost levels and to safeguard earnings. The aim is to achieve annual savings of EUR 6–10 million.
Shareholdings and administration
On 24 June 2009, Osuuskunta Metsäliitto sold its 49.9 per cent share in Vapo Oy to a consortium led by EPV Energia Oy, which adopted the new name of Suomen Energiavarat Oy.
At an extraordinary shareholders’ meeting, Kari Jordan, Martti Asunta and Markku Melkko submitted their resignations from the Board of Directors and three new members were appointed in their place for the remainder of the term: Perttu Rinta, Managing Director, Hannu Linna, Managing Director, and Risto Kantola, Managing Director. Rinta was elected the Deputy Chairman of the Board.

More information: Matti Hilli, Managing Director, Vapo Oy, +358 (0)40 500 9549