PROFITABLE SOLUTIONS 2015 SOLUTIONS FOR PROFITABLE AND SUSTAINABLE MANUFACTURE OF PLYWOOD AND LVL Raute is a technology and services company that serves the wood products sector worldwide. Raute is a part of the wood-processing value chain by providing the wood products industry with production machinery and services required for manufacturing veneer, plywood and LVL (Laminated Veneer Lumber). The company is the global market leader in its largest customer sector, the plywood industry. Raute’s position in the LVL industry is particularly strong: more than half of the LVL manufactured in the world is produced on machines supplied by Raute. Our customers are served by close to 650 Raute professionals around the world. Raute is a financially sound Small Cap company with a strong family background. The company’s series A shares are listed on Nasdaq Helsinki Ltd. RAUTE’S OPERATING AREAS AND NUMBER OF PERSONNEL EUROPE CONTENTS 4 6 10 16 18 22 24 26 32 34 36 Review by the President and CEO Raute’s value chain and megatrends Business environment Business review Strategy Technology and product development Responsible employer Financial review Board of Directors Executive Board Information for shareholders RUSSIA 443 10 NORTH AMERICA 76 ASIA-PACIFIC 112 SOUTH AMERICA 5 RAUTE SALES AGENT NET SALES MEUR 127.3 2014: MEUR 94.0 OPERATING PROFIT MEUR 8.1 2014: MEUR 2.6 ORDER INTAKE MEUR 145 2014: MEUR 112 GROWTH IN 2015 35% R AU T E 2 015 3 REVIEW BY THE PRESIDENT AND CEO A RECORD-BREAKING YEAR ACROSS ALL INDICATORS 4 R AU T E 2 015 We can be pleased with our success in 2015. Order intake, net sales and operating profit were all at a record high. There is still room for improvement, but we are in a good position to move forward. Economic development in our main market areas was not favorable. The peak of the crisis has most likely passed in Europe, and many countries are already on the growth path. In North America strong growth continued, but construction activity has remained at a low level. Major South American countries are suffering from a poor economic situation, but exchange rates and new, competitive production plants are helping our customers succeed in the export markets. The slowdown of China’s economic growth has caused uncertainty not only in Asia but also in other areas. We have our long-term cooperation with our customers, aimed at promoting their success, and their solid business and confidence in the future to thank for our successes last year. At the start of 2015, our order book was fairly strong, and we gained good momentum early in the year. In March, we received two major orders within a short period of time. These orders, combined with the third major order received in April, secured a strong order book and high work load for the remainder of the year. Our net sales and operating profit improved markedly and reached a record-high level. We also succeeded in keeping up the good performance of our technology services business, although the growth leveled out as some of our customers, in addition to ourselves, focused on those large projects. For us, last year’s highlights were the start-up of three major projects, receiving their orders and carrying them out successfully. Also positive was the continued favorable development of our North that our input into emerging markets will generate growth in the current year. Despite the slowdown in China’s economic growth, the country remains by far the biggest producer of plywood. Its growth in 2014 was around 5 percent, which in terms of cubic meters equals more than half of Russia’s total output. As regards our technology services, we will return to a path of stronger growth. WE HAVE OUR LONG-TERM COOPERATION WITH OUR CUSTOMERS TO THANK FOR OUR SUCCESSES LAST YEAR. American business and the success of our machine vision products. The fact that we have won major projects shows that we have succeeded in our longterm customer work, in our technology investments and in the implementation of our strategy based on a total offering. With respect to China’s markets and our products targeted at them, we will continue our efforts to achieve our goals. In my view, we will be able to maintain, this year, the level of net sales and operating profit we have achieved. Our order book declined after last summer but remains at a strong level. Our customers in many market areas are preparing investments of different sizes. I am also confident I would like to send out a heartfelt thank you to Raute’s customers for their invaluable cooperation and trust, to our personnel for their outstanding work and flexibility under the significantly heavier workload, to our shareholders for their continued confidence in us, and to all our other partners for their role in furthering Raute’s development and success. Tapani Kiiski President and CEO R AU T E 2 015 5 RAUTE IS A PART OF THE WOODPROCESSING VALUE CHAIN CHEMICALS ENERGY Sustainable and environmentally friendly, wood is a renewable raw material which is constantly gaining popularity in construction, for example. Raute supplies the wood products industry with machinery and equipment for the profitable and environmentally sustainable production of wood products. Raute’s customers produce veneer, plywood and LVL (Laminated Veneer Lumber), which are used mainly in construction, the manufacture of furniture and in the transport vehicle and packaging industries. By investing in Raute’s production technology, wood products industry operators can boost their production, reduce their consumption of wood, energy and chemicals and improve the quality of their end products. Raute’s solutions cover the entire production process lines for plywood and LVL: log handling, peeling, drying, veneer handling, pressing, lay-up and panel and billet handling. LOGS FOREST After their useful life is over, wood products can be recycled or used as raw material in energy production. The value of the global wood products industry market is approximately EUR 150 billion. Demand and profitability are influenced by the general increase in the standard of living, construction regulations, availability and price of wood and economic cycles. Investment activity is at its highest level at the end of a business cycle. 6 R AU T E 2 015 RAUTE'S SOLUTIONS WOOD PRODUCTS INDUSTRY OTHER USES • PULP AND PAPER INDUSTRY • BIOENERGY PULPWOOD 1 VENEER Raute’s customers are wood products industry companies. PLYWOOD 2 With Raute’s solutions, customers manufacture veneer, plywood and LVL from wood. 3 Veneer, plywood and LVL are used in construction and furniture-making and in the transport vehicle and packaging industries. LVL END USE RECYCLING • CONSTRUCTION • FURNITURE • TRANSPORT VEHICLE AND PACKAGING INDUSTRY • SPECIAL USES R AU T E 2 015 7 MEGATRENDS CLIMATE CHANGE IMPACT ON RAUTE’S SECTOR GLOBAL ECONOMIC DEVELOPMENT • Increasing popularity of renewable raw materials and products • Focus of overall demand shifting increasingly towards the emerging markets • Growing environmental awareness • Increasing importance of energy efficiency as price of energy rises • Environmentally sound processes gain ground • Emissions decline RAUTE’S SOLUTIONS RAUTEN RATKAISUT 8 R AU T E 2 015 • High degree of automation minimizes energy consumption and raw material waste in production processes • Electrical, quiet and energy-saving actuators as modernization products for old production lines • As the standard of living rises, investments in construction and housing will increase • Quality and ergonomic demands and rising costs enhance the significance of automation also on the emerging markets • In veneer peeling and drying the Dragon technology increases the level of automation in emerging market production and boosts the use of veneer-based products as their quality improves AVAILABILITY OF NATURAL RESOURCES TECHNOLOGICAL DEVELOPMENT • Competitiveness of wood-based construction products improving • More efficient use of raw material and other production factors • Use of plantation wood as raw material on the rise • Increasing willingness to invest in more efficient production processes • More efficient use of raw materials and additives • Production facilities become larger • More efficient use of oil-based additives, and especially glue and overlays • More efficient utilization of process by-products Using Raute’s modern measuring and automation technology, almost half a million truck-loads of wood could be saved in plywood mills each year. • Demand for expert services grows as automation and digitalization increase • Increasing use of further-processed wood products • Standardization and quality requirements for products increase • Research and development into the processing of new plantation wood species • Increased automation of production processes ensures consistent quality and efficient use of the raw material • Maximization of the quality and strength of wood products using advanced grading technologies Using Raute’s modern energy technology, plywood mills could save a volume of heat energy equal to the output of a large nuclear plant. • Life-cycle technology services • Glue-saving veneer and LVL lay-up and gluing solutions • Advanced technologies for measuring the wood’s shape, visual quality, moisture and density R AU T E 2 015 9 BUSINESS ENVIRONMENT MAJOR INVESTMENTS IN PRODUCTION CAPACITY IN EUROPE The situation in the global economy and the financial markets during 2015 did not change considerably with respect to Raute or Raute’s customer base. In our view, new equipment investments in 2015 as a whole were at a level corresponding to a normal economic situation. The uncertainty linked to global economic development increased, in particular due to weaker-thanusual economic reports and forecasts from China and political unrest in a number of regions. In Europe, economic development continued its gradual strengthening. 