A year of change and adaptation Raute 2009 ANNUAL REPORT 2009 Growth follows adaptation. Vision Raute's vision is to be the world's leading supplier of technology and services in its field. Mission Raute generates added value for its customers' businesses by supplying state-of-the-art technology and services to facilitate the profitable and environmentally sustainable production of wood products. Values · The customer · Trust in people · Continuous development · The environment 2 CONTENTS BUSINESS REVIEW Business review Raute in brief Review by the President and CEO Operating environment Strategy Business review Product development Personnel Environment Financial review Year 2009 in brief Corporate Governance Corporate Governance Risks and risk management Board of Directors Executive Board Information to shareholders Stock exchange releases and announcements Addresses 4 6 8 10 12 16 18 20 22 26 30 32 34 36 38 39 4-21 CORPORATE GOVERNANCE FINANCIAL REVIEW 22-25 26-38 Raute's financial statements have been published as a separate electronic publication on the company's webpage at www.raute.com. It can be ordered in electronic format or as a printout by email: ir@raute.com or by phone: +358 3 829 11. 3 BUSINESS REVIEW: RAUTE IN BRIEF Raute ­ products and services STATE-OF-ThE-ART TEChNOLOGy ANd VERSATILE SERVICES ThROUGhOUT ThE LIFE-CyCLE OF ThE CUSTOmER'S INVESTmENT. aute is a globally operating technology corporation and a partner to its customers throughout the life-cycle of their investments. Raute manufactures complete mills and production lines, as well as individual machines and equipment for the veneer, plywood and LVL (Laminated Veneer Lumber) industries. Raute's technology offering covers the customer's entire production process, ranging from raw material processing to the finishing and packaging of end products. Additionally, Raute's total service concept includes technology services, such as maintenance, spare parts services, equipment modernization, consulting, training and sales of reconditioned machinery. The Group has production units in Finland, Canada and China. The company's sales network has a global reach. Raute's net sales in 2009 totaled EUR 36.6 million. The company had 524 employees in eight countries. The company's shares have been listed on the NASDAQ OMX Helsinki Ltd since 1994. R services for the veneer, plywood and LVL industries throughout all stages of the investment life-cycle. The customers' needs are the starting point for continuous research and development. Raute's wide product and service offering covers the entire production process from the planning stages to maintenance and modernizations based on contracts. Close continuous co-operation with the customer enables the long-term development of the customer's processes and end products. Raute's expertise and solid experience within the field as well as close co-operation with the customers are the basis for development work. facts Project deliveries · Complete mills for the veneer, plywood and LVL industries · Production lines for the above-mentioned mills, such as peeling, drying, lay-up and pressing lines · Individual machines and equipment Technology services · Maintenance · Spare parts services · Modernizations · Consulting · Training · Reconditioned machinery project deliveries Raute is able to deliver mill-scale, highly automated projects for the veneer, plywood and LVL industries. This provides a competitive advantage in comparison to other operators in the field. Long-term experience and comprehensive competence are also significant advantages in smaller projects. technology services Raute's technology services comprise basic services, value-added services which improve the equipment base or operations, as well as partnership ser- Versatile products and serVices Raute offers versatile technology and vices based on close co-operation. Proactive and systematic maintenance in addition to modernizations considerably increase the life-cycle of investments. Customers whose production equipment has been delivered by Raute form the primary customer base for technology services. more information on Raute's financial development on pages 22­25. Raute's financial statements have been published as a separate electronic publication on the company's webpage at www.raute.com. 4 Raute's customers' products: veneer, plywood and LVL RAUTE'S CUSTOmERS manufacture veneer, plywood and LVL (Laminated Veneer Lumber). Veneer and plywood are considered very old products, the production of which dates back hundreds of years. Plywood is manufactured either from hardwood or softwood veneer. Up to a third of the world's plywood is manufactured in China. The next biggest areas are North America and South-East Asia and the Pacific area. Plywood production is increasing in areas where quickly growing plantation wood is available as a raw material. The most important end-use for plywood is in construction, where it is used as forms for concrete casting and as a diverse interior decoration material. Other important uses for plywood, in addition to construction, are transportation vehicles, in which plywood is used for the interior fittings of trailers and in the tanks of LNG tankers. Plywood is an economical, sturdy and low-noise alternative to aluminum and steel. It also does not expand with temperature increases. LVL, developed in the 1970s in North America, is a newer product. The U.S. and Canada still account for more than 90 percent of the world's LVL. Raw materials used for LVL include various pine and spruce species, and its primary end use is in construction, particularly in load-bearing structures. It is a more environmentally friendly alternative to steel and concrete. LVL is especially popular in wood construction in North America. VENEER is a thin, sheet-like wood product, peeled or sliced from a block. PLyWOOd is a wood panel product, manufactured by crossbonding at least three veneers, each laid with its grain at right angles to adjacent layers. LVL (Laminated Veneer Lumber) is a bar-like structural wood product, created by gluing veneers together, laid one on top of and after the other with the grain running in the same direction. 5 BUSINESS REVIEW: REVIEW By ThE PRESIdENT ANd CEO A year of change and adaptation 2009 CAN BEST BE dESCRIBEd AS A yEAR FILLEd WITh ChANGES ANd AdAPTATION mEASURES. A t the end of 2008 it became apparent that Raute's slump in the markets would be much greater than we had believed up until that point. The flexibility that we had achieved in previous years through structural changes was not enough for us to adapt to the exceptionally fast, strong and long-lasting downturn that was seen in demand. We had no choice but to extend the adaptation measures that we began at the end of 2008 into 2009. The most obvious and distressing measures were the extensive temporary lay-offs, affecting our entire personnel. At the same time, however, we implemented some development projects which are very important for Raute's future. low order book Our net sales fell significantly in 2009, by 63 percent. The fall is attributed to a low number of new orders, amounting to EUR 35 million. Our order book in 2009 was at the lowest level in Raute's history, at times reaching as low as EUR 10 million. The biggest challenge of the financial year was having the ability to react quickly and efficiently to the sudden decline in production. The difficulties resulted from the fact that customers in all market areas faced similar problems. The demand for wood-based panel products decreased tremendously. Many mills recorded a capacity utilization rate of less than 50 percent and, ac- cording to my estimations, the average rate was only 70 percent. In such a situation, there is obviously no need to invest in more capacity. Due to the low utilization rate of production machinery, there was a clear reduction in the need for spare parts and maintenance. Demand for Raute's technology services, which are assumed to be more immune towards market fluctuations, decreased strongly as well. Competition between our customers stiffened as the markets dwindled. In such a situation, our customers would typically launch projects to improve their existing production capacity and improve their competitive advantage. The crisis in the financial markets, however, led to more stringent conditions placed on financing, which in turn limited such efforts in many markets that are crucial to Raute. ticular situation and needs. The reorganization also means that customers can access all of Raute's products and services in the most convenient way possible. In our internal operations we united the resources of project deliveries and technology services under the same operative leadership, allowing us to ensure sufficient competence in all of our operations, as well as flexibility in how we use our resources ­ even during times of reduced production levels. In our North American unit we launched a significant development project. We are developing our operations to better respond to the market development we forecast for the coming years. Overall production of veneer-based wood products will not grow significantly in North Ameri- preparing for the future Even in the prevailing market situation, we did not just settle for lowering our costs as a means of adjusting to the reduced demand. We developed Raute's product offering, organization and operating processes in response to the changing market situation. All of Raute's customer service personnel now work in customer group-based organizations. The change means that we can offer our customers the services of a customer team that is familiar with their par- We continued to develop products and services which will help our customers boost their production without need for huge investments. 6 ca. Instead, considerable focus will be placed on increasing the efficiency of production and the quality of end products. Projects in which our customers strive to achieve these goals require even more flexibility, efficiency and cost-effective services from Raute. We also actively continued to develop products and services that have a fast payback period and which will help our customers to boost their production without the need for huge investments. We see even more demand in the future for products and services that extend and boost the life-cycle of our customers' investments. improving the competitiveness of our customers' existing capacity. Since implementing our renewals, Raute is more prepared than ever to embark on both paths of development ­ increasing the value of our new customer base and responding to the redirection of our traditional customers' demands. past year. Raute's struggles have also posed challenges to many of you. The only way to go from here is up. waiting for a definite upswing At the end of 2009, we received considerably more orders than earlier in the year and our order book situation was looking up. I will not, however, go so far as to say that on the basis of these orders, Raute no longer faces a weak market situation. As with many other projects, these new projects have been under negotiation for months, some for even over a year. An improved order book gives us a better start for 2010 than we would have anticipated a few months ago. Our situation is still not normal, however. This year will also be a very challenging one for Raute. Due to last year's low reference level, our growth will look good on paper, but our profitability in 2010 will not rise to the level we hope for in the long term. I would like to thank our customers for the confidence they have shown in Raute, all the while themselves trying to operate in a very difficult market situation. And my deep gratitude goes out to all Raute employees for the good work they contributed during trying circumstances, and for showing an understanding attitude during tough adaptation measures. My thanks also go out to our partner network and stakeholder groups for the Tapani Kiiski President and CEO changes will serVe future needs The current recession is leaving