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Weather in summer 2009 and development programme crucial for Vapo’s earnings

The turnover of the Vapo Group in the January-March 2009 period was EUR 181.3 million (EUR 182.6 million in the comparable period in the previous year). Operating profit amounted to EUR 20.7 million, or 11.4 per cent of turnover (EUR 16.5 million, 9.1%). The Vapo Group posted poor earnings for  last year, due to two poor peat production seasons and a collapse in profitability in the sawmill industry. The improved trend in earnings in the first quarter of 2009 is due to earnings improvements in all Businesses apart from Vapo Timber Oy. Earnings for the whole year will be crucially affected by the success of peat production in the 2009 season. In order to safeguard earnings the Group launched a 2-3 year development programme to adjust the general cost level, the aim of which is to save EUR 6-10 million of costs annually.

The turnover of Local Fuels in the January-March 2009 period was EUR 74.3 million (EUR 69.3 million) and operating profit amounted to EUR 18.0 million (EUR 14.2 million). Peat has maintained its position in local fuel markets and demand was good, although costs were increased by a regional shortage of peat, quality problems and long transport routes. Deliveries of energy crops quadrupled to 35 GWh, more than the energy output from wind power.

Pellets posted turnover of EUR 33.4 million (EUR 30.6 million) and a positive operating profit of EUR 0.9 million (EUR -0.7 million). The supply overhang in pellets has been partially worked off and prices have stabilized, although lower prices for competing fuels and raw material bottlenecks continue to act as a brake on improved profitability.

Turnover in the Heat and Power Business was EUR 30.4 million (EUR 27.1 million) and operating profit amounted to EUR 5.7 million (EUR 5.3 million). Growth in energy sales was constrained by a general decline in energy consumption by customers. Interest in pellet heating remained at a high level.

Turnover in the Garden and Environment Business was EUR 26.9 million (EUR 28.7 million) and operating profit amounted to EUR 3.6 million (EUR 2.2 million). Consumer and landscaping activities progressed well, whilst sales of raw materials and bedding were restrained by poor production in the 2008 season. The economic downturn has been reflected in demand from greenhouse growers.

Vapo Timber Oy posted turnover of EUR 19.1 million (EUR 30.2 million) and an operating loss of EUR 3.8 million (EUR -0.2 million). The poor market situation has continued, with selling prices well below the previous year. Low market prices combined with high roundwood prices are currently a barrier to profitable activities. Production cutbacks remain in place at Vapo’s sawmills.

Growth in turnover and earnings for 2009 will be crucially dependent on the success of peat production in the upcoming season.

More information: Managing Director, Matti Hilli, Vapo Oy, tel. +358 40 500 9549