Financial statements 2009 Contents Board of Directors' report FINANCIAL STATEMENTS Financial statements, Group, IFRS Consolidated statement of comprehensive income Consolidated balance sheet Consolidated cash flow statement Consolidated statement of changes in shareholders' equity Notes to the consolidated financial statements Financial statements, Parent company, FAS Parent company's income statement, FAS Parent company's balance sheet, FAS Parent company's cash flow statement, FAS Notes to the Parent company's financial statements Key ratios describing the Group's financial statements Share related data Calculation of key ratios Shares and shareholders The Board of Directors' proposal for distribution of profits, signatures for the Board of Directors' report and financial statements and the Auditor's note List of the accounting document types, accounting journals types and means of storaging Development of quarterly results Auditor's report 3 9 10 11 12 13 41 42 43 44 52 53 54 56 61 62 63 64 2 Board of Directors' report The Group's net sales in the financial year 2009 totaled EUR 36.6 million (MEUR 98.5), down 63 percent from the previous year. The significant decline in net sales was due to the weak market situation. The Group's operating profit, EUR -9.7 million (MEUR +6.3) remained negative despite the adaptation measures taken. Financial income and expenses totaled EUR -0.2 million (MEUR +0.5). Profit before tax was EUR -9.9 million (MEUR +6.9) and profit for the financial year was EUR -8.1 million (MEUR +4.7). Comprehensive income totaled EUR -8.4 million (MEUR +5.0). Earnings per share were EUR -2.03 (EUR +1.18), and return on equity was -28 percent (+14%). In this report, figures in parentheses refer to the comparable figures for the previous years 2008 and 2007. spare parts services also dropped to a low level in all market areas due to the decreased capacity utilization rates. ORDER INTAKE AND ORDER BOOK Raute's business consists of providing project deliveries and technology services to the wood products industry. Project deliveries encompass complete mills, production lines, and individual machines and equipment. Technology services include maintenance, spare parts services, equipment modernization, consulting, training, and reconditioned machinery. The order intake for 2009 was only EUR 35 million (MEUR 67). The significant decline in the order intake volume resulted from the weakened market situation in customer industries and the postponement of large mill-scale projects. The postponements are evaluated to result from the decrease in demand for plywood and LVL and more difficult financing of investments. The proportion of project deliveries in the order intake in 2009 was EUR 19 million (MEUR 44). Within project deliveries, Russia accounted for 87 percent (32%) and Europe for 10 percent (58%). The share of other market areas was 3 percent (10%). The most significant single new order was the EUR 12 million sale of production machinery for a plywood mill in Russia in December. The proportion of technology services in the order intake in 2009 was EUR 16 million (MEUR 23). The order book at the end of 2009, EUR 22 million (MEUR 24), remained at a low level. BUSINESS ENVIRONMENT Market situation in customer industries Year 2009 was challenging in all market areas for Raute's customer industries. The plywood and LVL industries, manufacturers of wood-based panel products used in investment commodities, are highly affected by fluctuations in the fields of construction, housing-related consumption, international trade, and transportation. In general, due to the economic recession and especially because of the difficult situation faced by the construction and transport industries, the demand for wood-based panel products remained at a low level in all of the company's significant market areas. The majority of the mills have had to adapt their production levels to correspond with the lowered demand either by shortening their workweek or implementing shut-down periods of varied duration. Some of the least profitable and least efficient mills have been closed for good. COMPETITIVE POSITION There have been no essential changes in the Group's competitive position in 2009. Customers appreciate the supplier's comprehensive competence and strong technology development in their strategic investments aimed at ensuring their ability to deliver and provide service. The competitive advantage provided by Raute's technology plays an important role when customers select their suppliers. Demand for wood products technology and technology services Due to the low demand for wood-based panel products and the uncertain market outlook, investment activity in the plywood industry has been at a very low level in all market areas. In several market areas, the investment decisions for mill-scale, capacity-increasing projects, which had long been in the planning, were further postponed. Investments in the LVL industry, which is dependent on construction industry activity, were at a very low level in all market areas. The uncertainty in the financial markets continued in the emerging markets that are important to Raute and, above all, the availability of long-term financing, security demands, price and other conditions limited investments. The financial market situation was also the main impediment to implementing the modernizations aimed at improving the efficiency of existing mills. Demand for maintenance and NET SALES The Group's net sales (IFRS) totaled EUR 36.6 million (2008: MEUR 98.5; 2007: MEUR 110.8), down 63 percent from 2008. The significant decline in net sales was due to the low order intake. Net sales were generated exclusively by project deliveries and technology services related to the wood products technology business. 3 Net sales for project deliveries totaled EUR 22 million (MEUR 73), down 70 percent from the previous year, accounting for 60 percent (74%) of net sales. The plywood industry's share of the net sales of project deliveries was 98 percent (99%). Net sales for technology services totaled EUR 15 million (MEUR 25), down 40 percent from the previous year, accounting for 40 percent (26%) of net sales. The decrease in net sales was linked to the lower capacity utilization rates in the plywood and LVL industries and the shut-down of several customer mills. Europe took over as the biggest market area in 2009, accounting for 45 percent (48%) of net sales. Russia's share of net sales was 31 percent (35%) and South America's was 11 percent (4%). North America's share fell to 7 percent (10%). The share of other market areas was 6 percent (3%). Finland accounted for 17 percent (16%) of net sales. In 2009, the net sales (FAS) of the Parent company Raute Corporation totaled EUR 31.4 million (2008: MEUR 87.7; 2007: MEUR 93.0). the end of the financial year exceeded interest-bearing liabilities by EUR 9.4 million (MEUR 10.6). At the end of the financial year, the equity ratio was 46 percent (2008: 61%; 2007: 70%) and gearing -41 percent (2008: -31%; 2007: -33%). The Group's cash and cash equivalents, including financial assets recognized at fair value through profit or loss, stood at EUR 27.9 million (MEUR 21.1) at the end of the financial year. The change in cash and cash equivalents in the financial year was EUR 6.8 million positive (MEUR 9.8). Despite the negative operating profit, operating cash flow was EUR 5.6 million positive (MEUR +6.9) due to the decrease in net working capital. Cash flow from investment activities totaled EUR -0.9 million (MEUR -3.1). Cash flow from financing activities was EUR 2.1 million positive (MEUR +6.0) including a EUR 3 million security deposit related to TyEL loan security arrangements, EUR 10 million in new TyEL loans, EUR 2 million in TyEL loan instalments and EUR 2.8 million in dividend payments for 2008. Raute Corporation has prepared for an increase in the Group's working capital requirements and possible disturbances in the availability of money by taking out a EUR 10 million TyEL loan in December. The loan has a fixed interest rate and the loan period is five years. Due to the new loan, interest-bearing liabilities increased to EUR 18.5 million (MEUR 10.5) at the end of the financial year and its effect on the equity ratio was -11 percentage units. At the end of 2009, the Group's balance sheet total stood at EUR 57.4 million (2008: MEUR 60.2; 2007: MEUR 54.8). Other fluctuations in balance sheet items and the key figures based on them are the result of differences in the timing of customer payments and the cost accumulation from project deliveries, which is typical of the project business. Raute Corporation has a EUR 10 million commercial paper program, which allows the company to issue commercial papers maturing in less than one year. The company also has unused bilateral credit regulation agreements worth EUR 8 million with two different Nordic banks. At the end of 2009, the equity ratio (FAS) of the Parent company Raute Corporation was 45 percent (2008: 61%; 2007: 72%). RESULT AND PROFITABILITY The operating profit (IFRS) for 2009 declined to EUR -9.7 million (2008: MEUR 6.3; 2007: MEUR 8.6) and the operating profit to -26 percent of net sales (2008: 6%; 2007: 8%). The significant decline in net sales weakened the operating profit and the operating profit percentage, despite adaptation measures. In order to adapt to the drastically weakened market situation in North America, restructuring measures were decided on in Raute's Canadian subsidiaries in October. A total of EUR 0.8 million in one-time costs relating to the restructuring was recorded in 2009. The Group's financial income and expenses totaled EUR -0.2 million (MEUR +0.5). The Group's profit before tax was EUR -9.9 million (MEUR +6.9) and the profit for the reporting period was EUR -8.1 million (MEUR +4.7). The Group's comprehensive income totaled EUR -8.4 million (MEUR +5.0). Earnings per share were EUR -2.03 (EUR +1.18). There were no dilutive items. Return on investment was -22 percent (+19%) and return on equity -28 percent (+14%). In 2009, the operating profit (FAS) of the Parent company Raute Corporation totaled EUR -6.8 million (2008: MEUR +6.5; 2007: MEUR +7.8). The operating profit equaled -22 percent of net sales (2008: +7%; 2007: +8%). The profit for the financial year (FAS) was EUR -8.3 million (MEUR +4.5). The financial items included a loss of EUR 3.8 million relating to the valuation of loans to subsidiaries. LOANS TO RELATED PARTIES AND OTHER LIABILITIES On December 31, 2009, the Parent company Raute Corporation had loan receivables from its subsidiaries Raute Canada Ltd in the amount of CAD 1 115 thousand and from Raute Service LLC EUR 355 thousand. Raute Corporation had EUR 100 thousand in liabilities to the Raute Sickness Fund. Raute Corporation has written down loan receivables from Raute Canada Ltd. in the amount of EUR 3.8 million during the financial year 2009. Other obligations are described in the notes to the financial statements. CASH FLOW AND BALANCE SHEET The Group's financial position remained good throughout the year. The Group's cash and cash equivalents at 4 RESEARCH AND DEVELOPMENT COSTS AND CAPITAL EXPENDITURE Raute's goal is to be the leading technology supplier in its field, and to invest strongly in the continuous research and development of plywood and LVL manufacturing technology, in particular, and the supporting automation and instrumentation applications, such as machine vision. In 2009, the Group's research and development costs, EUR 2.5 million, represented 6.7 percent of net sales (2008: MEUR 4.4 / 4.4% of net sales; 2007: MEUR 4.0 / 3.6% of net sales). Raute's product development focused on new product solutions with a fast payback time for the customer and with which customers can, without major investments, boost the efficiency of their wood raw material recovery by decreasing the consumption of glue and additives as well as by saving on energy and labor costs. The Group's investments totaled EUR 1.1 million (2008: MEUR 3.2; 2007: MEUR 1.9). The largest single investment was the EUR 0.5 million modernization of the milling machine at the main production plant in Nastola. Total investments included capitalized investment costs of EUR 0.1 million (2008: MEUR 0.7; 2007: MEUR 0.2). Other investments consisted of information system and replacement investments. In 2009, the research and development costs (FAS) of the Parent company Raute Corporation were EUR 2.5 million, representing 7.9 percent of net sales (2008: MEUR 3.5 / 4.0% of net sales; 2007: MEUR 3.1 / 3.3% of net sales). Investments totaled EUR 0.9 million (2008: MEUR 2.0; 2007: MEUR 1.6). PERSONNEL The Group's headcount at the end of 2009 was 524 (573). Finnish Group companies accounted for 77 percent (77%) of employees, North American companies for 14 percent (13%), Chinese companies for 6 percent (7%), and other sales and maintenance companies for 3 percent (3%). Temporary lay-offs of varying duration and other adaptation measures involved the entire personnel of the Group. Converted to full-time employees, the average number of Group personnel was 419 (2008: 569; 2007: 566). Salaries