2015 was the second consecutive exceptional year in which several major investment decisions were made to increase production capacity. Russia experienced continued weak development. Russian plywood manufacturers lowered their prices on the export markets during the latter part of the year to offset weakened domestic demand. China’s measures to strengthen its economy do not as yet support the financing of investments among Raute’s customers. In addition the overheating of the equity markets during summer steered investments away from production operations in China. Construction activity remained at a low level in all market areas, including North America, where the 10 R AU T E 2 015 economy in general continues its positive growth. Due to the market situation described above, Raute’s customers’ order books have remained short, which does not make for an attractive environment for implementing investments. Demand for maintenance and spare parts services continued at a good level. This bears testimony to the fact that the utilization rates of Raute’s customers’ production facilities were mostly at a good level. ANNUAL INVESTMENTS BY RAUTE’S CUSTOMERS APPROX. MEUR 600 High technological level in Europe Europe is a market area with advanced technology where plywood manufacturers are focused on producing high value-added, high-quality end products. The markets for plywood are primarily in Europe, but special products are also exported to the US and Asia, for example. Raute is the biggest supplier of technology to its customer industries in Europe. Its strengths include expertise in production technology suited to European conditions as well as its recognizability and good reputation in the domestic market. Little new production is being built, but the service business offers growth opportunities to Raute. We seek growth by strengthening our customer relationships, adding to the scope of our technology services and helping our customers to capitalize on the growth in wood construction. RAUTE’S SHARE OF THE MACHINE INVESTMENTS 15–20 % Africa is a traditional supplier of round wood, and the development of its plywood industry has been slow. However, the restrictions on wood exports in some important producer countries have increased the need for local further processing of wood. Economic situation in Russia defers investments Russia is a strong plywood industry area where plywood production has long traditions and a high level of expertise. Its large forest resources and competitive production costs provide good prerequisites to expand plywood production and make new mill investments. The political uncertainty resulting from the crises in Ukraine and Syria, the weak economic development resulting from low oil and raw material prices and the difficulty of securing financing due to the economic sanctions have, however, caused investment decisions to be postponed. Raute is the leading supplier of plywood industry machinery, equipment and services in the Russian market. We are the only operator capable of delivering complete production facilities on our own. Thanks to a large installed base, Raute’s technology services still have growth potential in Russia. Growth in China’s plywood production levelling out The Asia-Pacific area has one of the world’s most powerfully growing plywood industries. A large proportion of the plywood manufactured in the area is used locally. In addition, wood-based panels are exported to the Middle East, the U.S. and Europe, for example. China is the world’s largest producer of plywood. Its plywood production has increased almost fivefold during the past decade. The recent levelling out of growth in production volumes shows a slowing down of growth to a more sustainable level. The weakening of China’s economic development has slowed down decision-making concerning a number of pending projects. Plywood production in China is traditionally based on highly manual and simple technology. The industry is expected to develop rapidly during the next few years in terms of technology, as the quality demands imposed by export markets require more modern manufacturing processes. Investments in solutions targeted at the Chinese markets and a local presence provide Raute with growth opportunities. Growth opportunities in South America South America is one of the biggest growth areas in plywood production. The largest plywood producers are Chile and Brazil. Raute is a major technology supplier in Chile, and sees potential in Brazil as a result of an increase in production quality requirements and the development of industry. Decline in North American plywood production North America is the world’s second largest plywood production region and the largest LVL producer in the world, despite the fact that its plywood production volume has fallen by half to around 11 million cubic meters within a decade. This development is, on the one hand, the result of plywood being replaced by cheaper products in a few key areas of housing construction and, on the other, the outcome of the general slowdown in housing construction. The wood products industry in the area is highly consolidated. Investments in plywood production have been minimal in recent years, and mainly targeted at modernization projects. A lack of trust in the continuation of positive economic development and the structural imbalance in housing demand preceding the recession have slowed down progress. Raute’s growth opportunities lie in the modernization of the existing machine base and in its automation expertise. Read more about markets on Raute’s website: RAUTE IN A STRONG COMPETITIVE POSITION Raute’s competitive position has remained good thanks to competitive advantages, such as overall expertise in plywood and LVL production processes and a broad and diverse technology offering. Raute’s strong financial position and long-term dedication to serving selected customer industries also enhance its credibility and improve its competitive position as a company that carries out long-term investment projects. R AU T E 2 015 11 BUSINESS ENVIRONMENT PLYWOOD PRODUCTION GLOBALLY NORTH AMERICA The world’s largest LVL producing area and the world's second largest plywood manufacturing area. The economy is growing. Construction remains at a low level. Developed market with a generally high level of production technology. PLYWOOD PRODUCTION, MILLION M 3 SOUTH AMERICA One of the biggest and most potential growth areas in plywood production. PLYWOOD PRODUCTION, MILLION M 3 PLYWOOD PRODUCTION, MILLION M 3 15 10 5 0 2000 2005 2010 2014 MARKET AREA’S SHARE OF RAUTE'S NEW ORDERS 2013–2015 Markkina-alueen osuus Rauten uusista tilauksista 2013–2015 R AU T E 2 015 4 2 0 MARKET AREA’S SHARE OF RAUTE'S NEW ORDERS 2013–2015 2000 2005 2010 2014 MARKET AREA’S SHARE OF RAUTE'S NEW ORDERS 2013–2015 12 8 Africa Europe 2000 2005 2010 2014 6 5 4 3 2 1 0 20 10 6 Investments focus on modernization projects to boost efficiency and replacement investments. 25 EUROPE AND AFRICA Markkina-alueen osuus Rauten uusista tilauksista 2013–2015 Markkina-alueen osuus Rauten uusista tilauksista 2013–2015 RUSSIA PLYWOOD PRODUCTION BY MARKET AREA 2014 Total 98.9 million m3 Large raw material reserves and developing economy in the long term. Excellent competitiveness in the export markets. PLYWOOD PRODUCTION, MILLION M 3 6 5 4 3 2 1 0 CHINA The world’s largest producer of plywood. Production mostly based on manual labor, simple technology and local machine suppliers. 2000 2005 2010 2014 MARKET AREA’S SHARE OF RAUTE'S NEW ORDERS 2013–2015 China 80 70 60 50 40 30 20 10 0 18% NAM Strong shift from natural forests to plantations. 