its mark on Raute's operating environment. Demand for plywood and LVL technology must surpass that of 2009. The focus of business in general and Raute's opportunities for growth, however, will be transferred to new areas. In these new markets, our customers' valuations and criteria for decisionmaking are somewhat different than in our traditional markets. If we want to achieve the same status that we have in our traditional markets, Raute must be able to undergo rapid change. As a result of the recession, we need to adjust, in the short term, to being a smaller and more adept company than we have been in recent years. The only way we can reach our previous level is by answering to the needs of our new customer base, and for that we need both new products and new service capabilities. Even in our traditional markets demand is increasingly being focused on services and on 7 BUSINESS REVIEW: OPERATING ENVIRONmENT The whole world as market area RAUTE'S CUSTOmER INdUSTRIES mANUFACTURE WOOd-BASEd PANEL PROdUCTS, WhICh ARE mAINLy USEd IN INVESTmENT COmmOdITIES. R aute serves the veneer, plywood, and LVL (Laminated Veneer Lumber) industries with a comprehensive, global technology and service offering. Their most important customers are the construction, transport, furniture and packaging industries. Raute's customers are susceptible to fluctuations in the fields of construction, housing-related consumption, international trade and transportation. In addition to the demand for their end products, the production capacity building of Raute's customers is governed by the availability and location of raw materials. Increasing environmental awareness, rising energy prices and the increasing prosperity of developing countries affects Raute's demand, either directly or indirectly, via its customer industries. competitiVe situation Raute is the global market leader in its largest customer sector, the plywood industry, with a 15­20 percent market share. Raute's position in the LVL industry is especially strong, as approximately half of the LVL manufactured in the world is produced on machines supplied by Raute. Raute's competitors are mainly small or medium-sized companies that operate locally or regionally and mainly focus on only one or a few processes and technologies. Raute's competitive advantage lies in its clear focus on serving the wood products industry exclusively, which enables the company to offer customers unique competence for enhancing processes and generating added value. Raute's comprehensive product and service offering and ex- 8 Increasing environmental awareness and more stringent norms TRENdS IN ThE OPERATING ENVIRONmENT · Efficient use of raw materials Wood becoming more common as a building material · Use of renewable plantation trees as a raw material · Standardization and quality Continuous improvement in the cost-effectiveness · Efficient use of raw materials · Investing in more efficient · Increasing popularity of renewable requirements for products · Environmentally sound processes · Reduced emissions · Outside pressures are increasing raw materials and products · Increasing use of value-added wood products, such as LVL, in building; increasing use of veneer-coated products and plywood in interior decoration due to more stringent norms, which in turn will bring new business opportunities production processes · Production plants are getting bigger Energy prices rising · Energy-efficient solutions · Making use of by-products developing countries prospering · As the standard of living rises, increasing investments will be made in construction and housing · Increasing interest in automation, resulting from processes · Using oil-based additives, and especially glue and surface treatments, more efficiently also in emerging markets · Occupational safety and Raute's focus on serving the wood products industry exclusively is a competitive advantage for Raute and its customers. ergonomics becoming more important tensive experience help customers to improve their productivity, profitability and competitiveness. Year 2009 In general, due to the economic recession and especially because of the difficult situation faced by the construction and transport industries, the demand for products from Raute's customers was low in all of the company's significant market areas. This caused a delay in the most significant investment decisions in the plywood and LVL industries. Customers' low capacity utilization rates also meant that the demand for technology services was low. The recession has changed customers' criteria for investments. The focus of operations has also shifted to new areas, where the valuations and purchasing criteria are different. Customers are focused on a smaller, faster payback period on their investments. In the current situation, customers pay particular attention to the return on investment in their investment decisions, and they aim to lower production costs in relation to the amount of end product produced in order to secure their competitiveness. Key factors are using raw materials more efficiently, consuming less glue and energy and using them more efficiently. more information on the development of Raute's market areas on pages 12­15. 9 BUSINESS REVIEW: STRATEGy Industry leader through partnerships that last throughout the investment's life-cycle RAUTE IS A GLOBALLy OPERATING TEChNOLOGy COmPANy WhOSE CORE COmPETENCE LIES IN ThE PROdUCTION PROCESSES OF VENEER, PLyWOOd ANd LVL (LAmINATEd VENEER LUmBER). aute offers state-of-the-art technology and services for the profitable and environmentally sound production of wood products. Raute's objective is to be the world's leading supplier of technology and services in its field and to be a partner throughout the life-cycle of its customers' investments. The cornerstones of the company's strategy are: the ability to serve customers globally, a broad technology offering, full-service concept and long-term development of operations. R The company has defined three key strategic objectives for achieving its strategic intent. 1. Continuous improvement of profitability Raute focuses on its core competencies, i.e. production technologies for veneer, plywood and LVL. Profitable operations are based on competitively priced products and services that significantly benefit the customer. The timing of large individual projects can have a significant impact on a company's profitability in the short term. 2. Enhanced adaptation to cyclical economic fluctuations Raute's goal is to adapt to cyclical economic fluctuations by developing its partner network, by offering products and services for all stages of the lifecycle of the customer's investment, by boosting its own operations, by developing its product offering and by improving its know-how. 3. Controlled growth Raute aims to grow its business operations by introducing to the market innovations that will improve customers' STRATEGIC OBJECTIVES Continuous improvement of profitability · Adaptation to cyclical economic fluctuations · Controlled growth · AdAPTATIOn TO CyCLICAL ECOnOMIC fLUCTUATIOnS Emphasis between the key stategic objectives varies according to changes in the market situation. GROWTH PROfITAbILITy 10 Raute's ability to respond to growing demand once the markets recover will be excellent. competitiveness and by developing its technology services offering. Regional growth is being sought in emerging markets. New production capacity is being built up close to raw material reserves and in places where the current production capacity technology level is too low to enable profitable production. Raute's financial goals: · To improve profitability and retain a good level over the entire economic cycle. · To increase sales faster than the market growth rate. · To maintain good financial solvency and offer investors a competitive return. strong competitiVe position as the economY recoVers In 2009, the foundation for Raute's fu- ture market position was established, and the company's competitiveness, growth opportunities and profitability for the long term were improved. This reorganization is called "One Raute". Product development is aimed at products and services that have a fast payback period and which will allow Raute's customers to, rather than increasing their capacity, improve their competitiveness and profitability without major investment, also in the short term. Operational models have also been revised. Customer service has improved thanks to the new customer organization, and the service offering has been expanded and enhanced. Operations have been actively adapted to respond to the weakened market situation, without, however, jeopardizing our service and delivery capabilities. Thanks to its strong market position and the development efforts made, Raute's ability to respond to growing demand once the markets recover will be excellent. Customers appreciate comprehensive competence and strong technology development in their strategic investments aimed at ensuring their ability to deliver and provide services. The competitive edge provided by Raute's technology plays an important role when customers select their suppliers. more information on Raute's business operations on pages 12­15 and on the financial development on pages 22­25. 11 BUSINESS REVIEW: BUSINESS REVIEW Economic recession RAUTE'S NET SALES IN 2009 WERE EUR 36.6 mILLION (mEUR 98.5). BUSINESS OPERATIONS WERE GENERATEd By PROJECT dELIVERIES ANd TEChNOLOGy SERVICES RELATEd TO ThE WOOd PROdUCTS TEChNOLOGy BUSINESS. PROJECT dELIVERIES ACCOUNTEd FOR 60 PERCENT ANd TEChNOLOGy SERVICES FOR 40 PERCENT OF NET SALES. slows down markets uation faced by the construction and transport industries, the demand for products from Raute's customers was at a low level in all of the company's significant market areas. Customers were not keen to invest. Demand for technology services was also weak due to the low capacity utilization rates in our customers' mills. A comparable reduction took place in the need for maintenance and spare parts. Many of our customers need investments as a means of boosting their production capacities, but the payback period for smaller investments is long too, as a result of the low capacity utilization rates. In addition, the availability of financing, security demands, price and other conditions have further hampered the actualization of investments. Only after a delay will we begin to see the effects of a recovering economy on the demand for Raute's products. In Raute's view, the focus in traditional markets increasingly shifts to developing the competitiveness of existing production capacity. As the focus of economic activity begins to shift to emerging markets, plywood production will also shift to new areas. In these new markets, customers' valuations and criteria for decision-making are somewhat different than in Raute's traditional markets. In order to achieve the same status as in its traditional markets, Raute must be able to undergo rapid change. New products and concepts are required, and operations must be even more customer-focused and flexible. P roject deliveries form the foundation of Raute's business. Project deliveries encompass complete mills, production lines, and individual machines and equipment. Technology services include maintenance, spare parts services, equipment modernization, consulting, training, and sales of reconditioned machinery. Project deliveries pave the way for technology services sales and technology services correspondingly pave the way for project delivery sales, thus creating a basis for long-term partnerships with customers. Raute operates worldwide, taking the local needs of its customers in- to consideration. Raute's strengths include comprehensive knowledge of its customers' business and wood-based panel production processes. Raute's customers value the company's substantial investments in product development. Year 2009 was challenging in all market areas. Raute's customers, manufacturers of wood-based panel products used in investment commodities, are highly affected by fluctuations in the