paid by the Group totaled EUR 18.6 million (2008: MEUR 23.8; 2007: MEUR 24.0). A pay system involving the entire personnel is in use within the Group. On March 22, 2006, the Board of Directors of Raute Corporation approved a share-based incentive plan (2006). The reward from the plan was based on the Group's operating profit for 2006­2008 and on the Board of Directors' assessment of the success of the strategy. The incentive plan encompassed the Group's Executive Board (5 members) and 12 other key employees. The rewards were paid partly in shares and partly in cash in the 2009 financial year. The cash portion was intended for the payment of taxes and tax-related costs resulting from the rewards. The shares are subject to a two-year transfer prohibition, which ends on March 28, 2011. The Group has continued developing the competence of and increasing the personnel's commitment despite the weak profitability. Two percent (2%) of the payroll was invested in personnel training. The results of a personnel survey carried out in December were on the same level as the survey completed two years ago and had even improved in the area of supervisory work, despite the difficult employment situation. Converted to full-time employees, the average number of personnel employed by the Parent company Raute Corporation in 2009 was 303 (2008: 394; 2007: 393). Salaries paid by the Parent company totaled EUR 13.9 million (2008: MEUR 17.0; 2007: MEUR 16.3). DEVELOPMENT OF OPERATIONS During 2009, the organization and operating methods were developed to respond to the new challenges posed by the changed operating environment. Sales and other customer service operations were organized according to customers into teams with a special expertise concerning the particular customer relationship or market area. A customer base management system, developed especially for Raute's needs, was taken into use to support customer services. The system improves the efficiency of the management of customer service related information within the Group. The operative resources of project deliveries and technology services were unified under the same leadership, enabling more flexible use of competence and resources in different load situations. The North American operations were organized to respond to the present market situation as well as future growth and development possibilities. A decision was made to sell the facilities of the Canadian unit and to transfer during 2010 to new facilities which will better correspond with the chosen operating model. Simultaneously, productivity will be improved and delivery times shortened by modernizing production. SOCIETY AND THE ENVIRONMENT The environment is one of the values that guide Raute's operations. Raute has been systematically developing the environmental soundness of its products and services and aims to reduce the environmental impact of its operations. The Group abides by the principles of good corporate citizenship, taking into consideration nature and its protection, as well as the operating methods of the surrounding society, and by respecting local cultures. Raute's operations mainly affect the environment indirectly when the company's technology is used in the production processes of the wood products industry. Raute's technology enables the wood products industry to substantially reduce the environmental load caused by its operations 5 through, for example, more efficient use of wood raw materials, additives and energy. The Group's own operations do not involve considerable environmental risks that might have a direct impact on the Group's business operations or financial position. The Nastola and Jyväskylä plants manage environmental matters in compliance with a certified environmental system. At the Canadian plant, environmental surveys are carried out regularly by an external assessor. The operations and ethical principles of the partner and subcontractor networks are also subjected to systematic inspection. Raute aims to continuously reduce energy consumption, decrease the volume of waste, and develop the working environment. plementation costs. Contract, product liability, implementation, cost and capacity risks are managed using project management procedures that comply 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 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 significant 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 is also exposed to liquidity, interest and price risks. 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. The liquid assets are mainly held in Finnish and Swedish banks. The financing risks, as well as the risk management objectives and procedures, are described in more detail in the note number 38 to the financial statements. RISKS AND RISK MANAGEMENT Business Risks The Group's most significant business risks have been recognized as the fluctuation in demand resulting from economic cycles and delivery and technology risks. The Group has no ongoing legal proceedings or other disputes in progress that might materially affect the continuity of business operations, nor is the Board of Directors aware of any other legal risks related to the Group's operations that might have such an effect. 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. 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 im- 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. 6 Organizing risk management The Group has a risk management policy approved by the Board of Directors. The Board of Directors has determined the Group's general attitude to risk and has approved the risk management policy on a general level and handles the tasks of the Audit Committee. In that role, the Board is responsible for internal control and organizing risk management, and for monitoring their efficiency. 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. The President and CEO and the CFO regularly report significant risks to the Board. There is no separate internal auditing organization in the Raute Group. BOARD OF DIRECTORS AND PRESIDENT AND CEO The Annual General Meeting elects the Chairman and Vice-Chairman for the Board of Directors, and 3-5 Board members. In Raute Corporation's Annual General Meeting on April 2, 2009, 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. The Board of Directors appoints the President and CEO and confirms the terms of his or her employment, including fringe benefits. Mr. Tapani Kiiski, Licentiate in Technology, continued as Raute Corporation's President and CEO. He was appointed as Raute Corporation's President and CEO on March 16, 2004. As agreed in the executive contract, the term of notice is six months, and the severance pay equals six months' salary. Raute Corporation's Articles of Association do not grant any unusual authorizations to the Board of Directors, or the President and CEO. Any decisions on changes to the Articles of Association or an increase in share capital are made in compliance with the regulations of the effective Companies Act. 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 published on the company's website www.raute.com. EXECUTIVE BOARD Mr. Tapani Kiiski continued as Chairman of the Group's Executive Board, and the Executive Board also included 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 Business Operations, President of Raute's North American companies. GROUP STRUCTURE No fundamental changes took place in the Group's legal structure during 2009. SHAREHOLDERS Raute Corporation's number of shareholders totaled 1,528 at the beginning of the year and 1,820 at the end of the reporting period. Series K shares are held by 46 private individuals (46). The management held 4.9 percent (4.7%) of company shares and 9.1 percent (9.1%) of the votes. Nominee-registered shares accounted for 2.3 percent (2.4%) of the shares. No flagging notifications were given to the company in 2009. The distribution of ownership by sector and by size as well as the largest shareholders are presented in the financial statements under "Shares and shareholders". SHARES The number of Raute Corporation's shares at the end of 2009 totaled 4,004,758, of which 991,161 were series K shares (ordinary share, 20 votes/share) and 3,013,597 series A shares (1 vote/share). The shares have a nominal value of two euros. Series K and A shares grant equal rights to dividends and company assets. Series K shares can be converted to series A shares under the terms described in Article 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, the new owner shall report this to the Board of Directors in writing and without delay. The other shareholders of the K series have the right to redeem the share under the terms described in Article 4 of the Articles of Association. Raute Corporation's series A shares are listed on NASDAQ OMX Helsinki Ltd. The trading code is RUTAV. During 2009, 454,798 shares were traded (392,693) worth altogeth- AUDITORS Raute Corporation's 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. 7 er EUR 3,316 thousand (EUR 4,854 thousand). The number of shares traded represents 15 percent (13%) of all listed series A shares. The average price of a series A share was EUR 7.29 (EUR 12.37). The highest rate of the year was EUR 8.90 and the lowest EUR 6.50. The company's market capitalization at the end of 2009 totaled EUR 29.9 million (MEUR 25.6), with series K shares valued at the closing price of series A shares, EUR 7.47 (EUR 6.40), on December 31, 2009. Raute Corporation has signed a market making agreement with Nordea Bank Finland Plc in compliance with the Liquidity Providing (LP) requirements issued by NASDAQ OMX Helsinki Ltd. production lines in a plywood mill operating in the AsiaPacific region. Machine deliveries are scheduled between June and September 2010 and the start-up of the mill will take place by summer 2011. The customer does not wish to release any further information on the project for the time being. The typical value of this type of mill-scale project delivered by Raute has been more than EUR 15 million. ANNUAL GENERAL MEETING 2010 Raute Corporation's Annual General Meeting will be held in Lahti on Wednesday March 31, 2010. THE BOARD OF DIRECTORS' PROPOSAL FOR DIVI DEND DISTRIBUTION AND MEASURES CONCERN ING THE COMPANY'S RESULT According to the financial statements distributable assets total EUR 7,427 thousand. The Board of Directors proposes to Raute Corporation's Annual General Meeting, to be held on March 31, 2010, that no dividend shall be paid for 2009 and that the losses for the financial year shall be transferred to retained earnings. DIVIDEND FOR THE YEAR 2008 On April 2, 2009, Raute Corporation's Annual General Meeting decided to distribute a dividend of EUR 0.70 per share for 2008. The total amount of dividends paid on April 16, 2009 was EUR 2.8 million, series A shares accounting for EUR 2.1 million and series K shares for EUR 0.7 million. REPURCHASE AND DISPOSAL OF OWN SHARES OUTLOOK FOR 2010 During the financial year 2009, Raute Corporation's Board of Directors has exercised the authorization given by the Annual General Meeting on April 2, 2008 to repurchase and dispose of Raute Corporation's series A shares. Raute Corporation repurchased a total of 18,900 pieces of the company's series A shares during the period February 19­March 17, 2009 to be used in the remuneration systems of the company's key employees. On March 27, 2009, the company transferred the acquired shares to the 17 key employees covered by the Group's share-based incentive plan (2006) as the share portion of the remuneration paid for the period 2006­2008. The company did not possess company shares at the end of the financial period or hold them as security. Other information related to the repurchase and disposal of company shares is presented in the Shares and shareholders section of the financial statements. Due to the uncertainty related to the development of the global economy and financial markets, the market situation of Raute's customer industries is expected to continue to be uncertain. Demand for investments and services in the wood products industry is not expected to improve significantly during 2010. Individual mill-scale projects, through which customers are already making preparations for the period following the present recession, are, however, in the planning phase in many market areas; however, they involve uncertainties related to implementation and scheduling. In addition, restructuring resulting from the difficult situation in the customer industries may activate new investment projects. Thanks to its strong financial position, market position and the implemented development efforts, Raute's ability to survive the economic slowdown and to respond to growing demand as soon as the markets recover will be excellent. 