56% APAC 11% EMEA 5% LAM 5% CIS PLYWOOD PRODUCTION, MILLION M 3 4% Source: Indufor PLYWOOD PRODUCTION, MILLION M 3 2000 2005 2010 2014 Markkina-alueen osuus Rauten uusista tilauksista 2013–2015 REST OF THE ASIAPACIFIC AREA 80 70 60 50 40 30 20 10 0 PLYWOOD PRODUCTION TREND BY MARKET AREA (million m3) 60 2000 2005 2010 2014 50 40 MARKET AREA’S SHARE (INCLUDING CHINA) OF RAUTE'S NEW ORDERS 2013–2015 30 20 10 Source: Indufor Markkina-alueen osuus Rauten uusista tilauksista 2013–2015 2005 2010 APAC China LAM CIS EMEA NAM 0 2014 R AU T E 2 015 13 Steico’s LVL Investment and Production team at the LVL mill opening ceremony in September 2015 Steico’s new LVL mill in Czarna Woda, Poland 14 R AU T E 2 015 CASE STEICO’S GOAL IS TO MAKE AN IMPACT IN THE LVL WORLD Thanks to the unbeatable value, efficiency, security and reliability of its LVL Production Equipment solutions, Raute received, in June 2014, an order for an entire LVL production line from Steico, one of the leading producers of wooden construction materials in Europe. this process very labor effective. The three-opening 8x60 foot Raute hot pressing line has a capacity of over 90,000 m3/a, and together with the functional billet handling line, it enables the finishing of LVL products in all the finished sizes required by customers. “We chose the Raute LVL plant because of its good price-performance ratio. The smooth installation, fast commissioning and good cooperation with Raute proved our decision right. It has been especially pleasant to see the straightforward and fair cooperation between the project managers of both companies,” says Uwe Lange, CTO and Investments Director of Steico SE. Construction work on the facility started in Czarna Woda, Poland in July 2014, and all the lines were delivered and installed by the end of June 2015. In record time, only 12 months after the first stone of the mill’s foundation was laid, the first LVL billet was produced in Czarna Woda. Currently, the starting up of the line’s production and final acceptance are underway. With this state-of-the art LVL line, Steico aims to make an impact in the LVL world. An eightfoot RauteSmart peeling line is transforming the conditioned Polish-grown pine logs into 3.2-mm-thick 8x8 foot veneer. The veneer sheets are then dried on a 13-section six-deck Raute drying line, equipped with the latest generation automatic veneer grading based on strength, moisture and visual quality. The automatic continuous Raute lay-up and pressing line is connected to an inline scarfing function, making This full-scale greenfield LVL line project counts among one of Raute’s most challenging and exciting ventures. Challenging, because of the uncompromising need to achieve maximum production capacity within a quick start-up period: Steico has a driving need to rapidly supply their already developed Europe-wide customer network with its own manufactured LVL products. Exciting, because we at Raute now have a chance to test the ramp-up capability of our equipment within a demanding time frame. Three of the largest greenfield mill projects in the European engineered wood products (EWP) landscape in the last three years have been LVL mills. Their owners, Pollmeier, Steico and Stora Enso, have in common the realization that LVL can provide a strategic edge and significantly enrich their product offering. Why? VERSATILITY: LVL is the only EWP in the world excelling in both beam and panel applications. One product for a wide variety of applications results in fast capacity optimization. EFFECTIVENESS: The LVL technology allows the usage of a larger and more cost-efficient raw material base, resulting in maximum yield from a log. PROFITABILITY: Through the randomization of wood defects within thin layers, LVL is strong but light, straight and uniform, with one of the best price-performance ratios. This leads to growing global LVL consumption, rising LVL prices, improving LVL margins and faster return on investment for LVL producers. R AU T E 2 015 15 BUSINESS REVIEW TECHNOLOGY AND SERVICES FOR THE MANUFACTURE OF PLYWOOD AND LVL Raute is a technology and services company that serves the wood products sector worldwide. Its core competence lies in plywood and LVL manufacturing processes. Our customers are veneer, plywood or LVL (Laminated Veneer Lumber) mills, of which the majority are private family businesses, while some are part of major consolidated forest groups that manufacture not only plywood and LVL, but also products such as pulp, paper and sawn timber. Veneer, plywood and LVL are used mainly in construction and furniture and in the transport vehicle and packaging industries. State-of-the-art technology and diverse services Our full-service concept consists of project deliveries and technology services. Project deliveries include projects that consist of individual machines or production lines, all the way to deliveries that cover the machines and devices needed for the production processes of entire mills. Technology services range from spare parts deliveries to regular maintenance and equipment modernizations. The technology offering covers machinery and equipment for the customer's entire production process. 16 R AU T E 2 015 We support our customers throughout the life cycle of their equipment investments with diverse technologies and services. We see growth potential especially in technology services. Global market leader Raute is a global market leader in its biggest customer industry, the plywood industry, and present in all market areas. Our customers are served by close to 650 Raute professionals from ten countries. Raute’s production units are located in Finland, Canada and China. The company’s sales network has a global reach. Raute is a global market leader as a machinery supplier for new capacity in the plywood and LVL industry. Our market share of all machine investments in the plywood industry is estimated at 15–20 percent. We have a particularly strong market position in the LVL industry. More than half of the LVL manufactured in the world is produced on machines supplied by Raute. The increasing use of wood as a raw material boosts demand for Raute’s products and services. RAUTE’S MACHINES PRODUCE MORE THAN 50% OF THE WORLD’S LVL I ncreasing environmental awareness, the resulting use of wood, a renewable raw material, and efforts to improve energy efficiency boost the attractiveness and competitiveness of Raute’s solutions on the traditional markets. The increasing importance of emerging markets and tighter product quality requirements create new opportunities for utilizing Raute’s strengths. Our objective is to further strengthen our global market leadership and be one of the leading suppliers also in selected emerging markets. Raute’s competitors are typically small or mediumsized companies that operate locally or regionally and focus on only one or a few processes and technologies. PROJECT DELIVERIES 67% of 2015 net sales TECHNOLOGY SERVICES • Mill-scale projects, separate production lines, machinery and equipment • Automation, machine vision, measuring technology 33% of 2015 net sales • Modernizations • Maintenance and spare parts • Production support services RESPONSIBLE WOOD PRODUCTS TECHNOLOGY The use of renewable resources is favored especially in construction, but also in other industrial uses, such as transport vehicles. Raute’s single most important ecological achievement is to make it possible to produce wood products that are more environmentally friendly. We focus on the key environmental effects of the wood products industry and help our customers to operate in a more environmentally sustainable manner by improving the efficiency of raw material use, reducing energy consumption and minimizing the consumption of chemicals, especially glue. Raute actively develops solutions that can help to enhance the energy efficiency of customers’ production processes and improve the utilization of by-products. Automation also improves occupational safety and ergonomics. Raute’s goal is to create a continually developing and productive work environment. We operate globally in accordance with the principle of good corporate citizenship, taking into consideration the demands that the local culture and society place on our operations in all the countries where we have a presence. We develop the environmental sustainability of our products and services based on our customers’ viewpoints. The environmental impact of Raute’s operations mainly involves waste management for industrial sites, energy use, chemical management and safety. Our goal is to decrease the harmful effects resulting from our own operations, to create a continually improving work environment and to find the best and most efficient ways to manufacture products and provide services. Raute manages the environmental risks linked to its operations through its environmental and management systems. The Nastola main production unit has ISO-certified quality and environmental management systems in place. The operations and ethical principles of the comprehensive partner and subcontractor network are evaluated all around the world according to the standardized criteria set in Raute’s Code of Conduct. Energy savings targets met Thanks to its long-term development efforts, Raute has achieved the target of a nine percent improvement in energy savings by 2016. RAUTE’S COMPETITIVE ADVANTAGES • Leading technology and innovations • Comprehensive expertise in the plywood and LVL production process • Extensive