fields of construction, housingrelated consumption, international trade, and transportation. In general, due to the economic recession and especially because of the difficult sit- competitiVeness through product deVelopment In 2009, the focal point of Raute's product development was on devel- 12 Read more about Raute's products, services and product development on pages 16­17. oping products to serve the modernization needs of customers' existing production lines. By modernizing the machine base, customers will boost production capacity and their competitiveness and profitability already in the short term. Measured according to net sales, the most important market areas in 2009 were Europe and Russia. nET SALES by MARKET AREA, EUR million 120 000 100 000 80 000 60 000 40 000 20 000 0 russia Russia is a strong market area for Raute. The strengths of the Russian plywood industry are the abundant raw material supply and a cost-effective and competent workforce. A quarter of the world's forests are located in the area. In addition to its domestic market, Russian plywood mills supply plywood around the globe. Birch is the primary raw material used in the manufacture of plywood, but spruce, pine and larch are also used to some extent. The main players in the sector are established Russian plywood manufacturers, but new companies are also set to enter the sector. Well-established plywood manufacturers have, in recent years, invested in developing their production and modernizing their production facilities in response to the stiffening competition. New players in the industry are building entirely new and state-of-the-art production facilities. Raute is the market leader in plywood technology deliveries in Russia. Raute's special strength is experience in the operating methods of the Russian plywood industry, providing customer service in Russian and a large installed machine base. Good, longterm customer relationships allow for the long-term development of customers' production processes. In 2009 most Russian plywood mills had low capacity utilization rates due to the economic recession. The low capacity utilization rates, in turn, meant that spare parts and maintenance services were used con- new operating model improVes customer serVice In early 2009, Raute's sales, project and service personnel involved in customer service were combined into market area and customer teams according to customers. The new operating model improves, speeds up and harmonizes Raute's customer services and increases the efficiency and flexibility of operations. The new customer-based operating model allows fast and customer-focused service, while taking into account the special characteristics and needs of each customer. In fall of 2009, the development of the organization and operating models was continued by unifying the operative functions related to project deliveries and technology services under the same leadership. This enables the flexible and efficient use of competence and resources in various situations. 2005 2006 2007 2008 2009 Europe Russia north America South America Asia-Pacific By modernizing the machine base, customers boost production capacity, competitiveness and profitability already in the short term. siderably less than previously. At the end of the year, wood supply problems resulting from poor harvesting conditions also limited some customers' operations. The most important order of 2009 was a contract from Russia in December concerning new production lines for a plywood mill. In addition, smaller orders were received from the area, for example for drying lines. Raute's goal is to increase local maintenance operations in Russia and to strengthen maintenance co-operation with its customers. Plywood mills are increasingly focusing on developing existing production processes by modernizing their current machine base. Development work on production processes is being carried out systematically together with customers. Russia's considerable raw material reserves and its developing economy 13 BUSINESS REVIEW: BUSINESS REVIEW provide assurance that the area still has growth opportunities for Raute. europe Measured by net sales, Europe is one of Raute's most important market areas. Finland has traditionally been a strong plywood manufacturer. However, over the past few years, the focus has been shifting to the Baltic and Southern Europe. The European market area is fragmented, and European plywood manufacturers are focusing on producing high value-added, high-quality end products. The level of the mills' technology is also at a high level. The most important raw materials for plywood production are birch, spruce, poplar and beech. The markets for plywood can primarily be found in Europe, but special grades of plywood are also sold to global markets. The markets for LVL (Laminated Veneer Lumber) made from pine and spruce are worldwide. The difficult economic situation of 2009 also affected the operations of Raute's customers. The uptimes of customer mills were at a low level. Customers focused on improving their production efficiency and competitiveness by developing their existing machine base by carrying out modernizations. There were some small signs of increasing demand towards the end of the year. The demand for technology services was also low, due to the low capacity utilization rates of customer mills. Among the most important orders from the area were drying and composing lines and a peeling line modernization. Raute is seeking growth in Europe by strengthening customer cooperation and by expanding the service offering towards the long-term development of existing production to improve quality, efficiency and competitiveness. asia-pacific Plywood production in Asia has traditionally been based on the use of tropical wood species, such as meranti and keruing, as raw materials. The use of small diameter plantation wood, such as acacia and albizzia, however, is increasing as more emphasis is being placed on environmental aspects. In the Pacific area, plywood is mainly produced from various pine and eucalyptus species. There are numerous plantation forests in South-East Asia, Australia and New Zealand, and companies in this area are expected to invest in products with higher added value in the future. China is the most significant global plywood manufacturer, whose plywood industry skyrocketed in the early 2000s. China's production technology, for a large part, is still at a very low level. In addition, local raw material reserves are very limited and plywood production is largely reliant on imported wood from, among others, Russia and the Pacific area. Most of the plywood manufactured in the Asia-Pacific area is used within the area. The biggest consumer country, China, manufactures nearly all of the plywood used by the country and India is one of the largest importers of plywood. Plywood is also exported to the Middle East, the U.S. and Europe. Raute is a pioneer in the processing of small-diameter logs. With Raute's technology, production processes that use tropical wood species can be renewed to make use of plantation wood as the raw material and produce high quality plywood. Also in the Asia-Pacific area the difficulties experienced by the forest industry continued in 2009, and plywood production in China and South-East Asia fell by as much as 40 percent. The uncertainty was also reflected in Raute's customers' postponements in decision-making, and no new project orders were received in the area in 2009. The area's plywood manufacturers are expected to focus increasingly on developing their existing production facilities in the future. On the other hand, abundant plantation forest resources also enable new investments. Further processing, in particular, will play an important role in terms of the industry's competitiveness and the markets' reorganization after the economic crisis. Raute will 14 2010 is expected to be demanding, although there are already some small signs of recovery in the markets. In the future, wood production from plantation forests will increase and further growth potential can be seen in South American markets. The market area will shift its focus to investments in increasingly modern production technology. north america North America is the world's biggest producer of softwood plywood and LVL. The area also has a considerable veneer and plywood industry utilizing hardwood. The market area is broad and production is strongly concentrated with large forestry industry corporations. Five big players in the plywood market account for 65 percent of the plywood produced and 85 percent of the LVL produced. Demand is primarily driven by the U.S. economy, particularly housing construction. The economic recession and financial crisis have greatly affected the area, and construction activity has plunged by more than 70 percent from the 2006 level. Construction is not expected to revive and positively focus on offering its customers products and services that will allow them to increase and develop the efficiency of their production processes and raise the added value of their products. south america Plantation-based plywood production has increased greatly in the 2000s in South America. Raute is the market leader in the area in terms of project deliveries related to the construction of new plywood production capacity. Thanks to good forest management and a climate that encourages tree growth, high-quality raw material, mostly pine and eucalyptus species, is highly available for use by the plywood industry. Among the strengths of the South American plywood industry are also moderate labor costs. Most of the plywood produced is exported to North America and Europe, but the area's own consumption of plywood is also on the increase. The utilization rates of South America's biggest plywood mills have been high, even during the economic recession, which is proof of the mills' competitiveness in the global market. In 2009, Raute carried out several modernization projects and full production capacity was achieved in the start-up of two plywood mills. affect demand for wood products until 2011 or 2012. 2009 was a challenging year for Raute, due to the weak economic situation in the U.S. and particularly because of the slowdown in housing construction. In the difficult financial situation, the utilization rates of customer mills have been at a low level and poorly productive mills were permanently shut down. Where Raute was concerned, the weakening of the U.S. dollar against the euro made the market situation even more difficult. Investment activity has been very low and nearly exclusively focused on production machinery modernizations. Orders in 2009 consisted of various types of modernizations. 2010 is expected to be demanding, although there are already some small signs of recovery in the markets. Raute's Canadian unit is moving to new operating premises and the production machinery will be modernized to better respond to the focus that is being placed on modernizations and maintenance activities. 