2010 will be a challenging year due to the uncertainty in the market situation, despite the implemented adaptations measures. As a result of the two considerable new orders received in December 2009 and January 2010, the net sales for 2010 are expected to increase and the operating profit is expected to improve from 2009. Achieving a positive result will depend on the volume of order intake during the first half of the year. AUTHORIZATION OF REPURCHASE AND DISPOSAL OF OWN SHARES On April 2, 2009, the Annual General Meeting authorized the Board of Directors to decide on the repurchase of Raute Corporation's series A shares with the company's distributable assets and to decide on a directed issue of a maximum of 400,000 pieces of the company's series A shares. The authorization was not exercised in 2009. EVENTS AFTER THE REPORTING YEAR In January, Raute Corporation received a significant order from an established plywood producer for nearly all of the 8 FINANCIAL STATEMENTS 2009 / GROUP Consolidated statement of comprehensive income EUR 1 000 Note 2, 3, 4 5 NET SALES Other operating income Increase (+) or decrease () in inventories of finished goods and work in progress 6 7 10, 17, 18 12 Materials and services Expenses from employee benefits Depreciation, amortization and impairment charges Other operating expenses Total operating expenses OPERATING PROFIT (LOSS) 13 13 Financial income Financial expenses PROFIT (LOSS) BEFORE TAX 14 Income taxes PROFIT (LOSS) FOR THE FINANCIAL YEAR Other comprehensive income items Exchange differences on translating foreign operations Other comprehensive income items, net of tax TOTAL COMPREHENSIVE PROFIT (LOSS) Profit (loss) for the financial year attributable to Equity holders of the Parent company Total comprehensive profit (loss) for the financial year attributable to Equity holders of the Parent company Earnings per share for profit (loss) attributable to Equity holders of the Parent company, EUR Undiluted earnings per share Diluted earnings per share Shares, 1 000 pcs Adjusted average number of shares Adjusted average number of shares, diluted 1.1.­31.12.2009 1.1.­31.12.2008 36 638 153 98 466 95 795 15 695 22 047 2 670 6 869 47 281 9 695 356 551 9 890 1 749 8 141 404 50 906 28 592 2 751 10 375 92 624 6 341 1 268 -729 6 880 -2 157 4 723 228 228 8 369 247 247 4 970 8 141 4 723 8 369 4 970 15 15 2.03 2.03 1.18 1.18 4 003 4 003 4 005 4 005 9 FINANCIAL STATEMENTS 2009 / GROUP Consolidated balance sheet EUR 1 000 Note ASSETS Noncurrent assets Intangible assets Tangible assets Other financial assets Receivables Deferred tax asset Total Current assets Inventories Accounts receivable and other receivables Cash and cash equivalents Total TOTAL ASSETS SHAREHOLDERS' EQUITY AND LIABILITIES Equity attributable to equity holders of the Parent company Share capital Share premium Other funds Exchange differences Retained earnings Profit (loss) for the financial year Share of shareholders' equity that belongs to owners of the Parent company Total shareholders' equity Longterm liabilities Provisions Deferred tax liabilities Long-term interest-bearing liabilities Total Shortterm liabilities Provisions Pension obligations Short-term interest-bearing liabilities Advance payments received Current tax liabilities Trade and other payables Total Total liabilities TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 31.12.2009 31.12.2008 17 18 19 20 28 1 831 10 267 486 1 000 1 741 15 325 2 482 11 175 499 0 334 14 491 21 22 23 4 330 9 832 27 900 42 062 57 387 4 310 20 270 21 109 45 689 60 180 24 24 8 010 6 498 294 55 16 337 8 141 23 053 23 053 8 010 6 498 287 283 14 520 4 723 34 321 34 321 27 28 29 182 271 14 318 14 771 289 599 8 232 9 120 27 31 30 32 32 1 325 143 4 215 7 222 0 6 658 19 563 34 334 57 387 2 251 173 2 225 3 475 79 8 536 16 739 25 859 60 180 10 FINANCIAL STATEMENTS 2009 / GROUP Consolidated cash flow statement EUR 1 000 CASH FLOW FROM OPERATING ACTIVITIES Proceeds from sales Proceeds from other operating income Payments of operating expenses Cash flow before financial items and taxes Interests and other operating financial expenses paid Interests and other income received Dividends received Income taxes paid NET CASH FLOW FROM OPERATING ACTIVITIES (A) CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure in tangible and intangible assets Purchases of assets-for-sale as investments Proceeds from sale of tangible and intangible assets NET CASH FLOW FROM INVESTING ACTIVITIES (B) CASH FLOW FROM FINANCING ACTIVITIES Repurchase of own shares Increase of long-term and short-term receivables Repayment of short-term liabilities Increase of long-term liabilities Repayment of long-term liabilities Dividends paid NET CASH FLOW FROM FINANCING ACTIVITIES (C) NET CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C) increase (+) / decrease (-) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR* EFFECTS OF EXCHANGE RATE CHANGES ON CASH CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR* CASH AND CASH EQUIVALENTS IN THE BALANCE SHEET Cash and cash equivalents TOTAL 138 3 000 125 10 200 2 000 2 803 2 134 6 798 0 0 -63 10 069 0 -4 005 6 001 9 824 1 034 0 79 955 -3 201 -50 171 -3 080 50 988 85 46 020 5 053 486 423 79 550 5 619 100 611 65 -90 988 9 688 -224 828 133 -3 522 6 903 1.1.­31.12.2009 1.1.­31.12.2008 21 109 7 27 900 11 284 0 21 109 27 900 27 900 21 109 21 109 *Cash and cash equivalents comprise trading assets as well as cash and bank receivables, which will due under three months' period. 11 Consolidated statement of changes in shareholders' equity Share that belongs to the owners of the Parent company Exchange rate differences Share premium Share capital Other funds Retained earnings Minority interests 0 0 0 0 EUR 1 000 EQUITY at Jan. 1, 2008 Total comprehensive profit (loss) for the financial year Equity-settled share-based transactions Dividends paid EQUITY at Dec. 31, 2008 8 010 6 498 125 22 139 36 247 18 524 4 723 -4 005 19 242 19 242 -8 141 -138 36 -2 803 8 196 33 194 4 992 139 -4 005 34 321 34 321 -8 369 -138 36 7 -2 803 23 053 33 194 4 992 139 4 005 34 321 34 321 8 369 138 36 7 2 803 23 053 8 010 8 010 6 498 6 498 287 287 283 283 -228 EQUITY at Jan. 1, 2009 Total comprehensive profit (loss) for the financial year Repurchase of own shares 25 Disposal of own shares, tax effect Equity-settled share-based transactions 26 Dividends paid EQUITY at Dec. 31, 2009 7 8 010 6 498 294 55 12 TOTAL Note FINANCIAL STATEMENTS 2009 / GROUP Notes to the consolidated financial statements 1 ACCOUNTING PRINCIPLES OF THE CONSOLIDATED FINANCIAL STATEMENTS General information Raute Group (`Group') is a globally operating technology company which manufactures complete mills, production lines and single machines for the veneer, plywood and LVL industries. Raute's technology offering covers the customers' entire production process, ranging from raw material processing to the finishing and packaging of end products. Additionally, Raute's full 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 Group's Parent company, Raute Corporation, is a Finnish public limited liability company established in accordance with Finnish law (Business ID FI01490726). Its series A shares are quoted in NASDAQ OMX Helsinki Ltd, under Industrials. Raute Corporation is domiciled in Lahti. The address of its registered office is Rautetie 2, FI-15550 Nastola, and its postal address is P.O. Box 69, FI-15551 Nastola. These consolidated financial statements for the period between January 1 and December 31, 2009 were authorized for issue by Raute Corporation's Board of Directors at its meeting on February 11, 2010. According to the Finnish Companies Act, shareholders may approve or reject the financial statements at the shareholders' meeting arranged after the statements have been issued. The shareholders' meeting also has the opportunity to make changes to the financial statements. Raute Corporation's consolidated financial statement information is available online at www.raute.com or at the head office of the Parent company, Rautetie 2, FI-15551 Nastola. Raute Corporation's consolidated financial statements have been prepared under the historical cost convention, except for items measured at fair value, which are available-for-sale financial assets, financial assets and liabilities recognized at fair value through profit or loss, derivative financial instruments, hedged items in fair value hedge and cash-settled share-based transactions. Investments presented in available-for-sale financial assets whose fair value cannot be determined have, however, been measured at original cost. Cash-settled share-based transactions have been recognized at fair value at the grant date. All of the figures presented in these consolidated financial statements are in thousand euro, unless otherwise stated. The Group has applied the following new and amended standards and interpretations which have taken effect on January 1, 2009 or later: · IAS 1 Presentation of Financial Statements, Amendment to the standard. According to the amended standard, nonowner changes in equity are not presented in detail in the statement of changes in equity. All non-owner changes in equity are presented in the items of a statement of comprehensive income. Following the amendment, the Group can choose to present a single statement (statement of comprehensive income) or two separate statements (income statement and statement of comprehensive income). Raute Corporation has chosen to present a single statement of result in its consolidated financial statements. · IFRS 7 Financial Instruments: Disclosures - Improving Disclosures about Financial Instruments, amendment to standard. Following the amendments, a three-level hierarchy is adopted in presenting fair values of financial instruments and additional notes that make it easier to evaluate the relative reliability of fair values. In addition, the amendments clarify and broaden the previous requirements concerning the presentation of information related to liquidity risk. The amendments have resulted in an increased number of notes concerning the abovementioned issues. · IFRS 8 Operating Segments. According to the standard, the segment information presented should be based on internal reports submitted to the management and the calculation principles followed in the reporting. The accounting principles applied to the segment reporting to the Group's management are consistent with the external accounting. The assessment of segment performance and decisions on the allocation of resources to the segment are based on its operating profit. The introduction of IFRS 8 did not have any significant impact on the presentation of information concerning the segments, as the segment information disclosed by the Group previously was already based on the Group's internal reporting structure. Basis of preparation Raute Corporation's consolidated financial statements for January 1­December 31, 2009 have been prepared in accordance with international financial statement standards (International Financial Reporting Standards, IFRS). Preparations have complied with the IAS and IFRS standards, as well as SIC and IFRIC interpretations, effective on December 31, 2009. IFRS refers to the standards and their interpretations that have been approved for application within the EU in the Finnish Accounting Act and regulations issued under it in accordance with the procedures laid down in EU regulation No 1606/2002. The notes to the consolidated financial statements also comply with Finnish accounting legislation. 13 FINANCIAL STATEMENTS 2009 / GROUP The Group has applied the following amended standards and interpretations as of January 1, 2009, but they did not affect the Group's profit or loss, balance position or financial statement presentation: · IAS 23 Borrowing Costs, amended standard. According to the amended standard, borrowing costs that are attributable to the acquisition or production of a qualifying asset should be capitalized as part of the cost of that asset. · IAS 27 Consolidated Financial Statements and Separate Financial Statements, amendment to standard. According to the amended standard, the effect of transactions conducted with non-controlling owners should be recognized in equity, unless control changes, and no goodwill or profit or loss is generated from these transactions. In addition, the standard provides guidelines on accounting procedures in case of loss of control. · IFRS 2 Share-based Payment ­ Vesting conditions and cancellations, amendment to standard. The amended standard clarifies the vesting conditions and the characteristics of share-based payment transactions. · IFRS 3 Business Combinations, amendment to standard. The standard contains amendments to the assumptions and calculation principles of the purchase method applied in business combinations when measuring the purchase. · IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial instruments: Recognition and measurement ­ Embedded Derivatives, amendments to standards. These amendments clarify the reassessment and treatment of derivatives in the financial statements. · IFRIC 12 Service Concession Arrangements. The standard provides guidelines for handling service concession arrangements from private operator to public sector in financial performance of the concession operator. · IFRIC 16 Hedges of a net investment in a foreign operation. This standard includes, for example, guidance on risk hedging treatment and what hedging instrument may be held. · IFRIC 15 Agreements for the Construction of Real