experience in project deliveries to all market areas • Comprehensive technology and service offering • Comprehensive maintenance and spare parts service • Local presence worldwide • As a solvent and public listed company, Raute is a reliable partner R AU T E 2 015 17 STRATEGY PROFITABLE SOLUTIONS FOR ALL CUSTOMER NEEDS Raute’s strategy boils down to our vision: Raute offers profitable solutions for all customer needs. Profitability is essential for both Raute’s customers and Raute itself to be able to continue and develop their operations. The solutions integrate technology, equipment and the services necessary for their operation and the development of the customer’s entire production process. Profitability, adaptation and growth as strategic goals Improving profitability, the ability to adjust to economic cycle variations and controlled growth are Raute’s strategic goals. The financial goal is to grow faster than the markets, to remain financially sound and to offer investors competitive returns. As the actualization of the goals is strongly dependent on the development of the global economy as well as the timing of customers’ individual investments, no time-bound target values are disclosed for the financial goals. Demand shifting towards emerging markets The plywood and LVL industry’s investments in the western markets will increasingly focus on growing the efficiency of existing production capacity and improving competitiveness. 18 R AU T E 2 015 The focus of Raute’s products and services is shifting towards the emerging markets, which do not form a coherent whole. In China and India, most of the plywood production remains largely manual and simple. On the other hand, production plants in Russia and in parts of South America, for example, have reached a technological level that is near to that of developed markets. Southeast Asia and Brazil are somewhere between these two in terms of technology. The common denominator of the emerging markets from Raute’s viewpoint is the cost structure of wood products, which differs from the developed markets: labor costs are low but raw material and production automation costs are high. Raute offers its customers not only high technology, but also solutions for conditions where automation does not yet guarantee a significant competitive advantage. Becoming a preferred supplier Raute needs to gain a better understanding of the individual needs of customers, production bottlenecks and criteria for carrying out investments. This understanding needs to be translated into solutions that will help Raute to become the preferred supplier in the eyes of a growing number of customers and in various market areas. This can only be achieved when the product offering and delivery capability meet the customers’ needs and help them to develop their own operations and succeed. The share and importance of technology services is increasing as the markets change and technology develops. Technological development also makes it possible to extend the life cycle of basic equipment through modernizations. Raute is the trusted partner of its customers throughout the lifecycle of the investments and also focuses on modernizing competitors’ equipment with Raute’s technology. Digitalization brings with it new opportunities to further develop Raute’s service offering. 2017 MARKETS STEER OFFERING OF LIFE-CYCLE SOLUTIONS Faster growth than the markets 2016 EXCELLENT CUSTOMER SERVICE Capability to offer Raute’s entire product offering on all markets Cascading the strategy Customer needs, growing technology services, operating on the emerging markets, cost-efficient and high-quality operations and a personnel driven by a hunger for success are Raute’s strategic cornerstones. The strategic choices are reviewed annually and the management sets the goals and the main themes for strategic development work. HR management ensures that the entire personnel understands the strategy and implements it in their work. In 2015, the strategic development projects focused on ensuring delivery capability and quality. New operating methods and tools have been used to simultaneously implement three major delivery projects. In 2016, the focus will shift to developing sales with the objective of further growing the company’s market share and service business. In 2017, the theme is to support growth through the development of the product and service offering. 2015 HIGH-QUALITY DELIVERIES Customer promises met R AU T E 2 015 19 STRATEGY IMPLEMENTING THE STRATEGY IN 2015 CUSTOMER NEEDS • The measurement of veneer density combined with visual imaging has elevated the grading of dry veneer to a new level • The composing of green veneer has improved the efficiency of raw material use • First machine-vision-based modernizations of veneer composers carried out • Latest machine vision technology delivered to customers that use hardwood • Competitors’ equipment modernized with machine vision technology • Entry into Asian and South American markets through machine vision technology TECHNOLOGY SERVICES • Service business strengthened through increased local presence according to planned priorities in Europe, North America and Asia • Spare parts and small project delivery capability strengthened • IoT-based remote services launched together with customers 20 R A U T E 2 0 1 5 O GR H WT CUSTOMER FOCUS PRO F I TA B I L I T Y A DA COST-EFFICIENCY PT AT IO N Emphasis between the key strategic objectives varies according to changes in the market situation. HUNGER FOR SUCCESS Raute generates added value for its customers’ businesses by supplying solutions to facilitate profitable and environmentally sustainable production of wood products. Raute offers profitable solutions for all customer needs. GLOBAL SERVICE EMERGING MARKETS VALUES CONTINUOUS DEVELOPMENT CUSTOMER ENVIRONMENT TRUST IN PEOPLE EMERGING MARKETS COST-EFFICIENCY AND QUALITY HUNGER FOR SUCCESS AND PERSONNEL • Dragon product family, targeted at emerging markets, expanded with eight-foot peeler and veneer dryer • Local organization strengthened and improved to correspond with the challenges linked to the Chinese markets and the development of the Dragon product family • Continued improvement of quality and occupational safety • Continued maintenance and standardization of the product base and development of tools to support tendering and engineering • Development of management model • New IT system launched to support project management and issue management • Manufacture of parts begun at Chinese plant • Production investments started up at Nastola plant • Competence surveys of Finnish personnel carried out and development plans drawn up • Comprehensive mentoring program launched for ensuring continuity of product expertise • Raute’s employer image strengthened through communications R AU T E 2 015 21 TECHNOLOGY AND PRODUCT DEVELOPMENT DIGITALIZATION TRANSFORMS VENEER MANUFACTURE Raute’s product development team researches and develops new products in order to meet changing customer needs. Digitalization and the Internet of Things have become one of the key technology trends. We are deeply focused on development work. Many types of industrial production equipment have long been connected to the internet. For example, peeling lines supplied by Raute were first connected to the internet more than eight years ago so that data on the machines’ functioning, needed for pre-emptive maintenance, could be sent. Internet connection can be used to solve maintenance issues and exceptional situations remotely. Similarly to various consumer products, internet use in industry is expanding to a number of additional services, which are utilized in facilitating the use and maintenance of machines and, where applicable, in making them independent of location. Raute is a part of this Industrial Internet revolution. The first applications with which the efficiency figures of production lines can be monitored and compared, either by computer or 22 R A U T E 2 0 1 5 GREEN VENEER COMPOSING CHANGING VENEER MANUFACTURING PROCESS The circumferences of raw material logs are becoming smaller as we shift towards using plantation wood. More and more focus is being placed on the yields of tree plantations. The trees are felled when their growth rate begins to slow. As the circumferences of the logs shrink, the length of the veneer ribbon to be peeled becomes shorter and the proportion of veneer randoms to full-sized veneer sheets increases. mobile device, are already being used by a few of Raute’s customers. The applications function as a cloud service and are not tied to a specific location. Typically randoms are composed after drying. This requires different, more labor-intensive steps in the production process than for full sheets, both before and after the drying stage. New Industrial Internet applications will supplement the mill-wide production data collection and reporting systems, for which Raute has long been known. Through new products, also production reporting