15 BUSINESS REVIEW: PROdUCT dEVELOPmENT R&D brings RAUTE PROdUCES AddEd VALUE FOR ITS CUSTOmERS By CONTINUOUSLy dEVELOPING ITS TEChNOLOGy ANd SERVICE OFFERING. roduct development has annually accounted for 3­4 percent of Raute's net sales. Product development accounted for 6.7 percent (4.4%) of net sales in 2009. The percentage was unusually high due to the fast fall of net sales. The customer's needs are the starting point for product development: all new solutions are finalized co-operatively with the customer through various types of pilot projects. This results in a combination of the customer's expertise with Raute's competence and in new technologies being tested in production conditions in order to achieve the best possible end result. Product development involves the improvement and further devel- added value to customers opment of existing products and services or the creation of entirely novel products and concepts. Through continuous product development, Raute aims to boost the customer's production processes and maximize the benefits to the customers: the efficient use of raw materials, energy and additives such as glue and coatings, a good, even product quality as well as high productivity. Raute aims for proactive product development. When selecting and planning product development projects, Raute always takes into consideration future developments within the industry as well as within occupational safety and environmental regulations. to savings in energy and labor costs. The focus was on improving the existing production capacity instead of on new construction. In 2009, Raute especially continued to develop products and services that have a fast payback period and which will help boost production without the need for huge investments. Raute's customers' mills have a long operating life and Raute strives to also increase the life-cycle of its machines and equipment through proactive maintenance and modernizations. Most of Raute's products are designed so that they may also be utilized in machines delivered previously by Raute with the help of modernizations, thus achieving considerable improvements in productivity and quality. P raute's r&d focal areas for 2009 In a difficult economic situation, Raute's customers are focusing especially on the recovery of wood raw materials, and reducing their consumption of glue and additives, in addition goal of minimizing enVironmental impacts Raute takes into account the central environmental impacts of the wood products industry from the customers' Most efficient use of rawmaterials RECOVERY + High and even product quality QUALITY + x CAPACITY = PROFITABLE PRODUCTION PRODUCTIVITY Work hours per produced cubic meter 16 PROdUCT dEVELOPMEnT MEUR 7 6 5 % 7 6 5 4 3 2 1 0 point of view. Raute helps its customers to function in a more environmentally sustainable way by improving the efficiency of raw-material use, reducing energy consumption and reducing the use of additives, especially glue. Production lines delivered by Raute usually include a significant amount of analyzing applications and they are highly automated. The high level of automation also improves occupational safety and ergonomics. With the help of advanced technology, production efficiency can be improved, while simultaneously decreasing environmental impacts. Environmentally sustainable technologies are thus economically profitable for both Raute and its customers. In the future, product development efforts will be focused especially on minimizing energy consumption for every cubic meter of plywood produced. Another important focal area for development is the maximization of energy production (heat and electricity) from the plywood mill's byproducts. 4 3 2 1 0 2005 2006 2007 2008 2009 EUR million % of net sales facts Raute's environmental solutions for 2009 included: · Using a small, closed steam chamber for steaming logs instead of a large steam tank. · Saving glue by using a one-sided liquid extruder gluing method. · Sorting based on machine vision in the further processing of veneer. · Maximum utilization of smallerdiameter wood in various process stages. · Minimizing energy consumption especially in the drying of veneer. · Testing the utilization of new raw materials and optimizing of processes. 17 BUSINESS REVIEW: PERSONNEL HR management ensures future competitiveness hUmAN RESOURCES mANAGEmENT SUPPORTS RAUTE'S GOAL TO BE ThE LEAdING TEChNOLOGy COmPANy IN ITS SECTOR. ThE AIm IS TO ENSURE ThE COmPANy'S FUTURE COmPETITIVENESS ANd TO dEVELOP ThE kNOW-hOW OF PERSONNEL. I n 2009, Raute employed an average of 542 persons (585). The number of personnel decreased especially in the Finnish and Chinese units. The decrease in Finland resulted mainly from the lay-offs implemented due to the weakened market situation as well as an increase in the number of personnel retiring. The recruitment of new personnel was at a low level. The personnel turnover was 8.2 percent (10.7%). a Year of organizational renewals New operating methods were developed at Raute throughout the year and the organization was renewed. In the early part of the year the sales, project and service businesses were combined into market area and custom- er teams. The reorganization, called "One Raute," will improve, speed up and standardize Raute's customer service and increase the efficiency and flexibility of operations. In the fall, project and technology services operations were combined and operating methods were standardized to create a more effective whole. The renewals mean personnel resources can now be used more flexibly and the work load is more evenly distributed. Thanks to the successful organizational renewal, Raute's customer service ability remained strong, even in situations of reduced production. work tasks presented an extra challenge to management and supervisory work. Supervisors were supported in their work with regular information, discussion and coaching events according to various themes. The adaptation measures required personnel to be flexible and to make use of a wide range of aptitudes. By rising to the challenge, the personnel showed a high level of commitment and responsibility to the company. customer needs steer competence deVelopment Despite the challenging economic situation, maintaining competitiveness requires continuous development of competence among the personnel. Customer needs determine the direction of development. The focal areas of 2009 were training to support the work of the customer teams that were created as a result of the organizational renewal, and ensuring our future competence, a concrete example of which is the continuation of mentoring activities. In addition, charting in order to recognize our future critical competence was launched. The intention is to develop competence in a more systematic and longterm way. The Raute Future Leader training for new and future supervisors was continued, with the goal of preparing participants to lead individuals and groups, as well as to provide informa- adaptation measures in a tough market situation The effort to adapt to the reduced production situation, which was started in the fall of 2008, continued throughout 2009. The adaptation measures for personnel in Finland consisted of full and temporary lay-offs of various duration, which affected all personnel groups. As an alternative to lay-offs, labor market training was arranged. Short-term lay-offs, or work share programs, were also implemented in North America as a means of adjusting to a fluctuating production situation. The measures were carried out without compromising Raute's ability to deliver, and customers were served without disruption. The practical arrangements required for lay-offs and distribution of 18 PERSOnnEL by COUnTRy China 6.8% Others 2.9% finland 77.2% PERSONNEL* number of personnel Average age Women, % years of experience at Raute new employment contracts Personnel turnover, % Training days/employee 2005 533 44 11 14 39 10 2 2006 540 45 12 14 44 8 2 2007 548 47 12 14 71 13 3 2008 550 45 12 14 53 11 2 2009 524 45 12 14 13 8 1 north America 13.1% *Current employment contracts at Dec. 31. tion on employment issues and strategic leadership. personnel satisfaction at a good leVel Assessing the level of personnel satisfaction was considered important even during the difficult market situation. A personnel survey was conducted in late fall of 2009. The survey charted personnel's perspective on the work situation, supervisory work, Raute as a company and the immediate work environment. The survey revealed that personnel satisfaction at Raute is at a good level: people enjoy working at Raute and they feel that their work is challenging. Raute employees understand their role in executing the strateAVERAGE nUMbER Of PERSOnnEL 600 500 400 300 200 100 0 gy and they value good team spirit. A particularly positive point in the results of the 2009 survey was the improvement in the estimation of supervisory work, which illustrates that the focus placed on leadership and supervisory work has produced results. The emphasis in occupational health care is on preventive measures that maintain the ability to work. EdUCATIOn Of PERSOnnEL basic education 15.4% University 11.4% University of Applied Sciences 16.8% market situation influences hr management The impact of the market situation can also be seen in HR management for 2010. The continued adaptation measures will pose challenges in the daily leadership activities of supervisors, as well as in the personnel's ability to cope and their level of commitment. Supervisory work and leadership will continue to be developed during 2010 on the basis of the feedback received from the personnel survey. The performance-based pay system, which covers all personnel, will be revised. Ensuring competence for the future will be further highlighted. Competence development will be continued according to the development needs that have been outlined. In terms of well-being at work, measures aimed at maintaining and improving physical well-being will be continued. College 27.6% Vocational school 28.8% AGE dISTRIbUTIOn Of PERSOnnEL > 60 years 12.7% < 30 years 11.6% 31­40 years 23.0% 2005 2006 2007 2008 2009 Personnel, on average Effective, on average 51­60 years 23.4% 41­50 years 29.3% 19 BUSINESS REVIEW: ENVIRONmENT Environmentally RAUTE STRIVES TO BOOST ITS PROdUCTION ANd dECREASE ITS ENERGy CONSUmPTION. ENERGy EFFICIENCy BRINGS COST SAVINGS ANd INCREASES ThE PROFITABILITy OF PROdUCTION. sustainable and efficient production T he environmental impacts of Raute's operations are systematically verified. The goal is to create a continually improving and productive work environment and to find the best and most efficient ways to manufacture products and provide services. The environmental impacts of Raute's operations mainly involve waste management, energy use, chemical management and safety. The company follows an environmental management program to manage the potential risks of environmental impacts. The program defines the environmental aspects of the company's operations, as well as objectives and measures aimed at reducing environmental impacts. On a quarterly basis, Raute's upper management follows up on how the goals of the environmental management program are being realized. The Nastola and Jyväskylä production units have ISO-certified quality and environmental management systems. Field surveys are organized at the industrial sites twice a year, with a focus on environmental and safety aspects. The operations and ethical principles of Raute's broad, international network of partners and subcontractors are assessed according to standardized criteria. The aim is to ensure the ethical functioning of the entire production chain. improVing the work enVironment Raute's objective is to further develop its working environment both from a production and safety standpoint. Environmental and safety issues at Raute were maintained at a high level in 2009. The company retained its 90 percent waste recycling rate. Competitive bidding for service providers meant additional cost savings in waste management. The goal is to further develop Raute's waste management and recycling efficiency in 2010. 