Estate. The interpretation clarifies whether the IAS 18 Revenue or IAS 11 Long-term contracts standard should be applied to certain transactions. In the company management's view, the following standards, amendments and interpretations effective as of January 1, 2009 are not related to the Group's operations: · IFRIC 13 Customer Loyalty Programmes. Raute Group does not have any customer loyalty programs referred to in this interpretation. The preparation of financial statements in conformity with IFRS requires management to make certain estimates and to exercise its judgment in applying the Group's accounting policies. Because the forward-looking estimates and assumptions are based on management's best knowledge at the reporting date, they comprise risks and uncertainties. The actual results may therefore differ from these estimates. Information about the estimates and judgment that the management has used and that are most critical to the figures in the financial statements are disclosed under "Critical accounting judgments and key sources of estimation uncertainty". Operating segments Raute Group has one operating segment. Continuing operations belonged to the wood products technology segment. The division into operating segments is based on the Group's internal decision-making order, organizational structure and financial reporting. Segment reporting follows the principles of presentation of the consolidated financial statements. Consolidated financial statements The consolidated financial statements include the Parent company Raute Corporation and its subsidiaries in which the Parent company holds, directly or indirectly, over 50 percent of the votes or in which it exercises control otherwise. Control means the right to decide on the company's financial and business principles to profit from the company's operations. On December 31, 2009, the Group did not have any associates over which the Group would have significant influence but not control. Mutual shareholding has been eliminated using the purchase method. Subsidiaries have been consolidated from the date on which control is transferred to the Group. They have been de-consolidated from the date that control ceases. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. All intra-Group transactions, receivables, liabilities and unrealized margins, as well as internal distribution of profit have been eliminated. The allocation of the profit or loss for the period to the equity holders of the Parent company and to the minority has been presented in connection with the statement of comprehensive income. The consolidated financial statements do not include any minority interests at the balance sheet date on December 31, 2009. The Group has made use of the exemption available under standard IFRS 1 not to restate the acquisitions that took place prior to January 1, 2004. Transactions in foreign currency The consolidated financial statements have been presented in euro, which is the Parent company's functional and presentation currency. The figures concerning the profit or loss and financial position of the companies combined under the consolidated financial statements have been measured in the currency of the economic environment in which that company mainly operates (`functional currency'). 14 FINANCIAL STATEMENTS 2009 / GROUP Foreign currency transactions have been translated into the functional currency using the exchange rates prevailing at the dates of the transactions. In practice the translation is often carried out using rates that approximately correspond to those prevailing at the dates of transactions. Monetary items in foreign currency have been translated into the functional currency using the rates prevailing on the last day of the report period. Foreign currency nonmonetary items measured at fair value have been translated into the functional currency using the rates prevailing at the date of measurement. Otherwise non-monetary items have been measured using the rate prevailing at the date of transaction. Gains and losses from foreign currency transactions and translation of monetary items have been recognized through profit or loss. Exchange rate gains and losses from transactions have been presented under the income statement item before operating profit to which the transaction is attributable. Rate exchange gains and losses related to cash and cash equivalents, loans and other financial assets and liabilities have been presented in the income statement under financial income or expenses. The income statements of foreign subsidiaries have been translated into euro using the weighted average exchange rates during the reporting period and balance sheets have been translated at the average rate on the balance sheet date. Translation of income and comprehensive income at different exchange rates in the income statement and in the balance sheet results in translation differences which have been recognized in the balance sheet under equity, the difference of which has been recognized in the items of the comprehensive income. The translation differences arising from the elimination of the acquisition cost of foreign subsidiaries and from the translation of equity items accumulated after the acquisition have been recognized in the other items of the comprehensive income. On partial or full disposal of a subsidiary, the accumulated translation differences have been recognized through loss or profit as part of the gains or losses from disposal. The exchange rates used for the consolidation of subsidiaries have been presented in the notes to the consolidated income statement and balance sheet number 39. the expected loss has been recognized as an expense immediately. If the result of a long-term project cannot be reliably estimated, the project costs have been recognized as an expenditure in the period in which they have been incurred, and project revenue has been recognized only to the extent of project costs that are likely to be recovered. Costs related to projects that have not yet been recognized in revenue have been recognized as long-term projects in progress under inventories. During the financial year 2009 and the comparison period, the Group had no financial costs allocated to the long-term projects entered in the balance sheet. Net sales recognized on the basis of percentage of completion have been allocated to prepayments from customers, and the amount that exceeds the prepayments received has been presented under accounts receivables and other receivables in the balance sheet. If a contractual entity (e.g. mill-scale delivery) includes sub-entities (e.g. production lines) with determined contract terms and conditions and with risks, rewards and control of ownership transferred to the buyer separately from the rest of the contractual entity, they have been treated as separate long-term projects. Revenues from the sale of spare parts and other goods, as well as small and short-term projects, have been recognized in full when the significant risks and rewards have been transferred to the buyer and the Group no longer has right of possession of and control over the product. This generally means the moment at which the goods have been delivered to the customer in accordance with the agreed delivery clause. The delivery conditions used in the Group are based on Incoterms 2000 delivery clauses which have been presented in the official rules published by the International Chamber of Commerce for the interpretation of trade terms. Revenues from time-based maintenance contracts have been recognized as income for the maintenance contract period and the costs incurred have been recognized as expenses on performance basis. Revenues from other services have been recognized in net sales for the period in which the service has been provided. Other operating income includes revenue not included in net sales, such as lease income, insurance compensations and gains on the disposal of fixed assets. Lease income has been recognized as income on a straight-line basis for the lease term. Interest income has been recognized as income in the period in which it has arisen. Dividend income has been recognized when the company paying dividends pays it. Revenue recognition Net sales include revenue from the sale of products and services, as well as raw materials and equipment, adjusted net of indirect taxes, discounts, and exchange differences from foreign currency sales. All components pertaining to each contractual entity have been treated as a whole and the same revenue recognition method is applied to them. Revenue and costs from long-term projects (project deliveries and modernizations in technology services) have been recognized based on the percentage of completion as soon as it has been possible to assess the end result reliably. Percentage of completion is measured on a cost-basis as the relation of actual project costs to the estimated total project costs. When it is probable that the total costs needed to complete the contract will exceed total contract revenue, Noncurrent assets held for sale and discontinued operations Non-current assets held for sale have been classified as held for sale if the amount corresponding to the carrying amount of the asset will accrue from the disposal of the asset. The asset is measured at the lower of carrying amount or fair value, less costs to sell. Depreciation of these assets has ended at the date of classification. 15 FINANCIAL STATEMENTS 2009 / GROUP A separate major line of business which can be clearly distinguished from other operations in terms of property and result and which is part of a single disposal plan is treated as a discontinued operation. The consolidated financial statements do not include any assets classified as long-term assets held for sale and discontinued operations at the reporting date on December 31, 2009. in non-current financial assets under accounts receivables and other receivables in the balance sheet if they mature over 12 months from the balance sheet date. Otherwise they have been presented in current financial assets. Sales and other revenue have been recognized in accounts receivables at the original receivable amount. Short-term accounts receivables have been measured at the original receivable amount. Long-term accounts receivables have been measured at their present value discounted at the effective interest rate. Available-for-sale financial assets are assets not included in derivatives that have been expressly assigned to this Group or that have not been classified into any other Group. They are included in non-current assets unless the intention is to hold them less than 12 months from the balance sheet date, in which case they are included in current assets. Available-for-sale financial assets may consist of shares and interest-bearing investments. They have been measured at fair value or, where fair value cannot be reliably determined, at cost of acquisition. Changes in fair value of available-for-sale financial assets have been recognized in other items of the comprehensive income and they have been presented in the fair value reserve, including the tax effects. Accumulated changes in fair value are transferred from equity and recognized through profit or loss when the investment is sold or when its value has decreased in such a way that an impairment loss must be recognized for the investment. Permanent impairment of assets is always recognized directly in the income statement. Cash and cash equivalents comprise cash in hand, shortterm bank deposits and other highly liquid short-term investments with original maturities of three months or less. Bank overdrafts are included in short-term interest-bearing liabilities. Credit accounts related to Group accounts are included in short-term interest-bearing liabilities and presented net if the Group has a contractual legal right of set-off concerning full or partial payment or elimination of an amount to the lender. Financial assets are derecognized when the contractual right to cash flows expires or the Group has substantially transferred risks and income outside the Group. Financial liabilities have been recognized at fair value based on the purchase consideration at the grant date. They have been measured at amortized cost using the effective interest method. Financial liabilities are included in current and non-current liabilities and they may be interest-bearing or non-interest-bearing. The fair values of all financial instruments in the balance sheet are based on market values. The fair values have been presented in the note number 37 to the financial statements. At each reporting date the Group assesses whether there is objective evidence of impairment of a financial asset or a Group of financial assets. The default risk related to accounts receivables is estimated on the basis of a comprehensive survey of accounts receivables carried out at Income taxes The income statement includes as taxes the estimated taxes corresponding to the taxable profit of the companies belonging to the Group for the period, as well as tax adjustments for previous periods and the change in deferred taxes. Current tax