will become available as a cloud service, doing away with the need for installing and maintaining local software. Raute’s green veneer composing technology forms full sheets of the veneer randoms prior to drying. The processing of the sheets, carried out in connection with the dryer, can now be fully automated, improving the dryer’s degree of filling and efficiency. Digitalization is much more than just the Internet of Things and the Industrial Internet. Consumers are already used to taking care of most things online. Raute provides key machine spare parts through its eStore. More new digital services are also continuing to be developed alongside other technologies. Raute developed the green veneer composer and made its first commercial delivery during 2015. The product will be launched for sale worldwide during spring 2016. PATCHMAN Raute’s virtual character Patchman represents the world’s most advanced plywood manufacturing technology with an intelligent combination of the latest machine vision and mechanical tools. Patchman is named after Raute’s first automatic veneer patching line. SUSTAINABLE AND ECOFRIENDLY WOOD is a significant renewable raw material which is constantly gaining popularity in end products. Raute’s technology and raw material expertise guarantee that the customer’s end product will be durable and adaptable to any number of end uses. PANEL REPAIR TOOLS The markets’ most precise panel repair tools automatically repair defects on the panel surface based on the observations of the machine vision and automate a work stage that earlier required a great deal of manual labor. SMART MACHINE VISION identifies details from the flow of veneer and panels that impact quality, such as knots and cracks and makes split-second decisions on the production line concerning the veneer’s grading, clipping or patching. PATCHING HEAD The Patchman 2 veneer patching line combines Raute’s expertise in optimizing wood raw material quality, the markets’ most precise machine vision and automated veneer handling. The manipulators steered by machine vision and environmentally friendly electric servo technology transfer the sections of the veneer sheets that require patching to the patching unit for processing at a speed of 3,000 patches per hour, and ensure the efficient production of top-quality veneer. R AU T E 2 015 23 RESPONSIBLE EMPLOYER PERSONNEL GEOGRAPHICALLY INTERESTING AND CHALLENGING TASKS GLOBALLY Finland 66% China 18% Canada 13% Others 4% AGE OF PERSONNEL Raute’s product and service solutions as well as global project activities offer a variety of tasks for experts in both Finland and abroad. In order to secure its future competitiveness, Raute will require both new experts and experienced wood product and wood technology professionals with an understanding of customer and business needs. Competent personnel that is success-oriented and committed to the company’s targets enable Raute to implement its strategy. HR management is based on Raute’s values, responsible ways of operating and a cutting-edge working culture. The main goal is to support the implementation of our strategy and improve our competitiveness by ensuring sufficient levels of competence. To achieve this, people need to be given jobs that suit them in terms of expertise and motivation. Raute assesses the implementation of the personnel strategy regularly through performance and 24 R AU T E 2 015 Personnel well-being and competence development Customer needs determine the direction and priorities of personnel development throughout our global organization. We wish to offer our employees an equal work community, motivating and meaningful work and a safe work environment. 26% 22% 51–60 years development discussions and personnel surveys. According to the feedback received from the personnel survey and the strategy forum held in November 2015, Raute’s employees now have a better understanding of Raute’s strategy and goals and the role of their own tasks with respect to the strategy. 22% 31–40 years 41–50 years Personnel creates prerequisites for success < 30 years 25% > 60 years 5% The Särmä change project was implemented at Raute in 2012–2014. For Raute employees Särmä means smooth team work, keeping our promises, taking quality seriously and respecting one another and our customers and partners. PERSONNEL DEVELOPMENT IN 2015 The priorities of personnel development have been the identification of critical competencies and the closing of skill gaps. We carried out measures for the development of supervisory work identified through the 360 assessment implemented at the end of 2014. Training was carried out in many areas according to identified needs. We strengthened our local business resources in Europe, North America and Asia. At our Chinese unit we strengthened the local organization so that it can take charge of sales and production management in upcoming years. In our biggest overseas units we adopted Groupwide HR management principles. Wendy Lee’s career atMUKANA Raute began KASVUA RAUTENGeneral Manager16 years ago as an office secretary. Now the at Raute Shanghai, she says she has grown together with the company. ”My image of Raute, even as a student at the Beijing Forest University, was very positive, and I was glad to join the company in 1999 when it decided to establish the Beijing sales office.” In 2004, Wendy Lee was appointed Sales Manager and in 2006 she became Chief Administrator at the recently established Raute (Shanghai) Machinery Co., Ltd. ”In the beginning there were just a couple of people working in 1,200-square-meter premises. Today, Raute Shanghai employs 107 people in a more than 10,000 m2 workshop,” says Wendy, who has been the General Manager of Raute (Shanghai) Machinery Co., Ltd since 2014. China’s plywood industry is currently undergoing a change due to increasing labor costs and growing raw material prices. The responsibility for our Chinese business unit is also transferring to our local management. ”This is an excellent opportunity for Raute – one we have to grab with both hands, no matter how difficult it is,” Wendy explains. ” I’ve enjoyed being part of the big Raute family and being able to develop with support from colleagues in Nastola and Shanghai.” R AU T E 2 015 25 BUSINESS REVIEW RAUTE’S YEAR 2015 KEY FIGURES 2015 2014 127.3 94.0 Change, % 35.4 12.9 Earnings per share (EPS), undiluted, EUR 1.65 0.59 Earnings per share (EPS), diluted, EUR 1.64 0.59 Balance sheet total, MEUR 61.8 52.6 Equity ratio, % 58.5 55.8 Interest-bearing net liabilities, MEUR -5.0 -1.7 Personnel, average 624 545 Net sales, MEUR No significant changes took place in the business environment in 2015 with regard to Raute and Raute’s customers. Uncertainty in the global economy and the financial markets continued, and construction activity remained at a low level. Our clients’ order books were short, but production capacity utilization rates remained mainly at a good level. Order intake in Europe to a record high – Europe remains the largest market Unusually, altogether three major mill-scale capacity-generating projects were begun in Europe in 2015. In all three, Raute won the orders for the delivery of the main production technology. A machinery and equipment order for an LVL production line in Finland and a plywood machinery and equipment order for the expansion of a veneer mill into a plywood mill in Estonia took effect in March. In April, an order for the machinery and equipment relating to a plywood mill expansion project in Estonia took effect. Europe maintained its position as Raute’s largest market area – order intake from Europe increased 38 percent from 2014, and Europe’s share of all new orders remained at a high level, at 67 percent (63%). Even though the North American economy continued to experience strong growth compared to the rest of the world, the growth of the construction industry has been clearly slower. Among Raute’s customers, demand focused on 26 R A U T E 2 0 1 5 smaller modernization projects and technology services, as well as on individual replacement and efficiency-improving investments. Order intake from North America more than doubled from the previous year, with its share increasing to 15 percent (10%). ago and finding markets for their new production capacity. No new major investment projects were started up. Replacement investments also remained at a low level. New orders from South America declined by more than a third, and their share fell to 3 percent (7%). The political uncertainty resulting from the crises in Ukraine and Syria, the weak economic development resulting from low oil and raw material prices, the weakening of the ruble and the difficulty of securing financing due to the economic sanctions have caused investment decisions to be postponed in the Russian markets. However, many investments are still being prepared actively. The normalization of the market situation in Russia is not expected to happen anytime soon. New orders from Russia remained on a par with