20 In order to improve the safety of the work environment, training involving heavy lifting and the lifting of personnel was arranged for production employees in 2009. Occupational safety is improved and maintained through monitoring. facts Environment facts from Raute's main production unit in Nastola, Finland emissions VOC emissions from paints and solvents amount to less than 5,000 kg per year. Raute aims to reduce this amount by finding more environmentally sound substances and ones that contain a higher level of solids. greater energY efficiencY In 2010, Raute's goal is to find new ways to improve energy efficiency. The company is committed to the target of a nine percent improvement in energy savings by 2016, as outlined in the energy efficiency agreement of the Federation of Finnish Technology Industries. Raute's energy efficiency was improved in 2009 through the use of compressed air surveys and by optimizing lighting. Total energy consumption at Raute has been decreasing for several years. In 2010, Raute will continue to systematically prevent environmental impacts as part of the company's environmental management program. Monitoring of energy consumption will be stepped up and operations will be optimized on the basis of the results. materials Raute primarily uses steel for its products, as well as small amounts of plastics and rubber-based materials. The products are coated with paints and other coatings. The company's packaging operations use wood products and plastics. energY consumption Raute's electricity consumption in 2009 was approximately 2.9 GWh and heating some 3.8 GWh. waste Raute's total waste in 2009 amounted to approximately 300 metric tons. Steel shavings and other steel debris resulting from production, as well as cutting fluids and oil residues from machinery are recovered accordingly. Wood and plastic waste from packaging is recycled through Raute's cooperation partners. Hazardous waste is methodically collected at designated locations, from where it is taken for further processing. Raute focuses on energyefficient production. water consumption Raute's water consumption in 2009 amounted to approximately 3,000 cubic meters. 21 FINANCIAL REVIEW Year 2009 in brief operating enVironment and demand · Weak market situation of construction and transportation industries due to the economic recession. · Demand for and production volumes of plywood and LVL products remained at a low level. · Production volumes of plywood and LVL adapted to correspond with the lowered demand, least profitable mills were stopped or closed for good. Low capacity utilization rates lowered the demand for maintenance and spare parts services. · No need for investments in new capacity, mill-scale investments were postponed. · Availability and terms of financing limited smaller investments targeting production capacity development. 0 2005 nET SALES, EUR million 120 100 80 60 40 20 2006 2007 2008 2009 nET SALES by PROdUCT AREA, EUR million 120 100 80 60 40 20 0 raute · Order intake at a low level. · Order book remained at a low level. · Net sales declined significantly, 63%. · Operating profit for 2009 negative despite adjustment measures that were carried out throughout the year. · The product offering was developed and the organization renewed to better correspond with the market situation. 2005 2006 2007 2008 2009 kEy FIGURES net sales, MEUR Operating profit, MEUR 2009 2008 36.6 -9.7 -21.6 -28.4 46.0 22 -2.03 5.76 0.00* 524 542 98.5 6.3 19.4 14.0 60.5 24 1.18 8.57 0.70 573 585 10 8 6 4 2 0 -2 -4 -6 -8 -10 Project deliveries Technology services ROI, % ROE, % Equity ratio, % Order book at dec. 31, MEUR Earnings per share, EUR Equity per share, EUR dividend per share, EUR number of personnel at dec. 31 Personnel average OPERATInG PROfIT, EUR million *The Board of Directors' proposal to the Annual General Meeting. Raute's financial statements have been published as a separate electronic publication on the company's webpage at www.raute.com. It can be ordered in electronic format or as a printout by email: ir@raute.com or by phone: +358 3 829 11. 2005 2006 2007 2008 2009 22 Summary of financial statements The complete consolidated statement of comprehensive income and balance sheet are presented in the financial statements, which have been published as a separate electronic publication on the company's webpage at www.raute.com. EUR 1 000 GROUP (IFRS) 1.1.­31.12.2009 36 638 153 795 47 281 -9 695 -195 -9 890 1 749 -8 141 31.12.2009 15 325 42 062 57 387 1.1.­31.12.2008 98 466 95 404 92 624 6 341 539 6 880 -2 157 4 723 31.12.2008 14 491 45 689 60 180 PARENT COmPANy (FAS) 1.1.­31.12.2009 31 356 431 683 39 242 -6 771 -3 842 -10 613 418 1 851 -8 343 31.12.2009 11 715 43 388 55 103 1.1.­31.12.2008 87 713 571 383 82 158 6 509 -259 6 250 355 -2 120 4 485 31.12.2008 14 812 43 323 58 135 INCOmE STATEmENT NET SALES Other operating income Increase (+) or decrease (-) in inventories of finished goods and work in progress Total operating expenses OPERATING PROFIT (LOSS) financial income PROFIT (LOSS) BEFORE TAX Appropriations (fAS) Income taxes PROFIT (LOSS) FOR ThE PERIOd BALANCE ShEET ASSETS non-current assets Current assets TOTAL ASSETS ShAREhOLdERS' EQUITy ANd LIABILITIES Total shareholders' equity Appropriation reserve (fAS) Total liabilities TOTAL ShAREhOLdERS' EQUITy ANd LIABILITIES 23 053 34 334 57 387 34 321 25 859 60 180 21 935 0 33 169 55 103 33 220 418 24 497 58 135 CASh FLOW STATEmENT Operating activities Investing activities financing activities NET ChANGE IN CASh ANd CASh EQUIVALENTS 1.1.­31.12.2009 5 619 -955 2 134 6 798 1.1.­31.12.2008 6 903 -3 080 6 001 9 824 1.1.­31.12.2009 6 586 -2 640 2 995 6 941 1.1.­31.12.2008 5 086 -1 681 6 776 10 181 ORdER InTAKE, EUR million 140 120 100 80 60 40 20 0 2005 2006 2007 2008 2009 ORdER bOOK QUARTERLy, EUR million 80 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 Project deliveries Technology services Q1 Q2 Q3 Q4 23 FINANCIAL REVIEW Financial development EUR 1 000 net sales Change in net sales, % Exported portion of net sales % of net sales Operating profit (loss) % of net sales Profit (loss) before tax % of net sales Profit (loss) for the financial year % of net sales Return on investment (ROI), % Return on equity (ROE), % balance sheet total Interest-bearing net liabilities % of net sales non-interest bearing liabilities Equity ratio, % Gearing, % Gross capital expenditure % of net sales Research and development costs % of net sales Order book, EUR million Order intake, EUR million Personnel at dec. 31 Personnel, effective, on average Personnel, average 2009 36 638 -62.8 30 466 83.2 -9 695 -26.5 -9 890 -27.0 -8 141 -22.2 -21.6 -28.4 57 387 -9 366 -25.6 15 801 46.0 -40.6 1 095 3.0 2 470 6.7 22 35 524 419 542 2008 98 466 -11.1 82 666 84.0 6 341 6.4 6 880 7.0 4 723 4.8 19.4 14.0 60 180 -10 653 -10.8 15 402 60.5 -31.0 3 242 3.3 4 375 4.4 24 67 573 569 585 2007 110 799 4.3 96 759 87.3 8 607 7.8 8 976 8.1 6 601 6.0 29.2 21.1 54 800 -10 794 -9.7 21 116 70.3 -32.5 1 869 1.7 3 969 3.6 56 90 570 560 575 2006 106 206 -2.2 95 789 90.2 4 513 4.2 4 887 4.6 3 632 3.4 18.6 13.1 68 472 -23 539 -22.2 38 696 60.1 -80.3 1 852 1.7 3 765 3.5 77 132 540 546 547 2005 108 627 48.6 78 183 72.0 4 403 4.1 5 461 5.0 4 152 3.8 20.7 15.8 55 435 -10 861 -10.0 28 755 55.7 -41.5 3 798 3.5 3 616 3.3 55 109 533 536 537 EQUITy RATIO And GEARInG, % 90 60 30 0 -30 -60 -90 2005 2006 2007 2008 2009 RETURn On InVESTMEnT And RETURn On EQUITy, % 30 20 10 0 -10 -20 -30 2005 2006 2007 2008 2009 Equity ratio Gearing ROI ROE 24 Share-related data 2009 Earnings per share, EUR Equity to share, EUR dividend per share, EUR dividend per profit, % Effective dividend yield, % Price/earnings ratio (P/E ratio) development in share price (series A shares) Lowest, EUR Highest, EUR Average share price for the financial year, EUR Share price at dec. 31, EUR Market value of capital stock at dec. 31, EUR 1 000 ** Trading in the company's shares (series A shares) Shares traded during the financial year, 1 000 shares % of the number of series A shares Total number of shares Issue-adjusted weighted average number of shares Issue-adjusted number of shares at the end of the financial year 4 004 758 4 004 758 4 004 758 4 004 758 3 814 608 4 003 183 4 004 758 4 004 758 3 866 561 3 814 608 455 15.1 393 13.0 981 32.5 1 088 36.1 1 530 54.2 6.50 8.90 7.29 7.47 29 916 6.24 15.20 12.37 6.40 25 630 12.40 15.45 13.85 14.35 57 468 11.60 17.60 14.03 12.85 51 461 7.60 16.42 11.24 14.24 54 320 -2.03 5.76 0.00* 0.0* 0.0* -3.67 2008 1.18 8.57 0.70 59.4 10.9 5.43 2007 1.65 8.29 1.00 60.7 7.0 8.71 2006 0.94 7.32 0.70 74.5 5.5 13.68 2005 1.09 6.80 0.60 55.1 4.2 13.08 The deferred tax liabilities have been included in the calculation of the key ratios. *Board of Directors' proposal to Annual General Meeting. **Series K shares valued at the value of series A shares. InVESTInG In THE fUTURE MEUR 8 7 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 COnSOLIdATEd CASH fLOW, EUR million % 8 7 6 5 4 3 2 1 0 15 12 9 6 3 0 -3 -6 -9 -12 -15 2005 2006 2007 2008 2009 Capital expenditure, MEUR R&d expenditure, MEUR R&d costs, MEUR Capital expenditure of net sales, % R&d costs of net sales, % 25 CORPORATE GOVERNANCE Corporate Governance general Raute Corporation's operations are based on compliance with the legislation in effect, the standards covered by the legislation, and ethically acceptable operating methods. The Parent company, Raute Corporation, is a Finnish public limited liability company which abides by the principles set by the Finnish Companies Act and The Securities Markets Act and by Raute Corporation's Articles of Association in its decisionmaking and corporate governance. The Board of Directors has issued Administrative Instructions for the company, comprising a charter for the decisionmaking bodies, instructions on the division of responsibilities between the Board of Directors, the President and CEO and the Executive Board, and guidelines for organizing internal control and risk management. Raute Corporation is a listed limited liability company, to which are applied the rules of NASDAX OMX Helsinki Ltd. Raute Corporation is committed to complying with the Finnish Corporate Governance Code for listed companies issued by the Securities Market Association on October 22, 2008 in all other respects except for in the composition of the Appointments Committee. Raute deviates from the Code's recommendation 22 on electing members to the Appointments Committee in that one member is elected to the Appointments Committee from outside the Board of Directors, as per the company's Administrative Instructions, from among the representatives of major shareholders who have significant voting rights. Raute Corporation's Articles of Association, Administrative Instructions, Corporate Governance Statement and other information related to the company's administration and investor relations are available on Raute's website, www.raute.com. Information concerning the Group's administration and risk management can also be found in the Report of the Board of Directors of the Financial Statements. by the Board of Directors and in one newspaper appearing in the company's domicile Lahti and on the Company's website. A shareholder who wishes to exercise his share-based voting rights at the Annual General Meeting shall notify the Company thereof not later than on the day stipulated in the summons to the meeting. This day may not be more than ten days before the meeting. shares and shareholders Raute Corporation's shares are divided into ordinary shares (series K) and A shares (series A). The difference between the series is that a series K share entitles the holder to twenty (20) votes and a series A share to one (1) vote at Annual General Meetings. The series A shares have been quoted on the NASDAQ OMX Helsinki Ltd since 1994. The shares have a nominal value of EUR 2.00. Series K shares can be converted to series A shares under the terms described in section 3 of the Articles of Association. If a series K share is transferred to a new owner who does not previously hold series K shares, other shareholders of the K series have the right to redeem the share under the terms described in section 4 of the Articles of Association. 2009 Raute Corporation's Annual General Meeting was held on April 2, 2009. The Meeting adopted the financial statements for 2008 and resolved to distribute a dividend of EUR 0.70 per share, elected the Board of Directors and the auditors, and decided on their remuneration. The Annual General Meeting decided to amend the Articles of Association, mainly due to the new Limited Liability Companies Act, which came into force on September 1, 2006. The Meeting authorized the Board to decide on the acquisition of the company's own series A shares and the directed issue of a maximum of 400,000 shares. 