based on the taxable income is calculated on taxable income using the tax rate in force in each country. The taxes on income and expenses presented in the components of the comprehensive income have been presented in the income statement under the item in question. Deferred taxes have been calculated for all temporary differences in accounting and taxation using the tax rates enacted by the reporting date. The principal temporary differences arise from the amortization of tangible fixed assets. Deferred tax liabilities have been presented in full in the balance sheet. Deferred tax receivables have been presented to the extent that it is probable that taxable profits will be available against which temporary differences can be utilized. Financial assets and liabilities Financial assets have been classified as financial assets at fair value through profit and loss, loans and other receivables and available-for-sale financial assets. Financial liabilities have been classified as financial liabilities at fair value through profit or loss and other financial liabilities. Classification is made based on the purpose of acquisition in conjunction with the original acquisition. An item in financial assets is assigned to the `financial assets at fair value through profit or loss', if it is held for trading. All purchases and sales of financial assets have been recognized on the transaction date. Financial assets at fair value through profit or loss include shares and units, deposits with maturities under three months and other securities. Financial assets held for trading have mainly been acquired to generate profit from short-term changes in market price. Derivatives that do not meet the conditions for hedge accounting provided for in IAS 39 have been classified as held for trading. Derivatives held for trading, as well as financial assets maturing within 12 months, have been included in current assets. The items in this Group have been measured at fair value. Gains and losses from changes in fair value have been recognized in the income statement under financial income and expenses and in the period in which they have arisen. Loan and other receivables are assets with fixed or determinable payments that are not quoted in an active market and which the company does not hold for trading. Loan and other receivables have been measured at amortized cost using the effective interest method. They have been presented 16 FINANCIAL STATEMENTS 2009 / GROUP the balance sheet date. Factors indicating impairment of accounts receivables include repeated failures or delays to pay, imminent bankruptcy or debt restructuring as a result of major financial difficulties of the debtor. Estimated impairment losses have been recognized in the income statement as the difference between the carrying amount and the present value of estimated future cash flows discounted at the effective interest rate. If an impairment loss decreases in a subsequent period, and the decrease can be objectively related to an event occurring after the impairment was recognized, the impairment loss is reversed through profit or loss. cost of the asset can be measured reliably. In other cases the expenditure from intangible assets has been recognized as an expense when incurred. Intangible assets include goodwill, capitalized development costs and other intangible assets. Goodwill Goodwill represents the excess of the cost of acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and always when there are indications of a possible impairment of an asset. Goodwill is measured at original cost less impairment losses. Raute Corporation's consolidated financial statements 2009, including the comparison data, do not include goodwill. Research and development costs Research and development costs have been recognized as an expense in the income statement. Development expenditure incurred in planning new or more advanced products and in manufacturing test machinery for testing them has been recognized as intangible assets in the balance sheet from the moment the product can be produced technologically, utilized commercially, and future financial benefit is expected from it. Capitalized product development costs include the material, work and testing expenditure incurred directly from completing the product for the intended purpose. Development expenditure previously recognized as an expense is not capitalized at a later date. Depreciation of capitalized product development costs is started when the product is ready for use. The useful life of development costs is three years, during which time capitalized assets have been recognized as an expense on a straight line basis. Capitalized product development costs are tested annually for impairment and impairments have been recognized in the income statement as depreciations. Other intangible assets Others intangible assets have been recognized in the balance sheet at original cost when it is probable that the expected future financial benefit attributable to the assets will flow to the entity over a period of several years (depreciation period) and the cost of the assets can be measured reliably. Depreciation is not recognized for other intangible assets with an indefinite useful life. The other intangible assets with a finite useful life have been recorded in the balance sheet and recognized in the income statement as an expense based on the straight-line depreciation method over their useful life as follows: Patents Computer software Other intangible assets 10 years 5 years 3­10 years. Derivative financial instruments and hedge accounting The Group uses currency derivative contracts hedging against currency risks of commercial transactions (hedging of business payments in foreign currency related to binding fixed-price commercial contracts,"operational derivatives") and currency derivative contracts hedging against currency risks of financing items (hedging of loans and financial assets, "financing derivatives" to hedge against currency risks related to future transactions. Derivative contracts have been classified as economic hedging or fair value hedging at the date of acquisition. Derivative contracts classified as fair value hedging are subject to account fair value or cash flow hedging according to the IAS 39 standard. Raute Corporation's consolidated financial statements 2009, including the comparison data, do not include derivative financial instruments subject to hedge accounting according to the IAS 39 standard. The derivative financial instruments have been recognized in the balance sheet at their acquisition cost at the contract date. All derivative contracts, irrespective of the items hedged, have been measured at fair value at the balance sheet date and the changes in their value have been recognized through profit or loss. The fair values of derivative contracts have been determined using the market values at the balance sheet date. The fair values of financing derivatives have been set off against each other for the financing derivates with a right of mutual set-off. The derivative financial instruments have been presented as accrued expenses or receivables in non-current assets or liabilities in the balance sheet when the remaining hedged item is more than 12 months from the reporting date. Otherwise the derivative financial instruments have been presented as accrued expenses or receivables under current assets or liabilities in the balance sheet. The changes in the value of the operational derivatives have been presented in the income statement items before operating profit and the changes in financing derivatives have been presented in financing income or expenses. Intangible assets An intangible asset has been recognized in the balance sheet when it is probable that the expected future financial benefit attributable to the asset will flow to the entity over a period of several years (depreciation period) and the The items presented in the balance sheet under other intangible assets are tested annually for impairment and impairments have been recognized in the income statement as depreciations. 17 FINANCIAL STATEMENTS 2009 / GROUP Property, plant and equipment All property, plant and equipment is measured at acquisition cost less accumulated depreciation and impairment. The acquisition cost includes the purchase price, cash and other discounts, import duties and fixed taxes. When property, plant or equipment is manufactured in-house, it also includes, in addition to the above-mentioned items, a share of the Group's fixed costs. Ordinary property, plant and equipment repair and maintenance costs have been recognized through profit or loss as incurred. Possible costs incurred in restoring to original state have been taken into account in IFRS accounting as part of the acquisition cost. Raute Corporation's consolidated financial statements of December 31, 2009, including the comparison data, do not include property, plant or equipment for which costs capitalized in the future should be taken into account. Depreciation of tangible assets is calculated using the straight-line method over their estimated useful lives as follows: Buildings 25­40 years Machinery and equipment 4­12 years Other fixed assets 3­10 years Land no depreciations are made. The residual value of property, plant and equipment presented in the balance sheet after depreciations and their remaining useful lives have been reviewed and confirmed. If required, the values in the balance sheet have been adjusted to reflect changes occurring in the expected financial benefit. Tangible fixed assets are classified in the balance sheet as held for sale and depreciation of their balance sheet value through profit and loss has been discontinued according to the standard IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, when the decision to sell the asset has been made and its use in business operations has ceased. Raute Corporation's consolidated financial statements of December 31, 2009, including the comparison data, do not include property, plant or equipment classified as held for sale. Gains and losses on decommissioning and disposal of property, plant and equipment have been recognized through profit or loss. An impairment loss has been recognized when the value of the asset presented in the balance sheet exceeds the amount of the asset recoverable in the future. Testing for impairment involves measuring the recoverable amount of the asset. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. The value in use is the present value of the expected recoverable cash flows from the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. An impairment loss has been recognized in the income statement as depreciation when established. An impairment loss recognized in previous periods for assets other than goodwill is reassessed at each balance sheet date. The recognition of an impairment loss is reversed when a change has taken place in the circumstances or in the estimates used to determine the recoverable amount of the asset. However, reversal of impairment shall not exceed the asset's carrying amount less impairment loss. Impairment loss for goodwill is not reversed. Leases Group as lessee Leases in which a significant portion of the risks and rewards incident to ownership are retained by the lessor have been treated as operating leases. Payments made under other leases have been recognized as an expense based on the lease period. Inventories Inventories have been measured at the lower of cost and net realizable value. Raw materials and supplies have been measured using the weighted average cost method. The cost of finished goods and work in progress comprises direct material and production costs and the portion of indirect production costs and depreciation allocated to products at a normal capacity excluding financial expenses. The value of inventories includes impairment due to obsolescence. Provisions Provisions have been recognized when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Provision related to warranty obligations has been recognized through profit or loss when revenue from a long-term project, service or spare part including a warranty clause has been recognized. The amount of the warranty provision is estimated at the beginning of the project based on past experience from warranty costs. The unused provision has been recognized as income at the end of the warranty period and expiry of the warranty obligations. In long-term projects recognized on the basis of percentage of completion, the warranty provisions are included in the estimated total costs of the project. Provision for unprofitable contract has been recognized when the unavoidable direct costs and estimated indirect production costs and depreciation under the contract exceed the benefits from the contract. Public contributions Public contributions received as compensation for costs incurred have been recognized in the income statement in the period in which the right to receive the contribution arises. Contributions related to acquisitions of intangible and tangible fixed assets have been recognized as a decrease in the carrying amounts when the Group meets the eligibility criteria for the contribution and a decision granting the contribution is received. Impairments Regular depreciations are not recognized for the Group's intangible assets with an indefinite useful life, but they are tested annually for impairment. For other balance sheet assets, impairment is tested if there are changes in the circumstances or indications of a possible impairment of the asset. 