the previous year and Russia’s share fell to 10 percent (15%). The weakening of China’s economic development slowed down decision-making concerning a number of pending projects. This also impacted the rest of Asia and even the entire world. China’s and Asia’s share of the order intake remained at 5 percent (5%). The Dragon product family is raising interest in China and Southeast Asia, but gaining a foothold in the markets has proven slower than anticipated. In South America, Raute’s customers continued to focus on ramping up the capacity of the large plywood mill investments they made a few years Demand for maintenance and spare parts services remained at a good level throughout the year, increasing by nearly a fifth from the previous year. This bears testimony to the fact that the utilization rates of Raute’s customers’ production facilities mainly remained good. A year of growth Our net sales increased by 35 percent (13%) in 2015. The growth in net sales resulted from a higher initial order book than in the comparison year, a large volume of order intake and the timing of the order book. Project deliveries’ net sales increased 48 percent (12%) and that of technology services 16 percent (14%). The plywood industry’s share of the net sales of project deliveries was 68 percent (75%), while the LVL industry’s share was 32 percent (25%). delivery of LVL mill machinery to Germany has been further delayed due to changes made in the production process. The two major orders received from Poland in 2014 progressed to production use and ramping up of production. The three new major orders received in 2015 progressed as planned to the machine and equipment delivery phase and installation phase. Growth in personnel, R&D costs and investments Progress in major projects T he number of personnel increased by 59 employees, or 10 percent, in 2015. Most of the new employees were recruited for the Nastola unit. The focus in personnel development was, based on competence surveys, on the removal of identified bottlenecks in competence and the induction of new employees. A ltogether six major capacity-generating projects were at the installation and commissioning phase during the year, and they have proceeded according to the timetable set by the customer. The final approval of the order received in July 2012 for the Strong focus on the development of increasingly efficient, productive and environmentally friendly manufacturing technology and supporting measurement and machine vision applications contin- The operating profit more than tripled due to the increase in net sales and the implemented development measures. ued. Research and development costs grew to EUR 3.1 million (MEUR 1.8) and 2.4 percent of net sales (1.9%). In 2015, the extensive program aimed at developing automation, measurement systems and machine vision to produce new, more advanced applications for process optimization in the plywood and LVL industries was continued. The new green veneer composing concept, which improves customers’ raw material utilization, was successfully tested in production. The Dragon product family, targeted at China’s emerging plywood manufacturing markets, was expanded with an eight-foot peeling line and a veneer dryer. The implementation of IoT-based remote services was continued and expanded together with customers. The Group’s investments during the financial year increased to EUR 2.5 million (MEUR 1.7). The investments essentially consisted of replacement investments related to fixed assets in Finland. The biggest single investment was the NC boring machine purchased for the Nastola production unit, the installation of which started in late 2015. R AU T E 2 015 27 FINANCIAL REVIEW 2015 NET SALES EUR million NET SALES BY PRODUCT AREA EUR million KEY FIGURES Net sales, MEUR 2015 127.3 2014 94.0 Change, % 35.4 12.9 Exported portion of net sales, MEUR 97.1 88.7 140 140 120 120 Operating profit, MEUR 8.1 2.6 100 100 Profit before tax, MEUR 8.1 2.8 80 80 Return on investment (ROI), % 28.5 10.9 60 60 Return on equity (ROE), % 24.7 9.8 Equity ratio, % 58.5 55.8 40 40 Order book, MEUR 60 44 20 20 Order intake, MEUR 145 112 0 0 Earnings per share (EPS), undiluted, EUR 1.65 0.59 Earnings per share (EPS), diluted, EUR 1.64 0.59 Equity to share, EUR 7.26 6.06 11 12 13 14 15 11 12 13 14 15 Project deliveries, LVL Project deliveries, plywood Dividend per series A share, EUR 0.80 * 0.40 Technology services Dividend per series K share, EUR 0.80 * 0.40 Dividend per profit, % 48.4 * 68.0 Repayment of equity per share, EUR EARNINGS/SHARE AND DIVIDEND EUR OPERATING PROFIT EUR million 646 587 Personnel, average 624 545 *Board of Directors’ proposal to the AGM 1.5 1.0 * 0.5 0 -0.5 -1 11 12 13 14 15 11 12 13 14 15 Earnings per share Dividend Repayment of equity * Board of Directors’ proposal to the AGM 28 R A U T E 2 0 1 5 0.20 Personnel at Dec. 31 2.0 10 9 8 7 6 5 4 3 2 1 0 - SUMMARY OF FINANCIAL STATEMENTS EUR 1,000 INCOME STATEMENT Net sales Change in inventories of finished goods and work in progress GROUP (IFRS) PARENT COMPANY (FAS) 1.1.–31.12.2015 1.1.–31.12.2014 1.1.–31.12.2015 1.1.–31.12.2014 127 278 94,021 112 450 80,936 -313 1,672 -653 1,014 ORDER INTAKE BY PRODUCT AREA EUR million 160 393 72 1,365 408 140 -119,238 -93,160 -104,903 -81,370 120 8,120 2,605 8,258 988 100 -1 205 888 459 80 8,118 2,810 9,147 1,447 60 – – 36 -36 40 Income taxes -1,435 -449 -1,457 -504 Profit for the financial year 6,684 2,361 7,725 908 31.12.2015 31.12.2014 31.12.2015 31.12.2014 Non-current assets 10,799 12,107 9,278 9,420 Current assets 50,960 40,539 47,602 35,743 Total assets 61,760 52,646 56,879 45,163 Total shareholders’ equity 29,700 24,334 26,705 20,782 Total liabilities 32,059 28,312 30,174 24,381 Total shareholders’ equity and liabilities 61,760 52,646 56,879 45,163 1.1.–31.12.2015 1.1.–31.12.2014 1.1.–31.12.2015 1.1.–31.12.2014 7,477 -1,858 5,602 -3 499 40 30 Other operating income Total operating expenses Operating profit Financial income and expenses Profit before tax Appropriations (FAS) BALANCE SHEET 20 0 11 Assets Shareholders’ equity and liabilities CASH FLOW STATEMENT Operating activities Investing activities -2,329 -1,101 -69 717 Financing activities -3,052 -5,189 -3,052 -8,148 2,481 -7,971 13 14 15 14 15 Project deliveries, LVL Project deliveries, plywood Technology services ORDER BOOK AT DEC. 31 EUR million 60 50 -5,189 2,096 12 Net change in cash and cash equivalents 20 10 0 11 12 13 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 website at R AU T E 2 015 29 KEY RATIOS DESCRIBING THE GROUP’S FINANCIAL DEVELOPMENT EUR 1,000 2015 2014 2013 2012 2011 Net sales 127,278 94,021 83,274 101,273 74,323 35.4 12.9 -17.8 36.3 18.2 97,113 88,696 78,436 95,099 65,432 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 76.3 94.3 94.2 93.9 88.0 8,120 2,605 1,828 5,022 -738 6.4 2.8 2.2 5.0 -1.0 8,118 2,810 1,589 4,766 -1,126 6.4 3.0 1.9 4.7 -1.5 6,684 2,361 1,196 2,985 -1,095 5.3 2.5 1.4 3.0 -1.5 Return on investment (ROI), % 28.5 10.9 7.3 15.0 -0.1 Return on equity (ROE), % 24.7 9.8 5.0 13.1 -4.7 % of net sales Balance sheet total 61,760 52,646 48,783 63,076 28,421 22,795 18,302 27,235 -5,003 -1 669 -6,677 -8,087 -1.8 -8.0 -8.0 20 0 -20 -40 -60 11 -10,397 -3.9 40 15,320 Interest-bearing net liabilities 60 52,666 Non-interest-bearing liabilities EQUITY RATIO AND GEARING % 12 13 14 15 14 15 -14.0 % of net sales 58.5 55.8 56.6 48.0 -16.8 -6.9 -28.3 -33.5 -47.1 Gross capital expenditure 2,506 1,675 3,189 3,529 1,885 Gearing 46.9 Gearing, % Equity ratio Equity ratio, % RETURN ON INVESTMENT (ROI) AND RETURN ON EQUITY (ROE) % 2.0 1.8 3.8 3.5 2.5 3,092 1,767 2,523 2,516 2,020 2.4 1.9 3.0 2.5 2.7 25 60 44 28 50 36 20 Order intake, EUR million 145 112 63 116 77 Personnel, at Dec. 31 646 587 534 503 464 Personnel, effective, on average 614 530 515 480 457 % of net sales Research and development costs % of net sales Order book, EUR million Personnel, average Dividend Repayment of equity * The Board of Directors’ proposal to the Annual General Meeting. 624 3,289 * – 30 15 10 545 522 488 475 5 1,606 801 2,002 1,201 0 803 1,201 – – -5 11 12 13 Return on investment (ROI) Return on equity (ROE) 30 R A U T E 2 0 1 5 SHARE-RELATED DATA 2015 2014 2013 2012 2011 Earnings per share (EPS), undiluted, EUR 1.65 0.59 0.30 0.75 -0.27 Earnings per share (EPS), diluted, EUR 1.64 0.59 0.30 0.75 -0.27 Equity to share, EUR 7.26 6.06 5.90 6.03 5.51 0.80 * 0.40 0.20 0.50 0.30 0.80 * 0.40 0.20 0.50 0.30 Dividend per profit, % 48.4 * 68.0 66.7 66.4 -109.7 5.7 * 5.5 2.9 5.6 4.8 8.55 * 12.42 23.28 11.95 -22.67 – 0.20 0.30 – – Price/earnings ratio (P/E ratio) Repayment of equity from invested non-restricted equity reserve, EUR Development in share price (series A shares) Lowest share price for the financial year, EUR 7.17 6.90 6.88 6.18 14.25 8.60 9.33 9.24 11.95 7.69 8.49 8.22 14.12 7.30 6.95 9.00 29,311 27,833 36,043 4.0 4% 3.0 3% 2.0 2% 1.0 1% 0% 6.20 58,057 5% 8.57 Share price at Dec. 31, EUR 5.0 11.55 Average share price for the financial year, EUR 6% 6.05 Highest share price for the financial year, EUR 6.0 0 Dividend per series A share, EURR Dividend per series K share, EUR Effective dividend return, % INVESTING IN THE FUTURE EUR million 24,829 Market value of capital stock at Dec. 31, EUR 1,000** 11 12 13 14 15 R&D costs Capital expenditure of net sales, % R&D expenditure R&D expenditure of net sales, % Capital expenditure Trading in the company's shares (series A shares) 1,095 594 514 302 522 35.1 20.0 17.0 10.0 17.3 Issue-adjusted weighted average number of shares 4,051,034 4,009,777 4,004,758 4,004,758 4,004,758 Issue-adjusted number of shares at the end of the financial year 4,111,708 4,015,228 4,004,758 4,004,758 4,004,758 Shares traded during the financial year, 1,000 shares % of the number of series A shares OPERATING CASH FLOW EUR million 8 Total number of shares (undiluted) The deferred tax liabilities have been included in the calculation of the key ratios. 