2009 More detailed information on Raute Corporation's shares and shareholders is provided on pages 36­37. board of directors Raute Corporation's Board's term of office starts at the Annual General Meeting where the Board is elected, and ends at the following Annual General Meeting. The majority of the Board members must be independent of the company, and at least two members in the said majority must be independent of the company's major shareholders. The Board of Directors of Raute Corporation administers the company's operations in accordance with the regulations laid down in the law and the Articles of Association. The Board of Directors also acts as the Board for the Raute Group, which handles and annual general meeting Raute Corporation's Annual General Meeting is held in March­April, but no later than six months from the end of the financial year. The Annual General Meeting elects the Chairman and Vice-Chairman for the Board of Directors, and 3­5 Board members. The Annual General Meeting and an Extraordinary General Meeting shall be called by a notice published in one national newspaper decided 26 decides on all important issues that affect the entire Group or the operations of its units, regardless of whether the issue requires a legal decision from the Board of Directors. The Board of Directors may handle any issue that concerns the Group companies if the Board or CEO of the Parent company deem it appropriate to do so. The Charter and tasks of the Board of Directors are described in the Administrative Instructions and Corporate Governance Statement available on the company's website. In addition to statutory tasks and those defined in the Articles of Association, the Board confirms the company strategy and budget annually, and, based on management reports, monitors the Group's financial status regularly and draws up interim reports. The Board carries out an annual self-evaluation of the work of the Board members and the Chairman of the Board. dance of individual members was as follows: Erkki Pehu-Lehtonen 10/10, Sinikka Mustakallio 11/12, Risto Hautamäki 10/10, Ilpo Helander 11/12, Mika Mustakallio 11/12, Panu Mustakallio 12/12, Jarmo Rytilahti 2/2 and Jorma Wiitakorpi 2/2. The meetings handled the matters listed in the Charter of the Administrative Instructions. The Board carried out a selfevaluation of the term of office 2008 in spring 2009. According to the plan for 2010, the Board of Directors will convene ten times and hold additional meetings if necessary. The Board members' personal data, share and option holdings on December 31, 2009, and the Board's remunerations for 2009 can be found on pages 32­33. Up-to-date share and option holdings are presented on the company's website. nies Act and Raute's Articles of Association. The Administrative Instructions are reviewed annually. The Administrative Instructions are available on the company's website. board committees Raute Corporation's Board has a Working Committee and Appointments Committee which support the Board's work. The Board approves the key contents of the committees' charter, and the committees regularly report on their work at the Board meetings. The Audit Committee's tasks are handled by the Board of Directors. The Board of Directors can also establish other committees. For the preparation of matters of major importance, the Board of Directors appoints a Working Committee from among its members, which includes the Chairman of the Board of Directors, the Vice-Chairman and one Board member. The Board elects an Appointments Committee, which includes the Chairman, Vice-Chairman and one member from outside the Board who is appointed from among the representatives of major shareholders who have significant voting rights. The task of the Appointments Committee is to prepare a proposal concerning Board members for the Annual General Meeting. the companY's administratiVe instructions On 21 June, 2004, Raute Corporation's Board of Directors issued Administrative Instructions for the company. They comprise the Charter for the decisionmaking bodies; instructions on the division of responsibilities among the Board of Directors, the President and CEO, and the Executive Board; as well as guidelines for organizing internal control and risk management to complement the provisions of the Compa- 2009 Raute Corporation's Annual General Meeting on April 2, 2009 elected six members to the Board of Directors. Mr. Erkki Pehu-Lehtonen was elected Chairman of the Board for Raute Corporation, Ms. Sinikka Mustakallio Vice-Chairman and Mr. Risto Hautamäki, Mr. Ilpo Helander, Mr. Mika Mustakallio and Mr. Panu Mustakallio as Board members. All Board members are independent of the company. The Chairman of the Board (Erkki Pehu-Lehtonen) and two Board members (Risto Hautamäki and Ilpo Helander) are independent of major shareholders. The Annual General Meeting of 2009 set the following remunerations for Board members in 2009: EUR 40 thousand to the Chairman of the Board and EUR 20 thousand to each Board member. The salaries and fees paid to the Chairman and Board members totaled EUR 127 thousand in 2009. The Board held 12 meetings in 2009, two of which were teleconferences. The Board members' average attendance at meetings was 96 percent. The atten- 27 CORPORATE GOVERNANCE 2009 The Chairman of the Working Committee was Chairman of the Board Erkki PehuLehtonen and its members were ViceChairman Sinikka Mustakallio and Board member Risto Hautamäki. The Working Committee convened five times in 2009, and the Committee members' attendance was 100 percent. Chairman of the Board, Mr. Erkki Pehu-Lehtonen, chaired the Appointments Committee, and Vice-Chairman, Ms. Sinikka Mustakallio, and Mr. Ville Korhonen ­ a representative of major shareholders ­ acted as its members. The Appointments Committee convened twice in 2009, and the Committee members' attendance was 100 percent. ings of subsidiaries and associates, and acts as Chairman of the subsidiaries' Boards of Directors, unless the Board decides otherwise in individual cases. The President and CEO steers the Group's business operations via the Executive Board and the operative units. The directors and managers who oversee the operative units report to the President and CEO. The President and CEO implements the guidance and monitoring of the operative units' tasks, with the assistance of the operations of the Executive Team and Group Administration. acts as the Chairman, and of a variable number of members appointed by Raute Corporation's Board of Directors. The Executive Board prepares the Group's business strategy and is in charge of its implementation. The Executive Board deals with all major operational issues, and its decisions are confirmed by the President and CEO. The members of the Executive Board are in charge of the day-to-day management of the company in their respective areas of responsibility. 2009 The Group's Executive Board consists of Mr. Tapani Kiiski, President and CEO (Chairman); Ms. Arja Hakala, CFO; Mr. Petri Strengell, Vice President, Technology and Operations; Mr. Timo Kangas, Vice President, Technology Services; and Mr. Bruce Alexander, Vice President, North American Operations. The Executive Board members' personal data and share and option holdings on December 31, 2009 are presented on page 34. Up-to-date share and option holdings are presented on the company's website. 2009 Since March 16, 2004, Raute Corporation's President and CEO has been Mr. Tapani Kiiski (Licentiate in Technology). He is independent of major shareholders. Ms. Arja Hakala, M.Sc. (Econ.), MBA, Chief Financial Officer, was appointed deputy to the President and CEO on March 16, 2004. According to President and CEO Tapani Kiiski's executive contract, his annual salary and fringe benefits total EUR 225 thousand. In addition, he has the possibility to receive a profit-related bonus amounting to six months' salary at the most. The contract does not include any special conditions concerning retirement or the amount of retirement allowance. The term of notice is six months, and the severance pay equals six months' salary. The salaries and fees paid to Raute Corporation's President and CEO in 2009 amounted to EUR 294 thousand, of which regular salaries accounted for EUR 225 thousand and profit-related bonuses for EUR 69 thousand, including the 3 500 Raute Corporation series A shares paid based on the share-based incentive plan for 2006­2008. The personal data and option and share holdings of the President and CEO and his deputy on December 31, 2009 are presented on page 34. Up-to-date share and option holdings are presented on the company's website. president and ceo Raute Corporation's President and CEO manages the tasks assigned to Presidents and CEOs in accordance with the Finnish Companies Act, and also serves as the President and CEO of the Group and as Chairman of the Group's Executive Board. The President and CEO ensures that the accounting of the company is in compliance with the law and that its assets are managed reliably. The President and CEO represents the Group at the shareholders' meet- salaries and fees The company's remuneration system is divided into three components: the basic salary, a profit- and performancerelated bonus system, and a long-term incentive plan. Depending on the employee's position, different variations of the above-mentioned elements are applied. The Board of Directors confirms annually the principles of the remuneration systems, and determines the profit-related bonuses of the President and CEO and other senior management. The Board of Directors prepares a proposal on and determines the President and CEO's annual remuneration and approves the remunerations of the Executive Board members, based on the President and CEO's proposal. An individual employee's remuneration is always approved by the superior of the employee's superior. The Chairman of the Board approves the remunerations of those of the President and CEO's immediate subordinates who are not business organization Raute Group's Executive Board consists of the President and CEO, who 28 members of the Executive Board. An employee is not entitled to separate remuneration for being a Board member in any of Raute Group's subsidiaries. insider issues Raute Corporation follows the Guidelines for Insiders issued by NASDAQ OMX Helsinki Ltd, the Central Chamber of Commerce, and the Confederation of Finnish Industries EK. In addition, the company applies separate insider instructions approved by the Board of Directors. The Chief Financial Officer is in charge of insider issues in the company. Raute Corporation's insiders comprise public insiders, permanent company-specific insiders and projectspecific insiders in accordance with the Finnish Securities Markets Act. The company's public insiders include the Board of Directors, the Group's President and CEO, the Executive Board, the Presidents of subsidiaries, and auditors. The company's permanent company-specific insiders include those persons employed by the company or persons performing work for the company on the basis of some other contract who, by virtue of their positions or tasks, have access to insider information on a regular basis. A project-specific insider register is set up if the person responsible for the project considers that the publication of the project may have a significant impact on the value of the company's shares. The company's insider registers are maintained at the company's head office, which updates the information concerning insiders subject to disclosure requirements which need to be listed in a public insider register in Euroclear Finland Ltd's SIRE service. The public information on the insiders is also available on Raute Corporation's website. The insider trading prohibition begins at the end of an interim reporting period or financial year and ends in two hours following the publication of the corresponding stock exchange release. Raute organizes press conferences in Helsinki in connection with the publication of the Financial Statements Review and Interim Reports in which analysts, investors and the media are given the opportunity to meet the President and CEO and the CFO in person. The company avoids investor communication meetings during insider trading prohibitions. Raute Corporation publishes all of its investor information on its website. All of the company releases are published in Finnish and English. accounting company is elected, a deputy auditor does not need to be elected. If the auditor elected is other than an authorized public accounting company, two auditors and one deputy auditor are elected. The Board of Directors approves the audit plan and supervises its implementation. In addition to their tasks defined in the regulations, the auditors report to the Chairman of the Board when necessary, and at least once a year to the Board of Directors on any issues that have arisen during the audit. 