18 FINANCIAL STATEMENTS 2009 / GROUP Restructuring provision has been recognized and presented in the income statement in the cost item in which the costs are expected to be incurred, when the Group has drawn up a detailed plan for restructuring and has started to implement the plan or has announced it. In case of dismissals, a provision for future unemployment pension contributions has been recognized in the Group's Finnish companies for persons whose age may later give rise to the employer company's obligation to pay unemployment contributions. ent company repurchases own equity instruments, their acquisition cost has been deducted from equity. Dividend The dividend proposed by the Board of Directors to the Annual General Meeting has been recognized as a liability and a deduction from distributable equity for the period in which the dividend has been approved for distribution by the shareholders. Employee benefits: Pension obligations Pension plans have been classified into defined benefit and defined contribution plans. Under a defined contribution plan the Group pays fixed contributions to a separate insurance company, after which the Group has no other obligations to pay. In addition, the Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay retirement benefits. All other plans which do not meet these conditions have been classified as benefit pension plans. Contributions to defined contribution pensions plans have been recognized in the income statement as expense in the period in which they were due. The Finnish statutory employment pension scheme and the pension plans of foreign subsidiaries have been classified as defined contribution plans. Raute Corporation's voluntary supplement to pension coverage has been treated in accounting as a defined benefit plan. Obligations arising from the voluntary supplement to pension coverage have been recognized as expenses in the income statement on the basis of actuarial calculations over the employees' average remaining working lives where they exceed the greater of the following: 10 percent of the defined benefit obligation or 10 percent of the fair value of plan assets. Operating profit IAS 1 Presentation of Financial Statements does not define the concept of operating profit. The Group uses the following definition: operating profit is the net sum calculated by adding other operating income to net sales; deducting purchase expenses that have been adjusted by changes in inventories of finished goods and work in progress and by expenses from production for own use; and by deducting expenses, depreciation and possible impairment losses from employee benefits, as well as other operating expenses. All other income statement items are presented under operating profit. Earnings per share Undiluted earnings per share have been calculated based on the weighted average of outstanding shares during the period. Diluted earnings per share have been calculated by adjusting the average of outstanding shares by the dilutive effect of options. The key figures of earnings per share included in Raute Corporation's financial statements of December 31, 2009, including the comparison data, do not include effect of options. Critical accounting judgments and key sources of estimation uncertainty When preparing the consolidated financial statements in compliance with IFRS, the company management must make certain estimates and assumptions. In addition, the management must exercise its judgment in selecting and applying the accounting policies. These estimates and assumptions affect the assets and liabilities in the Group's balance sheet, the disclosure of commitments and possible assets in the consolidated financial statements, and income and expenses for the period. Actual results may differ from the estimates. Intangible rights The Group's intangible assets have been tested for impairment. Other balance sheet assets have been assessed for indications of impairment as explained in the accounting principles above. The recoverable amounts of cash-generating entities have been determined based on value-in-use calculations, which require the use of estimates. Where the carrying amount of the asset exceeds the asset's estimated recoverable amount or fair value, impairment has been recognized through profit and loss. Long-term projects The percentage of completion method is based on estimates of expected project revenue and expenses, as well as on reliable measurement of project progress. Should the estimates of the project outcome change, the recognized Employee benefits: Sharebased incentive plan Granted share-based incentives have been measured in equity at the fair value at the grant date. Share- and cashbased payments have been recognized as an expense on a straight-line basis over the vesting period. The earnings period of the share-based incentive plan (2006) targeted at Raute Corporation's Executive Board and other key employees ended on December 31, 2008. The amount paid on December 31, 2008 in shares was based on the management's latest estimate at the balance sheet date of the number of shares expected to vest at the end of the commitment period and cash-settled payments were based on the latest estimate of outstanding shares and the fair value of shares at the balance sheet date. The number of shares transferred and cash-based payments on December 31, 2009 were based on the actual values at the transfer date on March 27, 2009. Share capital Series K and series A shares held by third parties have been presented in share capital. Expenditure related to own equity issues or acquisitions have been presented as allowance for equity. When the Par- 19 FINANCIAL STATEMENTS 2009 / GROUP revenue and profit is adjusted in the period in which the change first becomes known and can be estimated. Warranty provision The amount of warranty provisions is estimated on the basis of the management's experience from product costs in the warranty period, taking into consideration special product risks. Receivables The management has estimated customers' ability to remit the payment of such trade receivables, for which the company has not received any securities. The Group companies' ability to settle the trade receivables and payments related to the loans has been estimated by the management. Income taxes The management has also made estimates pertaining to the period's income taxes and deferred tax assets and liabilities. Criteria for recognition and measurement of deferred tax assets are estimated at the balance sheet date. The management estimates how likely it is for the Group's companies to have future recoverable taxable income against which unused tax losses can be utilized. The preparatory estimates used for the estimates at the balance sheet date can differ from the actual figures, in which case changes in tax assets have been recognized as expenses in the income statement. Employee benefits When calculating the Group's defined benefit pension plan, statistical and actuarial assumptions have been used, such as discount rate, expected income from the assets included in the pension plans and estimated future pay raises. The statistical assumptions used in the estimates can differ from the actual figures due to, among others, the general financial situation or the duration of the employees' working life. Application of new or amended IFRS stan dards and IFRIC interpretations The following standards, interpretations, and their amendments have been published, but they are not yet in effect, or they shall be adopted on January 1, 2010 at the latest, nor has the Group applied these provisions prior to their obligatory entry into force. · IFRS 3 Business Combinations, amendment to standard. The amendments affect the amount of goodwill recognized on acquisitions and the gain or loss recognized on disposals as well as the procedures of recognizing additional sale price. · IAS 27 Consolidated Financial Statements and Separate Financial Statements, amendment to standard. The amendment affects the presentation of changes in the ownership of a subsidiary in the financial statements. · IAS 39 Financial Instruments: Recognition and Measurement ­ Eligible Hedged Items, amendment to standard. The amendments concern hedge accounting and specify the guidelines on hedging one-sided risk and inflation risk for items included in financial assets and liabilities. · IFRIC 17 Distributions of Non-Cash Assets to Owners. · IFRIC 18 Transfers of Assets from Customers. The Group estimates that the amended standards will not have any significant impact on the Group's future financial statements. EUR 1 000 2 SEGMENT INFORMATION Operational segment Continuing operations of Raute Group belong to the wood products technology segment. Due to Raute's business model, operational nature and administrative structure, the operational segment to be reported as wood products technology segment is comprised of the whole Group and the information on the segment is consistent with that of the Group. Wood products technology Net sales Operating profit Assets Liabilities Capital expenditure 2009 % 2008 % 36 638 9 695 57 387 34 334 1 095 98 466 6 341 60 180 25 859 3 242 20 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 Assets of the wood products technology segment by geographical location Finland North America Russia China South America Others TOTAL Capital expenditure of the wood products technology segment by geographical location Finland North America Russia China South America Others TOTAL 3 2009 % 2008 % 53 448 1 950 948 858 88 95 57 387 94 3 2 1 0 0 100 55 616 2 730 782 860 36 156 60 180 92 5 1 1 0 0 100 1 071 18 2 3 0 1 1 095 98 2 0 0 0 0 100 2 775 75 2 369 19 2 3 242 86 2 0 11 1 0 100 PROCEEDS FROM SALES The main part of the net sales is comprised of project deliveries related to wood processing technology that are treated as long-term projects. The rest of the net sales is comprised of technology services provided to the wood products industry (spare parts, maintenance and modernization services as well as services provided to the development of customers' business). A significant part of the Group's net sales (project deliveries and modernization in technology services) include both product and service sales. Breakdown of the Group's net sales into purely product and service sales cannot be presented reliably. The Group had two customers (0), whose net sales temporarily exceeded 10 percent of the Group's net sales during the financial year 2009, due to a significant decline of net sales and the nature of project business. EUR 1 000 Net sales by market area Russia Rest of Europe Finland South America North America Asia Oceania Others TOTAL 4 LONGTERM PROJECTS Net sales Net sales by percentage of completion Other net sales TOTAL Project revenues entered as income from currently undelivered long-term projects recognized by percentage of completion Amount of long-term projects revenues not yet entered as income (order book) 2009 % 2008 % 11 237 10 415 6 172 3 853 2 549 1 287 954 171 36 638 31 28 17 11 7 4 3 1 100 34 359 31 909 15 800 4 311 9 832 1 241 701 313 98 466 35 32 16 4 10 1 1 1 100 26 990 9 648 36 638 80 749 17 717 98 466 27 184 20 976 85 487 22 817 21 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 Specification of combined asset and liability items Advance payments paid Advance payments received included in inventories in the balance sheet Accrued income corresponding to revenues by percentage of completion Advance payments received from project customers Project receivables included in current assets in the balance sheet Advance payments received in the balance sheet 5 OTHER OPERATING INCOME Capital gain on sale of fixed assets Other TOTAL MATERIALS AND SERVICES Materials and supplies - Purchases during the period - Change in inventories External services TOTAL EXPENSES FROM EMPLOYEE BENEFITS Wages and salaries Pension contributions - Defined contribution plans - Defined benefit plans Share-based payments settled in shares Share-based payments settled in cash Other personnel costs TOTAL Information on management's employee benefits and loans is presented in the note number 33 to the financial statements. Information on the share-based incentive plan (2006) is presented in the note number 26 to the financial statements. 