6 4 2 0 -2 * Board of Directors’ proposal to the Annual General Meeting. ** Series K shares valued at the value of series A shares. -4 11 12 13 14 15 R AU T E 2 015 31 The charter and tasks of the Board of Directors are described in the Administrative Instructions and Corporate Governance Statement on the company’s website. b. 1950, M.Sc. (Eng.) Chairman of the Board 2009– b. 1964, M.Sc. (Econ.), CEFA Member of the Board 2004– Member of the Board 2009– Vice Chairman of the Board 2012– Chairman of the Board’s Working Committee and Appointments Committee Member of the Board’s Working Committee and Appointments Committee Independent of the company and of major shareholders Independent of the company, dependent on major shareholders Erkki Pehu-Lehtonen was Senior Adviser to the Board of Pöyry Plc in 2008–2010 and Pöyry Plc’s President and CEO in 1999–2008. He was President of Jaakko Pöyry Oy, a subsidiary of Pöyry Plc, in 1996–1999 and Executive Vice President of the company in 1994–1996. Before joining the Pöyry Group, Erkki PehuLehtonen held top management positions at, among others, Neles-Jamesbury, Inc. and Valmet Paper Machinery Inc. Mika Mustakallio has been President of MORS Software Oy since 2006 and a bank risk management specialist since 2001. Prior to this, in 1995–2000, he worked at Svenska Handelsbanken as the Head of Risk Control and in 1991–1995 at Price Waterhouse as a consultant. Simultaneous positions of trust: Valmet Corporation, Member of the Board 2014– Raute shares: 1,000 pcs series A shares Holdings of Raute shares on December 31, 2015. The figures include holdings of their own, minor children and control entities. 32 R AU T E 2 015 Mika Mustakallio • No fewer than five and no more than seven members. • The term of office begins at the Annual General Meeting and ends at the following Annual General Meeting. • Majority of Board members independent of the company, of which members at least two must be independent of the company’s major shareholders. • Convenes, on average, ten times during the term of office. • In addition to statutory tasks and those defined in the Articles of Association, the Board approves the company strategy and budget annually, and, based on management reports, regularly monitors the Group’s financial status and draws up interim reports. • Carries out an annual self-evaluation. • A Working Committee and an Appointments Committee support the Board’s work. Erkki Pehu-Lehtonen BOARD OF DIRECTORS Simultaneous positions of trust: None Raute shares: 57,580 pcs series K shares 26,270 pcs series A shares Päivi Leiwo Joni Bask Pekka Suominen Risto Hautamäki b. 1945, M.Sc. (Eng.) Member of the Board 2009– b. 1976, M.Sc. (Econ.) Member of the Board 2010– b. 1975, M.Sc. (Eng.) Member of the Board 2012– b. 1964, Master of Law, MBA Member of the Board 2014– Member of the Board’s Working Committee Member of the Board’s Appointments Committee Independent of the company, dependent on major shareholders Independent of the company and of major shareholders Independent of the company, dependent on major shareholders Joni Bask has held various product development and management positions at Varian Medical Systems Finland Oy as of 2003. Current position: Systems Engineering Manager, Varian Medical Systems Finland Oy 2013–. Päivi Leiwo has been full-time Chairman of the Board of her family-owned company Oilon Oy since 2009. She previously worked as a lawyer for Oilon Oy in 1989–2009. Independent of the company and of major shareholders Risto Hautamäki was President of Metso Paper in 2005–2007, President and CEO of Tamfelt Corporation in 1995–2005 and President and CEO of Valmet Paper Machinery Inc. in 1990–1994. Simultaneous positions of trust: None Raute shares: 3,000 pcs series A shares Pekka Suominen was Business Manager of Talentum Events Oy in 2007–2012. Simultaneous positions of trust: Hakaniemen Metalli Oy, Member of the Board 2014– FBN Perheyrityspalvelut Oy, Member of the Board 2014– Raute shares: 48,000 pcs series K shares 62,429 pcs series A shares Simultaneous positions of trust: None Raute shares: 17,250 pcs series K shares 4,450 pcs series A shares Auditor The authorized public accounting company PricewaterhouseCoopers as auditor, with Authorized Public Accountant Janne Rajalahti as the principal auditor. Simultaneous positions of trust: The Federation of Finnish Technology Industries, Member of the Board 2012– Finpro ry, Member of the Board 2014–2015, Chairman of the Board 2015 Finpro Oy, Chairman of the Board 2016– Finland Chamber of Commerce, Vice-Chairman of the Board 2016– Raute shares: No holding of shares R AU T E 2 015 33 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 2002–2004: various positions such as Technology Director, Sales Director; KCI Konecranes International Plc 1994–2002: various positions, such as CIO; KONE Corporation, Kone Cranes 1985–1994: various positions, such as R&D Manager, R&D Director Simultaneous positions of trust: Helkama Bica Oy, Member of the Board 2014– Häme Chamber of Commerce, Chairman of the Board 2014– The Federation of Finnish Technology Industries, Member of the Board 2016– b. 1957, M.Sc. (Econ.), MBA Group Vice President, Finance, Chief Financial Officer, October 8, 2003– Deputy to President and CEO, October 16, 2004– With the company since: 1990– Member of the Executive Board since: January 1, 2001 Employment history: Raute Corporation 1990–2003: Administrative Director; Luhta Oy 1985–1990: Controller Raute shares and stock options: 1,750 pcs series A shares 5,000 pcs stock options 2010 B 5,000 pcs stock options 2010 C b. 1962, M.Sc. (Eng.) Group Vice President, Supply Chain, October 1, 2013– With the company since: 1987– Member of the Executive Board since: June 1, 2004 Employment history: Raute Corporation 1987–2013: various positions, such as Group Vice President, Technology and Operations; Engineering Manager, Production Director Raute shares and stock options: 5,250 pcs series A shares 5,000 pcs stock options 2010 C Raute shares and stock options: 8,500 pcs series A shares 10,000 pcs stock options 2010 B 10,000 pcs stock options 2010 C Holdings of Raute shares and stock options on December 31, 2015. The figures include holdings of their own, minor children and control entities. 34 R A U T E 2 0 1 5 Timo Kangas Petri Strengell Arja Hakala Tapani Kiiski EXECUTIVE BOARD b. 1965, Engineer Group Vice President, Customer Care, Technology Services, Market area EMEA, October 1, 2013– With the company since: 2004– Member of the Executive Board since: October 1, 2004 Employment history: Raute Corporation 2004–2013: various positions, including Group Vice President, EMEA; Group Vice President, Technology Services; Maintenance Service Manager; YIT Corporation 1999–2004: various positions in maintenance and equipment sales in forest, paper and food industry projects Raute shares and stock options: 2,500 pcs stock options 2010 A 5,000 pcs stock options 2010 B 5,000 pcs stock options 2010 C Marko Hjelt Mika Hyysti PRESIDENT AND CEO b. 1965, B.Sc. (Eng.) Group Vice President, Technology, October 1, 2013– b. 1969, M.Ed. Group Vice President, Human Resources, October 1, 2013– With the company since: 1990– With the company since: 2013– Member of the Executive Board since: October 1, 2013 Member of the Executive Board since: October 1, 2013 Employment history: Raute Corporation 1990–2013: various positions, such as Automation Engineering Manager, R&D Manager and Technology Manager Employment history: Raute Corporation 2013: Group HR Manager; Go On Yhtiöt 2010–2012: Head of unit in Lahti and Hämeenlinna, Finland; Mercuri Urval 1999–2009: Senior Consultant Raute shares and stock options: 2,700 pcs series A shares 1,000 pcs stock options 2010 B 1,000 pcs stock options 2010 C Raute shares and stock options: 200 pcs stock options 2010 A 2,500 pcs stock options 2010 B 5,000 pcs stock options 2010 C Mr. Antti Laulainen, M.Sc. (Tech.) (b. 1967), has been appointed as a member of Raute Group's Executive Board as of March 14, 2016 with responsibility for Technology Services and Sales Management (Group Vice