2009 The Annual General Meeting held on April 2, 2009 elected Ms. Anna-Maija Simola and Mr. Antti Unkuri, Authorized Public Accountants, as auditors, and Ernst & Young Oy, an authorized public accounting company, as deputy auditor. The remuneration paid to the auditors, elected by the Annual General Meeting, for the normal annual audit of year 2009 totaled EUR 77 thousand. Other remuneration paid to the authorized public accounting company Ernst & Young Oy amounted to EUR 44 thousand. organizing risk management and financing risks The organizing of risk management is described on page 30. The management of financing risks is described in the note number 38 to the financial statements. communications The central objective of Raute Corporation's investor communications is to produce reliable, real-time and consistent information concerning the Group's business operations and finances. audits According to the Articles of Association, the Company shall have at least one and at most two auditors and one deputy auditor. If an authorized public 29 CORPORATE GOVERNANCE: RISkS ANd RISk mANAGEmENT Business risks and risk management ThE GROUP'S mOST SIGNIFICANT BUSINESS RISkS hAVE BEEN RECOGNIzEd AS ThE FLUCTUATION IN dEmANd RESULTING FROm ECONOmIC CyCLES ANd dELIVERy ANd TEChNOLOGy RISkS. impact of economic fluctuations on business operations The Group's business is characterized by sensitivity to economic fluctuations due to changes in the investment activity of customer industries. The impact that the cyclical nature of project deliveries has on the Group's performance is mitigated by systematically increasing the share of technology services, by developing the subcontracting network, and by focusing on core competencies in the company's own operations. In the long term, the Group's growth opportunities are increased and the impact of economic fluctuations balanced by developing operations in market areas where the company's market share is still small, and by creating products for new customer groups. The uncertainty in the development of the global economy and financial markets perpetuates near-future risks, and it is difficult to predict all of their implications. The availability of financing, tightened security terms and conditions and the price of financing make corporate financing more difficult and increase financing costs, which then weakens the short-term market outlook for the Group and affects the Group's counterparty risk. with the company's certified quality system. Raute emphasizes product development and continuously develops new technology in order to offer solutions for customers' expanding needs. The functionality and capacity of new solutions cannot be fully verified until the solutions can be tested under production conditions in conjunction with the first customer deliveries. Technology risks are reduced by the conditions of delivery contracts and by restricting the number of simultaneous first deliveries. financing risks The most significant financing risk areas in the Group's international business operations have been recognized as being credit risks and currency risks related to customers and investment counterparties. The Group is also exposed to liquidity, interest and price risks. The maximum default risk relating to customers' solvency is the amount of receivables relating to binding sales contracts that are not covered by bank guarantees, letters of credit or other securities. The Group's liquid assets are mainly held in Finnish and Swedish banks. The Group's currency risks consist of foreign currency denominated purchases and sales as well as balance sheet items (transaction risks) and investments in foreign subsidiaries (translation risks). The Group's main currency is the euro. Other sig- deliVerY and technologY risks The bulk of the Group's business operations consist of different kinds of project deliveries, which always expose the company to risks caused by, for example, each customer's end product, production methods, or tailored solutions related to raw materials. At the quotation and negotiation phase, the company has to take risks relating to the promised performance figures and make estimates of implementation costs. Contract, product liability, implementation, cost and capacity risks are managed using project management procedures that comply 30 The financing risks, as well as the risk management objectives and procedures, are described in more detail in note number 38 to the financial statement. nificant currency risks result from the Canadian dollar (CAD) and US dollar (USD). Other currencies which are monitored to ensure the competitiveness and profitability of the Group are the Russian rouble (RUB) and the Chinese yuan (CNY). The Group has braced for fluctuations in the working capital tied up in project operations and possible disturbances in the availability of money by taking out a non-current TyEL loan. The Group's loans have fixed interest rates. The Group's interest risks are mainly directed at the return on liquid assets. accident risks The Group's most significant accident risks have been recognized as a fire and a serious machine or information system breakdown at the main Nastola unit, where the production, planning, financial, and ERP systems serving the Group's key technologies are centrally located. A fire or serious breakdown in machinery may result in considerable property damage or interruption loss. The Group hedges against such risks by assessing its facilities and processes in terms of risk management and by maintaining emergency plans. It regularly reviews its insurance policies as part of overall risk management. The objective is to use insurance policies to sufficiently hedge all risks that are reasonable to handle through insurance due to economical or other reasons. organizing risk management The aim of risk management is to further the achievement of strategic and other objectives in business operations, to eliminate essential unfavorable events and their effects as well as to ensure the continuity of activities. Raute has a risk management policy approved by the Board of Directors. The Board of Directors determines the Group's general attitude to risk and approves the risk management policy on a general level. In the role of the Audit Committee, the Board is responsible for organizing internal control and risk management, and for monitoring their efficiency. The Board also annually reviews the internal control plan and monitors its implementation. The Executive Team defines the Group's general risk management policy and operating policies, and defines the boundaries of the organization's powers. The President and CEO and the CFO regularly report significant risks to the Board. The Group's President and CEO controls the implementation of the risk management policy in the entire Group, while the Presidents of the Group companies are responsible for risk management in their respective companies. The members of the Group's Executive Board are responsible for their own areas of responsibility across company boundaries. The Chief Financial Officer is responsible for the coordination of risk management. There is no separate internal auditing organization in the Raute Group. The Group's Controller function oversees the annual internal control plan approved by the Board, develops internal control and risk management procedures together with the operative leadership, and monitors compliance with risk management principles, operational policies and powers. The absence of a separate internal auditing organization is taken into account in the planning of the annual internal control plan, the contents of Group reporting, audits based on quality control systems and the monitoring of subsidiaries. corporate goVernance statement Raute Corporation's Board of Directors has handled Raute Corporation's Corporate Governance Statement according to chapter 2, section 6 of the Finnish Securities Markets Act and code 51 of the Finnish Corporate Governance Code for listed companies issued by the Securities Market Association on October 20, 2008. The statement has been drawn up separately from the financial statements and was published together with the Annual Report and the consolidated financial statements on the company's website at www.raute.com. Raute emphasizes product development and continuously develops new technology. New solutions cannot be fully verified until the solutions can be tested under production conditions in conjunction with the first customer deliveries. 31 CORPORATE GOVERNANCE: BOARd OF dIRECTORS Board of Directors Erkki Pehu-Lehtonen b. 1950, M.Sc. (Eng.) Chairman of the Board 2009­ Independent of the company and of major shareholders Principal occupation: Senior Advisor to the Board, Pöyry Plc. 2008­, President and CEO, Pöyry Plc. 1999­2008 Main simultaneous positions of trust: Member of the Board: Tekla Corporation 2006­ Raute shares: No holding of shares Remuneration in 2009: EUR 27 thousand Share-based remunerations: No share-based remunerations Sinikka Mustakallio b. 1952 Vice-Chairman of the Board 2004­ Member of the Board 1998­ Chairman of Raute Corporation's Supervisory Board 1996­1998 Independent of the company Principal occupation: President, WoM Oy 2001­ Main simultaneous positions of trust: None Raute shares: 47 240 pcs series K shares 30 862 pcs series A shares Remuneration in 2009: EUR 18 thousand Share-based remunerations: No share-based remunerations Risto Hautamäki b. 1945, M.Sc. (Eng.) Member of the Board 2009­ Independent of the company and of major shareholders Principal occupation: President, Metso Paper 2005­2007, retired Main simultaneous positions of trust: None Raute shares: No holding of shares Remuneration in 2009: EUR 13 thousand Share-based remunerations: No share-based remunerations Erkki Pehu-Lehtonen Sinikka mustakallio Risto hautamäki 32 Ilpo Helander b. 1942, M.Sc. (Eng.) Member of the Board 2008­ Independent of the company and of major shareholders Principal occupation: President of Oy Electrolux Ab 1991­ 2004, retired Main simultaneous positions of trust: Member of the Board: Neomarkka Oyj 2007­ Reka Kumi Oy 2007­ Teknos Oy 2007­ CT-Logistics Oy 2008­ Raute shares: No holding of shares Remuneration in 2009: EUR 18 thousand Share-based remunerations: No share-based remunerations Mika Mustakallio b. 1964, M.Sc. (Econ. & Bus. Adm.), CEFA Member of the Board 2004­ Independent of the company Principal occupation: President, MORS Software Oy 2006­ Main simultaneous positions of trust: None Raute shares: 39 750 pcs series K shares 42 670 pcs series A shares Remuneration in 2009: EUR 18 thousand Share-based remunerations: No share-based remunerations Panu Mustakallio b. 1971, M.Sc. (Eng.) Member of the Board 2003­ Independent of the company Principal occupation: Innovation specialist, Oy Halton Group Ltd., 2008­ Specialist, Indoor Climate Technology, Halton Oy 2005­ Main simultaneous positions of trust: None Raute shares: 12 000 pcs series K shares 15 256 pcs series A shares Remuneration in 2009: EUR 18 thousand Share-based remunerations: No share-based remunerations Auditors Anna-Maija Simola, APA Antti Unkuri, APA Deputy Auditor Ernst & Young Oy Ilpo helander mika mustakallio Panu mustakallio holdings of Raute shares on december 31, 2009. The figures include holdings of their own, minor children and control entities. 