8 NUMBER OF PERSONNEL Employed at Dec. 31, persons Workers Office staff TOTAL - of which personnel working abroad Effective, on average, persons Workers Office staff TOTAL - of which personnel working abroad Average, persons Workers Office staff TOTAL - of which personnel working abroad 2009 2008 389 389 27 306 24 060 3 246 7 222 448 448 85 328 -73 509 11 819 3 475 68 85 153 30 65 95 6 14 472 361 862 15 695 45 832 155 4 919 50 906 7 18 591 2 560 7 6 9 889 22 047 23 846 3 359 -87 139 -28 1 362 28 592 172 352 524 120 178 395 573 136 112 307 419 109 176 393 569 136 175 367 542 116 183 402 585 136 22 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 9 RESEARCH AND DEVELOPMENT COSTS ENTERED AS EXPENSES FOR THE PERIOD Total research and development costs Depreciation of previously capitalized development costs Recognized as assets in the balance sheet Research and development costs entered as expenses for the period Total research and development costs % of net sales Research and development costs have been recognized in operating expenses prior to operating profit. 10 DEPRECIATION, AMORTIZATION AND IMPAIRMENT CHARGES Depreciation and amortization by class of assets Intangible assets - Capitalized development costs - Other intangible assets Tangible assets - Buildings and structures - Machinery and equipment - Other tangible assets TOTAL Impairments by class of assets Intangible assets - Capitalized development costs TOTAL TOTAL DEPRECIATION, AMORTIZATION AND IMPAIRMENT CHARGES Information on depreciation, amortization and impairment charges is presented in the note number 17 to the financial statements. 11 ACQUISITIONS No business acquisitions were made during the financial year 2009 and during the comparision year 2008. OTHER OPERATING EXPENSES Indirect production expenses Renting expenses Sales and marketing expenses Administration expenses Other expenses TOTAL Auditors' remunerations Authorized Public Accountant Ernst & Young Corporation Annual audit, statutory Tax services Other services TOTAL 2009 2008 2 470 599 125 2 943 2 470 6.7 4 375 549 -667 4 257 4 375 4.4 533 471 457 1 138 5 2 604 549 573 456 1 167 7 2 751 66 66 2 670 0 0 2 751 12 1 311 600 1 192 1 956 1 811 6 869 2 225 607 2 436 2 339 2 767 10 375 81 42 2 125 59 91 4 153 23 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 13 FINANCIAL INCOME AND EXPENSES Financial Income Interest income on loans and receivables Dividend income from available-for-sale investments Sales profit of financial assets through profit or loss Change in fair value of financial assets through profit or loss Other financial income TOTAL Financial expenses Interest expenses on financing loans recognized at amortized cost Losses from sales of available-for-sale investments Exchange rate losses of financing loans Other financial expenses TOTAL Financial income and expenses Exchange rate differences entered in consolidated statement of comprehensive income Included in net sales Included in operating expenses Included in financial income and expenses Included in other comprehensive income items TOTAL 14 INCOME TAXES Consolidated income statement Current tax Current tax of previous financial years Change in deferred taxes (note number 28) TOTAL Consolidated statement of comprehensive income Deferred tax related to items charged or credited directly to equity during the year: Acquisition of own shares, conveyed as reward payment on March 27, 2009 TOTAL Analysis of the relationship between realized tax expense and theoretical accounting result using Finnish tax rate of 26 percent. Profit before taxes Tax effects of following items Taxes calculated using the Finnish tax rate, 26% Effect of differences in tax rates of foreign subsidiaries Non-deductible income Non-deductible costs in taxation Taxes from the previous financial years Unrecognized tax assets from the losses of foreign subsidiaries Other items Consolidated tax expense Effective tax rate, % 2009 2008 275 79 0 0 3 356 681 133 86 -100 469 1 268 303 13 62 174 551 195 -43 -50 -505 -131 -729 539 18 12 60 228 282 4 -49 -38 247 164 41 54 1 736 1 749 -2 114 -180 138 -2 157 36 36 0 0 9 890 2 571 59 21 72 54 876 8 1 749 17.7 6 880 -1 789 16 35 -30 -180 -497 288 -2 157 31.3 24 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 15 EARNINGS PER SHARE Undiluted earnings per share Share of profit that belongs to the owners of the Parent company Weighted average number of shares, 1 000 shares Earnings per share, EUR The Group had no diluting instruments changing the number of shares during the financial year 2009 or the comparison year. Diluted earnings per share Share of profit that belongs to the owners of the Parent company Diluted weighted average number of shares, 1 000 shares Diluted earnings per share, EUR 16 2009 2008 8 141 4 003 2.03 4 723 4 005 1.18 8 141 4 003 2.03 4 723 4 005 1.18 DIVIDEND PER SHARE The Board of Directors proposes to Raute Corporation's Annual General Meeting, to be held on March 31, 2010, that no dividend shall be paid for 2009 and that the losses for the financial year shall be transferred to retained earnings. 17 INTANGIBLE ASSETS Development costs EUR 1 000 Intangible assets 2008 Carrying amount at Jan. 1, 2008 Exchange rate differences Additions Other reclassifications between items Carrying amount at Dec. 31, 2008 Long-term expenditure and intangible rights* TOTAL 3 174 667 3 841 2 095 -549 2 644 1 079 1 197 7 329 22 351 33 7 735 5 864 -13 -573 6 450 1 465 1 285 10 503 22 1 018 33 11 575 7 959 -13 -1 122 9 094 2 546 2 482 Accumulated depreciation and amortization at Jan. 1, 2008 Exchange rate differences Depreciation for the financial period Accumulated depreciation and amortization at Dec. 31, 2008 Book value at Jan. 1, 2008 Book value at Dec. 31, 2008 Intangible assets 2009 Carrying amount at Jan. 1, 2009 Exchange rate differences Additions Disposals Other reclassifications between items Carrying amount at Dec. 31, 2009 3 841 125 -28 3 939 7 735 -19 303 -495 7 524 6 450 6 495 -466 6 415 1 285 1 109 11 575 -19 429 -495 -28 11 462 9 094 34 495 -1 065 9 631 2 482 1 831 Accumulated depreciation and amortization at Jan. 1, 2009 2 644 Exchange rate differences 28 Accumulated depreciation and amortization related to disposals Depreciation for the financial period -599 Accumulated depreciation and amortization at Dec. 31, 2009 3 215 Book value at Jan. 1, 2009 Book value at Dec. 31, 2009 1 197 723 25 FINANCIAL STATEMENTS 2009 / GROUP *Long-term expenditure and intangible rights include patents, computer software and product rights. The value of capitalized research and development costs recognized in the balance sheet is decreased during the financial year 2009. As a result of the impairment test, the value of impairment EUR 66 thousand is recognized during the financial year. The changes in circumstances of market situation have been affected in expected recoverable cash flows. 18 PROPERTY, PLANT AND EQUIPMENT Land and water Buildings Machinery and and structures equipment Other tangible assets EUR 1 000 Assets in progress and advance payments TOTAL Property, plant and equipment 2008 Carrying amount at Jan. 1, 2008 Exchange rate differences Additions Disposals Other reclassifications between items Carrying amount at Dec. 31, 2008 Accumulated depreciation and amortization at Jan. 1, 2008 Exchange rate differences Depreciation for the financial period Accumulated depreciation and amortization at Dec. 31, 2008 Book value at Jan. 1, 2008 Book value at Dec. 31, 2008 Property, plant and equipment 2009 Carrying amount at Jan. 1, 2009 Exchange rate differences Additions Disposals Other reclassifications between items Carrying amount at Dec. 31, 2009 Accumulated depreciation and amortization at Jan. 1, 2009 Exchange rate differences Depreciation for the financial period Accumulated depreciation and amortization at Dec. 31, 2009 Book value at Jan. 1, 2009 Book value at Dec. 31, 2009 1 040 -58 982 13 545 -422 63 -3 75 13 259 24 886 -974 989 830 25 731 375 2 8 162 1 111 -87 -1 062 124 385 40 008 -1 453 2 170 -90 -157 40 480 0 7 714 395 -456 7 775 5 830 5 483 20 989 980 -1 167 21 176 3 897 4 555 344 -9 353 31 31 0 29 047 1 375 -1 632 29 304 10 960 11 175 0 1 040 982 0 162 124 982 63 6 -4 1 048 13 259 247 11 48 13 565 25 731 592 183 -20 35 26 521 385 -1 -1 383 124 466 -84 507 40 480 901 666 -25 0 42 022 0 7 775 -233 -462 8 470 5 484 5 094 21 176 -602 -1 149 22 926 4 555 3 594 353 -6 359 31 23 0 29 304 -834 -1 617 31 755 11 175 10 267 0 982 1 048 0 124 507 EUR 1 000 19 OTHER FINANCIAL ASSETS Availableforsale investments Publicly quoted share investments Unquoted share investments TOTAL 2009 2008 0 486 486 16 483 499 26 FINANCIAL STATEMENTS 2009 / GROUP Realized sales losses have not been recognized during the financial year from available-for-sale investments. Realized sales losses of EUR 50 thousand were recognized during the comparison year 2008. Unquoted shares are recognized at cost deducted with possible impairments, since their fair value cannot be determined reliably. EUR 1 000 20 LONGTERM RECEIVABLES Other receivables TOTAL Other receivables include interest-bearing collateral guarantees, which will be discharged over 12 months from the reporting date. Deferred tax receivables are presented in the note number 28 to the financial statements. 21 INVENTORIES Materials and supplies Work in progress Finished products/goods Advance payments TOTAL During the financial year, EUR 401 thousand (EUR 235 thousand) were recognized in expenses, reducing the carrying amount of inventories to correspond to the disposal price. 22 ACCOUNTS RECEIVABLES AND OTHER RECEIVABLES Shortterm receivables - Accounts receivables - Accrued income from customers recognized according to percentage of completion - Accrued income - Derivative contract receivables - Other receivables TOTAL 2009 2008 1 000 1 000 0 0 2 049 1 621 271 389 4 330 2 417 1 019 425 448 4 310 2 712 3 246 897 90 2 887 9 832 4 743 11 819 919 0 2 790 20 270 Balance sheet values correspond best to the amount of money that is the maximum amount of credit risk without taking into consideration the fair value of collaterals, in such a case where other contract parties are not able to fulfill their obligations related to financial instruments. Sales receivables are non-interest-bearing with average terms of payment of 30 days. Age analysis of accounts receivables is presented in the note number 38 to the financial statements. Percentage of completion receivables from customers relating to long-term projects with binding sales contracts, which is an item comparable to accounts receivables, is presented as financial asset in the note number 37 to the financials statements. Impairment of accounts receivables has been recorded, if there is evidence that the Group will not receive payment for overdue receivables. Accounts receivables do not in- clude significant default risks at the balance sheet date. No losses have been recognized in the accounts receivables during the financial year. Payments received from credit losses recognized during previous financial years were EUR 98 thousand. During the comparison year 2008 credit losses of EUR 129 thousand have been recognized and they are presented in the item Other operating expenses. Other receivables include interest-bearing collateral guarantees of EUR 2 000 thousand (EUR 0 thousand), which shall be discharged over 12 months from reporting date. The credit risks related to receivables at the balance sheet date are presented in the note number 38 to the financial statements. The fair values of receivables are presented in the note number 37 to the financial statements. 27 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 Substantial items included in accrued income - Periodizing of personnel costs - Other accrued income and prepaid expenses TOTAL 23 CASH AND CASH EQUIVALENTS Cash and bank accounts Bank deposits TOTAL Cash and cash equivalents in cash flow statement Cash and cash equivalents TOTAL 24 NOTES TO EQUITY Reconciliation of the number of shares, 1 000 pcs Number of shares at Jan. 1 Number of shares at Dec. 31 Nominal value, EUR Total shareholders' equity, EUR thousand Series K shares (20 votes/share) Series A shares (1 vote/share) 2009 2008 386 511 897 86 833 919 2 987 24 913 27 900 1 216 19 893 21 109 27 900 27 900 21 109 21 109 4 005 4 005 2.00 8 010 991 3 014 4 005 4 005 2.00 8 010 991 3 014 The minimum share capital is EUR 5 000 000 and the maximum share capital is EUR 20 000 000. All issued shares are paid in full. The share premium includes the value exceeding the nominal value that is paid for shares in connection with a rights issue. Other reserves include granted share-based remuneration, settled in shares. Exchange rate differences include exchange differences arising from translation of foreign subsidiaries' financial statements as well as gains and losses arising form hedging of net investments in subsidiaries. 25 OWN SHARES During the financial year, the company repurchased a total of 18,900 pieces of the company's own shares under the authorization given by the Annual General Meeting on April 2, 2008. The acquisition price of the shares was the stock exchange price at the time of the acquisition. The acquisition of the shares did not have any significant impact on the holdings and voting rights in the company. The Parent company has repurchased own shares during the period as follows: Period Amount, pieces Nominal value, euros Consideration paid, euros (average) Consideration paid, euros (range) From Feb. 19 to Feb. 28, 2009 8 800 2.00 7.00 6.90­7.15 From March 1 to March 17, 2009 10 100 2.00 7.12 7.00­7.20 All company shares held by the company were transferred on March 27, 2009 to the employees covered by the share-based pay system. The number of shares at the end of reporting period totaled 4,004,758 pieces. Adjusted average number of shares used in calculation of earnings per share, was 4,003,183 pieces during the reporting period. The company did not possess own shares at December 31, 2009. 