President, Technology Services and Sales Management). Responsible for the management of Raute’s business according to the Finnish Companies Act and the decisions and instructions of the Board of Directors. Reports to the Board of Directors on the business environment, such as on customers, the competitive and market situation as well as Raute’s financial standing and other important issues. Functions as the Chairman of the Group’s Executive Board and represents the Group at the shareholders’ meetings of subsidiaries and associates, and acts as Chairman of the subsidiaries’ Boards of Directors, unless the Board decides otherwise in individual cases. The Board evaluates the President and CEO’s work annually. GROUP’S EXECUTIVE BOARD Consists of the President and CEO, who acts as the Chairman, and of a variable number of members appointed by Raute Corporation’s Board of Directors. Prepares the Group’s business strategy and is in charge of its implementation. Deals with all major operational issues, and its decisions are confirmed by the President and CEO. R AU T E 2 015 35 INFORMATION FOR SHAREHOLDERS Raute is a financially sound Small Cap company with a family background. Raute operates globally and has a leading position in its field. a solid equity ratio. Due to the nature of the project business, the dividend is not directly tied to the annual result. Corporate governance Publishing of financial information The Parent company, Raute Corporation, is a Finnish public limited liability company which abides by the Finnish Companies Act, the Securities Markets Act, Nasdaq Helsinki Ltd’s rules, other regulations concerning publicly listed companies and Raute Corporation’s Articles of Association in its decision-making and corporate governance. The company’s Board of Directors has also issued Administrative Instructions for the company. In all of its communications, Raute abides by the requirements of the Finnish Securities Markets Act and Nasdaq Helsinki Ltd’s rules for listed companies concerning accurate and simultaneous disclosure of information. Raute Corporation’s Articles of Association, Administrative Instructions, Corporate Governance Statement and other information related to the company’s governance and investor relations are available on Raute’s website, Information concerning the Group’s administration and risk management is also included in the Report of the Board of Directors and Financial Statements. 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 36 R A U T E 2 0 1 5 Raute publishes financial information (Annual Report, Financial Statements and Interim Reports) and stock exchange releases and notifications in both Finnish and English. Read more about Raute’s investor communications policy on the company’s website at Persons responsible for investor relations Risks and risk management The Group’s identified key risk areas relate to the nature of the business, the business environment, financing, and damage or loss. The fluctuation in demand resulting from economic cycles and delivery and technology risks have been identified as the Group’s most significant business risks. Raute’s risk management policy is approved by the Board of Directors. The Board is responsible for organizing internal control and risk management, and for monitoring their efficiency. Raute has no separate internal auditing organization. The 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. Raute shares and stock options Series of shares Raute Corporation has two series of shares. Series A shares have been quoted on the Nasdaq Helsinki Ltd since 1994. Tapani Kiiski, President and CEO Arja Hakala, CFO tel. +358 3 829 11 email: SHARE Analysts monitoring Raute Inderes Oy In addition, other analysis companies occasionally draw up reports on the company. Raute is not liable for the estimates presented in the analysis. NUMBER OF SHARES TRADING AT DEC. 31, 2015 CODE Series A shares RUTAV 3,120,547 Series K shares RUTKV Total VOTES/ SHARE TOTAL NUMBER OF VOTES 1 3,120,547 991,161 20 19,823,220 4,111,708 22,943,767 Share quotations can be followed online at Annual General Meeting Stock options 2010 Raute's stock options 2010 are listed on Nasdaq Helsinki Ltd. as of April 27, 2015. ORIGINAL SHARE SUBSCRIPTION PRICE AMOUNT OF STOCK OPTIONS UNEXERCISED AT DEC. 31, 2015 SUBSCRIPTION PRICE AT DEC. 31, 2015 TRADING CODE SHARE SUBSCRIPTION PERIOD TO END AT 2010 A RUTAVEW110 March 31, 2016 EUR 7.64 EUR 5.44 15,355 2010 B RUTAVEW210 March 31, 2017 EUR 9.83 58,400 2010 C RUTAVEW310 March 31, 2018 EUR 8.40 EUR 7.93 * EUR 6.80 * STOCK OPTION 54,295 *The subscription price is reduced after the start of the period for determination of the subscription price, but before the share subscription, with the amount of dividend or funds distributed from the distributable equity fund. L ARGEST SHAREHOLDERS AT DEC. 31, 2015 % OF VOTING RIGHTS NUMBER OF SERIES K SHARES NUMBER OF SERIES A SHARES TOTAL NUMBER OF SHARES % OF TOTAL SHARES TOTAL NUMBER OF VOTES Sundholm Göran Wilhelm – 623,423 623,423 15.2 623,423 – 182,635 182,635 4.4 182,635 The Board of Directors’ proposal for profit distribution The Board of Directors will propose to Raute Corporation’s Annual General Meeting, to be held on March 31, 2016, that a dividend of EUR 0.80 per share be paid for the financial year 2015, and that the remainder of distributable funds be transferred to equity. Shareholders who are registered in the shareholders’ register maintained by Euroclear Finland Ltd on the record date for dividend distribution, April 4, 2016, are entitled to dividends. The dividend payment date will be April 12, 2016. 2.7 Mandatum Life Unit-Linked Raute Corporation’s Annual General Meeting will be held on Thursday, March 31, 2016 at 6 p.m. at Sibelius Hall, Ankkurikatu 7, Lahti, Finland. 0.8 BY NUMBER OF SHARES Laakkonen Mikko – 119,919 119,919 2.9 119,919 0.5 Suominen Pekka 48,000 62,429 110,429 2.7 1,022,429 4.5 Siivonen Osku Pekka 50,640 53,539 104,179 2.5 1,066,339 4.6 Kirmo Kaisa Marketta 55,680 48,341 104,021 2.5 1,161,941 5.1 Suominen Tiina Sini-Maria 48,000 54,316 102,316 2.5 1,014,316 4.4 – 85,000 85,000 2.1 85,000 0.4 Relander Harald Bertel Keskiaho Kaija Leena 33,600 51,116 84,716 2.1 723,116 3.2 Mustakallio Mika Tapani 57,580 26,270 83,850 2.0 1,177,870 5.1 Särkijärvi Anna Riitta 60,480 22,009 82,489 2.0 1,231,609 60,480 500 60,980 1.5 1,210,100 Mustakallio Marja Helena 43,240 16,047 59,287 1.4 880,847 3.8 12,000 43,256 55,256 1.3 283,256 1.2 • January–June on Wednesday, July 27, 2016 • January–September on Wednesday, October 26, 2016. 5.3 Särkijärvi Timo Juha • January–March on Friday, April 29, 2016 5.4 Mustakallio Kari Pauli In 2016 Raute Corporation will publish three interim reports as follows: Särkijärvi-Martinez Anu Riitta 12,000 43,256 55,256 1.3 283,256 1.2 Mustakallio Ulla Sinikka 53,240 – 53,240 1.3 1,064,800 4.6 Suominen Jukka Matias 24,960 27,964 52,924 1.3 527,164 2.3 – 51,950 51,950 1.3 51,950 0.2 Suominen Jussi Matias 48,000 – 48,000 1.2 960,000 4.2 Keskiaho Ilta Marjaana 24,780 19,094 43,874 1.1 514,694 2.2 632,680 1,531,064 2,163,744 52.6 14,184,664 61.8 The printed Annual Report will be mailed to the 200 largest shareholders and to others by request. Financial publications can also be ordered in print or as printouts by phone from +358 3 829 11 or by email from Keskinäinen työeläkevakuutusyhtiö Varma Total Read more about Raute as an investment: R AU T E 2 015 37 SHARE OWNERSHIP BY SHAREHOLDER CATEGORY AT DEC. 31, 2015 NUMBER OF SHAREHOLDERS AT DEC. 31 TRADING IN SERIES A SHARES 2015 EUR 1,000 3,000 1,000 pcs 250 2,500 200 2,000 150 100 1,000 Management Financial and insurance institutions 6.0% Companies 0 3.3% Public institutions 1.5% Non-profit shareholders 11 12 13 14 15 0.6% Foreign shareholders 0 01 02 03 04 05 06 07 08 09 10 11 12 /2015 3.7% Nominee-registered 1,000 500 0 5.8% 2,000 50 500 79.1% 2,500 1,500 1,500 Households 3,000 0.1% Trading 1,000 pcs Trading EUR 1,000 DEVELOPMENT OF SHARE PRICE EUR MARKET VALUE OF CAPITAL STOCK AT DEC. 31 EUR million 16 60 12 40 8 20 4 0 0 11 12 13 14 15 11 12 13 14 Average share price 38 R A U T E 2 0 1 5 Series K shares appreciated to the value of Closing price at Dec. 31 series A shares. 15 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 Email FOLLOW US ONLINE Annual Report 2015 Content: Raute Corporation and Pohjoisranta Burson-Marsteller Oy Translation: Traduct Oy, Raute Corporation Graphic design: Pohjoisranta Burson-Marsteller Oy Photos: Tomi Parkkonen (pages 1, 3, 4, 19, 20, 27), Steico (page 14) and Raute Corporation Printing house: Lönnberg Print & Promo Paper: Scandia White Twitter: @rautemachinery, @RauteOyj, @RauteCorp LinkedIn: Raute Oyj Facebook: Raute Corporation Instagram: @raute_corporation Youtube: Insta Our virtual character Patchman is a representation of Raute’s advanced technology. The character’s tools and machine vision reflect one of our strengths – our ability to combine mechanical functionality and automation into smart machines that serve our customers.