33 CORPORATE GOVERNANCE: EXECUTIVE BOARd Executive Board Tapani Kiiski b. 1962, Licentiate in Technology, M.Sc. (Eng.) President and CEO, March 16, 2004­ With the Company since: 2002­ Member of the Executive Board since: March 16, 2004 Employment history: Raute Corporation 2002­2004: various positions such as Technology Director, Sales Director; KCI Konecranes International Plc 1994­2002: various positions, such as CIO; Kone Corporation, Kone Cranes 1985­1994: various positions, such as R&D Manager, R&D Director Raute shares: 4 500 pcs series A shares Timo Kangas b. 1965, Engineer Vice President, Technology Services, October 1, 2004 With the Company since: 2004­ Member of the Executive Board since: October 1, 2004 Employment history: Raute Corporation 2004: Maintenance Service Manager; YIT Corporation, 1999­2004: various positions such as Key Account Manager, Area Manager Raute shares: 1 750 pcs series A shares Bruce Alexander b. 1959, B.Sc. (For.), MBA Vice President, North American Business Operations, President, Raute's North American companies, March 6, 2000­ With the Company since: 2000­ Member of the Executive Board since: 1 June 2004 Employment history: International Forest Products Ltd. 1988­2000: various positions, such as Corporate Development Manager, Divisional Manager Raute shares: 1 750 pcs series A shares Arja Hakala b. 1957, M.Sc. (Econ.), MBA Chief Financial Officer, Deputy to President and CEO, October 8, 2003­ With the Company since: 1990­ Member of the Executive Board since: 1 January 2001 Employment history: Raute Corporation 1990­2003: Administrative Director; Luhta Oy 1985­1990: Controller Raute shares: 1 750 pcs series A shares Petri Strengell b. 1962, M.Sc. (Eng.) Vice President, Technology and Operations, October 11, 2004­ With the Company since: 1987­ Member of the Executive Board since: June 1, 2004 Employment history: Raute Corporation 1987­2004: various positions such as Engineering Manager, Production Director Raute shares: 1 750 pcs series A shares holdings of Raute shares on december 31, 2009. The figures include holdings of their own, minor children and control entities. 34 Tapani kiiski Timo kangas Arja hakala Bruce Alexander Petri Strengell 35 CORPORATE GOVERNANCE: INFORmATION TO ShAREhOLdERS Information to shareholders RAUTE IS A FINANCIALLy SOUNd SmALL-CAP COmPANy WITh A BACkGROUNd OF FAmILy OWNERShIP. ThE COmPANy OPERATES GLOBALLy ANd IS ThE LEAdER IN ITS FIELd. In all of its communication, Raute complies with the requirements for listed companies as defined by the Securities Markets Act and the rules of the NASDAQ OMX Helsinki Ltd regarding prompt and simultaneous disclosure of information. To be entitled to attend the Annual General Meeting, shareholders must be registered in the shareholders' register maintained by Euroclear Finland Ltd at the latest on March 19, 2010. Shareholders who wish to attend the Meeting must register for it by 4:00 p.m. on Thursday, March 25, 2010 · by writing to Raute Corporation, P.O. Box 69, FI-15551 Nastola, Finland, · by email to eija.salminen@raute.com, · by sending a fax to +358 3 829 3582 · or by calling +358 3 829 3302, Ms. Eija Salminen. Any proxies should be supplied at the time of registration. Raute Corporation's Articles of Association do not specify special procedures for presenting initiatives to the Annual General Meeting. and Interim Reports) and Stock exchange releases and annoucements in Finnish and English. Financial information materials and other information on Raute are available on Raute's Internet site at www.raute.com. The printed Annual Report will be mailed to 200 largest shareholders and to others by request. Financial publications can be ordered in print or as printouts by phone from +358 3 829 11 or by email from ir@raute.com. In 2010 Raute Corporation will publish three interim reports: April 29 January­March 2010 August 3 January­June 2010 October 28 January­September 2010 inVestor relations Raute's investor relations strive for prompt, transparent and high-quality service. Investor contacts: Tapani Kiiski, President and CEO Arja Hakala, CFO tel. +358 3 829 11 email: ir@raute.com raute shares Raute Corporation has two series of shares. Series A shares have been quoted on the NASDAQ OMX Helsinki Ltd since 1994. Share quotations can be followed online at www.raute.com. Series A share · Trading code: RUTAV · Number of shares: 3 013 597 pcs · Votes/share: 1 vote Series K share · Number of shares: 991 161 pcs · Votes/share: 20 votes diVidend policY Raute exercises an active dividend policy. Its aim is to ensure competitive returns for its investors. Dividend payment takes into account future investment needs and the goal of maintaining a solid equity ratio. Due to the nature of the project business, the dividend is not directly tied to the annual result. dISTRIbUTIOn Of SHARE OWnERSHIP by SHAREHOLdER CATEGORy non-profit shareholders 0.6% Public institutions 1.5% Companies 5.8% nomineeregistered 2.3% paYment of diVidend The Board of Directors proposes to the Annual General Meeting that no dividend shall be paid for 2009. annual general meeting Raute Corporation's Annual General Meeting will be held on Wednesday, March 31, 2010 starting at 6:00 p.m. at Sibelius Hall, Ankkurikatu 7, Lahti, Finland. financial information Raute publishes financial information (Annual Report, Financial Statements, Households 85.5% foreign shareholders 4.1% Raute's financial statements have been published as a separate electronic publication on the company's webpage at www.raute.com. financial and insurance institutions 0.2% 36 20 LARGEST ShAREhOLdERS AT dEC. 31, 2009 By NUmBER OF ShARES 1 Sundholm, Göran 2 Suominen, Jussi Matias 3 Mustakallio, Kari Pauli 4 Suominen, Pekka Matias 5 Suominen, Tiina Sini-Maria 6 Siivonen, Osku Pekka 7 Hietala, Pekka Tapani 8 Kirmo, Kaisa Marketta 9 Lisboa de Castro Palacios Hietala, M. 10 Keskiaho, Kaija Leena 11 Särkijärvi, Riitta 12 Mustakallio, Mika 13 Mustakallio, Ulla Sinikka 14 Mustakallio, Risto 15 Sr Arvo finland Value 16 Mustakallio, Marja Helena 17 Kirmo, Lasse 18 Särkijärvi-Martinez, Anu Riitta 19 Särkijärvi, Timo 20 Suominen, Jukka Matias Total Number of series k shares 48 000 60 480 48 000 48 000 50 640 50 280 33 600 60 480 39 750 47 240 42 240 43 240 30 000 12 000 12 000 24 960 650 910 Number of series A shares 525 000 74 759 60 009 64 159 62 316 53 539 96 900 43 201 85 000 51 116 22 009 42 670 30 862 35 862 70 000 20 162 26 200 43 256 43 256 27 964 1 478 240 Total number of shares 525 000 122 759 120 489 112 159 110 316 104 179 96 900 93 481 85 000 84 716 82 489 82 420 78 102 78 102 70 000 63 402 56 200 55 256 55 256 52 924 2 129 150 % of total shares 13.1 3.1 3.0 2.8 2.8 2.6 2.4 2.3 2.1 2.1 2.1 2.1 2.0 2.0 1.7 1.6 1.4 1.4 1.4 1.3 53.2 Total number of votes 525 000 1 034 759 1 269 609 1 024 159 1 022 316 1 066 339 96 900 1 048 801 85 000 723 116 1 231 609 837 670 975 662 880 662 70 000 884 962 626 200 283 256 283 256 527 164 14 496 440 % of voting rights 2.3 4.5 5.6 4.5 4.5 4.7 0.4 4.6 0.4 3.2 5.4 3.7 4.3 3.9 0.3 3.9 2.7 1.2 1.2 2.3 63.5 EARnInGS / SHARE And dIVIdEnd, EUR 2,0 1,5 1,0 0,5 0,0 -0,5 -1,0 -1,5 -2,0 -2,5 2005 2006 2007 2008 2009 dEVELOPMEnT Of THE nUMbER Of SHAREHOLdERS 2 000 1 500 * 1 000 500 0 2005 2006 2007 2008 2009 Earnings per share Dividend *Board of Directors proposes to the AGM that no dividend shall be paid for 2009. dEVELOPMEnT In SHARE PRICE, EUR 15 12 9 MARKET VALUE Of CAPITAL STOCK, EUR million 60 50 40 30 6 3 0 20 10 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Share price at Dec. 31 Average share price Series K shares appreciated to the value of series A shares. 37 CORPORATE GOVERNANCE Stock exchange releases and announcements 2009 JanuarY January 20 Appointments Committee's proposal regarding composition of Raute Corporation's Board of Directors Raute's annual review 2008 Raute continues to adapt its operations maY May 20 Raute signs a contract with Chinese investors to deliver veneer mill machinery to Russia Raute gets prepared for the Nastola plant underloading with additional 90 days' temporary lay-offs January 21 January 30 May 26 februarY February 10 February 11 February 19 February 20 February 23 February 24 February 25 February 26 Raute to start acquiring its own shares Raute Corporation ­ Financial statements January 1 ­ December 31, 2008 Share repurchase February 19, 2009 Share repurchase February 20, 2009 Share repurchase February 23, 2009 Share repurchase February 24, 2009 Share repurchase February 25, 2009 Share repurchase February 26, 2009 JulY July 1 Raute's 8 MEUR contract not effective by the end of June august August 4 Raute Corporation ­ Interim report January 1 ­ June 30, 2009 september September 23 Raute Corporation's financial releases in 2010 march March 2 March 4 March 5 March 9 March 10 March 10 March 11 March 12 March 13 March 16 March 16 March 17 March 17 March 18 March 24 Share repurchase March 2, 2009 Share repurchase March 4, 2009 Share repurchase March 5, 2009 Share repurchase March 9, 2009 Invitation to Raute Corporation's Annual General Meeting Share repurchase March 10, 2009 Share repurchase March 11, 2009 Share repurchase March 12, 2009 Share repurchase March 13, 2009 Raute Corporation's employee negotiations concluded Share repurchase March 16, 2009 Raute's Annual Report and financial statements for 2008 published Share repurchase March 17, 2009 Raute to end acquiring its own shares Raute Corporation's conveyance of own shares october October 6 Raute gets prepared for continued work underloading and initiates negotiations in compliance with the Act on Co-operation at the Nastola plant Raute to adapt the Group's operations Raute Corporation ­ Interim report January 1 ­ September 30, 2009 October 26 October 27 noVember November 24 Raute shifts to a shortened working week at the Nastola plant due to work underloading december December 10 Raute to receive an EUR 12 million order for a plywood mill in Russia april April 2 April 2 April 29 Decisions of Raute Corporation's Annual General Meeting 2009 Raute Corporation's Board of Directors' independence and Board committees Raute Corporation ­ Interim report January 1 ­ March 31, 2009 Up-to-date information for investors is available in the investor section of Raute's website at www.raute.com. The section contains information about the company as an investment, Annual Reports and Stock exchange releases published by the company, as well as information on Raute's share and shareholdings. 38 Addresses Raute Corporation head office and main production plant Rautetie 2 P.O. Box 69 FI-15551 Nastola Finland Tel. +358 3 829 11 Fax +358 3 829 3200 www.raute.com Raute Corporation Jyväskylä plant Laukaantie 4 FI-40320 Jyväskylä Finland Tel. +358 3 829 11 Fax +358 3 14 445 4429 Raute Corporation mecano Business Syväojankatu 8 FI-87700 Kajaani Finland Tel. +358 3 829 11 Fax +358 8 612 1982 Raute Canada Ltd. 5 Capilano Way New Westminster, B.C. Canada V3L 5G3 Tel. +1 604 524 6611 Fax: +1 604 521 4035 Raute US, Inc. c/o Centrepot Int'l 5265 Hickory Hill, Ste 104 Memphis, TN USA 38141 Tel. +1 901 853 7290 Fax +1 901 853 4765 Raute Chile Ltda. Hernando de Aguirre 162 Of. 704 Providencia Santiago Chile Tel. +56 2 233 4812 Fax +56 2 233 4748 Raute Group Asia Pte Ltd. 35 Jalan Pemimpin # 06­02 Wedge Mount Industrial Building Singapore 577 176 Tel. +65 625 043 22 Fax +65 625 053 22 Raute (Shanghai) machinery Co., Ltd 18 Building, No. 399, Yuan Zhong Road Nan Hui District, Shanghai City, China P.C. 201300 Tel. +86 21 5818 6330 Fax +86 21 5818 6322 Raute (Shanghai) Trading Co., Ltd 17 Building, No. 399, Yuan Zhong Road Nan Hui District, Shanghai City, China P.C. 201300 Tel. +86 21 5818 6330 Fax +86 21 5818 6322 Raute Corporation moscow Representative Office Arkhangelskyi pereulok 1, office 409 101990 Moscow Russia Tel. +7 495 660 28 75 Fax +7 495 660 28 75 Raute Service LLC Moskovsky prospekt, 212 A, Office 4011 196066 St. Petersburg Russia Tel. +7 812 363 20 33 Fax +7 812 363 20 59 Annual Report 2009 Graphic design and layout: Onnion · Content: Pohjoisranta and Raute · Photos: Raute · Printing house: Lönnberg Painot 39 www.raute.com Growth follows adaptation.