28 FINANCIAL STATEMENTS 2009 / GROUP 26 SHAREBASED PAYMENTS Sharebased incentive plan (2006) The Board of Raute Corporation resolved on 22 March 2006 to implement a share-based incentive plan (2006). The earning period ended on December 31, 2008. The amount of reward to be paid on the basis of the plan was bound to the Group's operating profit (weight 75%) and the evaluation of the Board of Directors on e.g. the materialization of the strategy (weight +/-25%). The maximum total reward was 65,000 pieces Raute's series A shares and a cash amount for income tax payment equivalent to the value of the shares, in the maximum. No reward was paid if a person's employment ended before the reward payment. In addition, a person must own the earned shares at least for two years from the reward payment, until March 28, 2011. The basic information on the share-based incentive plan was the following: - Issue date: March 22, 2006 - Instrument: Share-based payment - Number of shares, max*: 54,000 pcs - Share price upon grant: EUR 17.28 - Fair value of the share upon grant**: EUR 15.28 - Earning period began: January 1, 2006 - Earning period ended: December 31, 2008 - Earnings criteria: Operating profit during financial years 2006­2008 and Board of Director's evaluation on e.g. the materialization of the strategy - Share ownership obligation: 2 years from the grant date - Persons at the end of the earning period December 31, 2008: 17 persons Determination of the fair value Raute Corporation has used Alexander Corporate Finance Oy as an advisor when determining the fair value of the reward. As the reward was paid as a combination of shares and cash payment, the determining of the fair value of the reward was divided into two proportions, in accordance with IFRS 2 standard: a proportion settled in shares and a proportion settled in cash. The proportion to be settled in shares was entered in the equity and the proportion to be settled in cash was entered in liabilities. The fair value of the share-based payment on the grant date was the market price of the Raute's series A share on March 22, 2006, the dividends to be distributed before the reward payment deducted. Correspondingly, the fair value of the proportion to be settled in cash was further evaluated every reporting day until the end of the earning period, and the fair value of the debt was thus changed in accordance with Raute series A share price. Values and assumptions used in evaluating the fair value of the share-based payment in the comparison year: - Shares granted: 54,000 pcs - Share price upon grant: EUR 6.40 - Assumed dividend before reward payment***: EUR 2.00 - Fair value (proportion in shares): EUR 15.28 - Share price December 31, 2008 (proportion in cash): EUR 6.40 - Pay-out assumption of earnings criteria: 35% - Estimate of shares to be returned: 0% - Fair value of reward: EUR 395,129 Materialized sharebased payments and their measurement The company repurchased a total of 18,900 pieces of the company's own series A shares under the authorization given by the Annual General Meeting on April 2, 2008. The own shares have been acquired using the company's unrestricted equity at the market price at the time of trading in public trading on the NASDAQ OMX Helsinki Ltd exchange at the share price on the day of trading, in accordance with the rules and regulations concerning the purchase of a company's own shares in public trading. The amount of and the payment for the repurchased own shares have been presented in the note number 25 to the financial statements. The acquisition price of the repurchased own shares totaled EUR 138 thousand in the financial year 2009. The company conveyed on March 3, 2009 a total of 18,900 pieces shares held by the Company gratuitously to 17 key persons of the Group's share-based incentive plan (2006) as reward payment. Shares granted Shares returned Shares distributed Shares forfeited Shares total Number of shares* Jan. 1, 2009 58 000 -4 000 0 0 56 000 Changes during the financial year 0 0 -18 900 -35 100 2 000 Number of shares Dec. 31, 2009 58 000 -4 000 -18 900 -35 100 0 In the financial year 2009, the portions paid in shares and cash had a total impact of EUR 15 thousand (EUR 49 thousand) on Raute Group's operating result. The cost impact of the portion that was paid in shares was EUR 6 thousand and the portion paid in cash EUR 9 thousand. *The numbers of shares January 1, 2009 describe the maximum numbers of shares to be distributed on the basis of the share ownership plan. In addition, the company is committed to pay a cash amount that corresponds to the value of the shares in the maximum (proportion for taxes). **From the share price on the grant date of the shares have been deducted the expected dividends 2.00 euros that the key people do not receive before the potential reward payment. ***Dividend assumption is an estimate on distributed dividends before reward payment at the grant date. 29 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 27 PROVISIONS Warranty provisions Book value at Jan. 1 Additions Used amounts Cancelled unused amounts Exchange rate differences Book value at Dec. 31 Losses from longterm projects in order book Book value at Jan. 1 Additions Decreases Book value at Dec. 31 TOTAL from which - long-term - short-term 2009 2008 2 111 1 154 1 928 0 15 1 353 1 080 1 775 -511 -220 -12 2 111 429 25 300 155 1 507 182 1 325 177 341 -90 429 2 540 289 2 251 28 DEFERRED TAX LIABILITIES AND DEFERRED TAX ASSETS Items entered through profit or loss Jan. 1, 2008 33 91 0 68 0 84 275 Jan. 1, 2009 16 112 0 45 0 161 334 EUR 1 000 Deferred tax assets Intercompany inventory profit Provisions Effects of Group consolidation Employee benefits Tax losses and credits unused Other temporary differences TOTAL Deferred tax assets Intercompany inventory profit Provisions Effects of Group consolidation Employee benefits Tax losses and credits unused Other temporary differences TOTAL Items entered in comprehensive income statement Items recognized in shareholders' equity Dec. 31, 2008 16 112 0 45 0 161 0 334 Dec. 31, 2009 27 34 0 37 1 596 48 0 1 741 -16 21 -23 77 59 0 10 -78 -8 1 596 -113 1 408 0 Items entered in comprehensive income statement EUR 1 000 Deferred tax liabilities Depreciation differences and other provisions Changes in fair value Effects of Group consolidation Other temporary differences TOTAL Jan. 1, 2008 507 25 93 51 676 Items entered through profit or loss Items recognized in shareholders' equity Dec. 31, 2008 -110 -25 -93 151 77 0 0 397 0 0 202 599 30 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 Deferred tax liabilities Depreciation differences and other provisions Changes in fair value Effects of Group consolidation Other temporary differences TOTAL Jan. 1, 2009 397 0 0 202 599 Items entered through profit or loss Items entered in comprehensive income statement Items recognized in shareholders' equity Dec. 31, 2009 -126 -202 328 0 0 271 0 0 0 271 Deferred tax liabilities and deferred tax assets are deducted from each other, if there is a right to set off tax liabilities from the taxable income of the financial year against tax assets from the taxable income of the financial year, if deferred taxes are related to the same tax collector. During the financial year 2009, a deferred tax liability of EUR 202 thousand has been deducted from the unused tax losses and credits. The Parent company Raute Corporation has recognized a deferred tax receivable of EUR 1 798 thousand relating to the tax losses carried forward in the financial statements 2009. Tax losses shall probably be recognized against future tax receivables in the expiration time of 10 years. Deferred tax asset of EUR 900 thousand (EUR 670 thousand) is recognized from losses of foreign subsidiaries from the financial year 2009. There is some uncertainty related to usability of deferred tax assets. EUR 1 000 29 LONGTERM INTERESTBEARING LIABILITIES Long-term financial liabilities recognized at amortized cost - Bank loans - Pension loans (TyEL) - Tekes loan TOTAL The TyEL loans have a fixed interest rate and the annual average interest rate is 2.89 percent (2.95%). The Tekes loan has an annual interest rate of 1.0 percent (1.0%). The annual interest rate of the other bank loan is 5.6 percent (-). Maturities, longterm and shortterm liabilities total Financial liability Pension loan Other loans Total 2009 2008 202 14 000 115 14 318 0 8 000 232 8 232 Under 1 year 4 000 215 4 215 1­5 years 14 000 318 14 318 EUR 1 000 30 SHORTTERM INTERESTBEARING LIABILITIES Partial payments of long-term loans Other short-term interest-bearing loans TOTAL Distribution of the Group's shortterm loans by currencies - EUR, % 2009 2008 4 115 100 4 215 2 000 225 2 225 100 100 31 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 The weighted averages of effective interest rates of current interestbearing liabilities were: Partial payments of long-term loans, % Other short-term interest-bearing loans, % Fair values of financial liabilities are presented in the note number 37 to the financial statements. 31 PENSION OBLIGATIONS Raute Corporation's voluntary supplement to pension coverage has been treated as a defined benefit plan in accounting. The current employees' voluntary supplementary pension insurances have been arranged through the Sampo Life Insurance Company. Defined benefit pension plans Items recognized in the balance sheet Present value of funded obligations Fair value of assets included in the plan Surplus (+) / deficit (-) Unrecognized actuarial gains and losses Net liabilities in the balance sheet Items entered in income statement, income () / expenses (+) Costs based on the work performance in the financial year Interest cost Expected return on plan assets Net acturial gains or losses recognized in the financial year Past service cost Settlements of the obligations Total, included in personnel expenses Realized income from the plan assets (expenses +/income -) Changes in defined benefit pension plan obligation during the financial year Defined benefit obligation at Jan.1 Current service cost Interest cost Actuarial gains (-) / losses (+) Benefits paid Settlements of the obligations Defined benefit obligation at Dec. 31 Changes in fair value of plan assets during the financial year Opening fair value of plan assets at Jan.1 Expected return on plan assets Actuarial gains (-) / losses (+) Employer contributions Benefits paid Settlements of the obligations Fair value of plan assets at Dec. 31 2009 2008 2.90 1.00 2.95 1.00 333 338 5 148 143 406 394 12 161 173 16 21 20 13 0 3 1 15 4 14 -15 -20 -39 -31 -87 1 406 16 21 10 90 10 333 353 4 14 35 0 0 406 394 20 5 30 90 11 338 364 15 -16 31 0 0 394 32 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 Key actuarial assumptions Finland - Discount rate, % - Expected rate of return on plan assets, % - Rate of future salary increases, % - Rate of inflation, % - Employees turnover assumption, % 32 ADVANCE PAYMENTS RECEIVED, TRADE AND OTHER PAYABLES Advance payments received EUR 7 222 thousand (EUR 3 475 thousand) comprise of advance payments received from long-term projects. Shortterm liabilities in the balance sheet - Trade payables - Accrued expenses and prepaid income - Derivative liabilities - Other liabilities TOTAL Substantial items included in accrued expenses and prepaid income - Accrued project expenses related to long-term projects - Accrued employee related expenses - Other accrued expenses and prepaid income TOTAL 33 RELATED PARTY TRANSACTIONS Raute Group's related parties consist of subsidiaries, Board members, President and CEO, Presidents of the subsidiaries and Raute Corporation's Sickness Fund. 2009 2008 4.5 4.5 2.5 2.0 1.0 4.9 4.0 2.5 2.0 1.0 1 649 4 554 0 455 6 658 2 863 5 003 34 636 8 536 295 3 190 1 069 4 554 225 3 788 991 5 003 Group companies Raute Corporation, Lahti, Finland (Parent company) Raute Canada Ltd., New Westminster, B.C., Canada Raute Inc., Delaware, USA Raute US, Inc., Rossville, Tennessee, USA RWS-Engineering Oy, Lahti, Finland Raute Group Asia Pte Ltd., Singapore Raute WPM Oy, Lahti, Finland Raute Chile Ltda., Chile Raute Service LLC, St. Petersburg, Russia Raute (Shanghai) Machinery Co., Ltd, Shanghai, China Raute (Shanghai) Trading Co., Ltd, Shanghai, China Group's ownership interest and voting power, % 100 100 100 100 100 100 100 100 100 100 Parent company's ownership interest and voting power, % 100 100 100 100 100 100 50 100 100 EUR 1 000 Group management's employee benefits Salaries and other short-term employee benefits Share-based payments TOTAL The contracts of the management do not include any special conditions concerning retirement or the amount of retirement allowance. 2009 2008 850 93 943 971 0 971 33 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 Salaries and remunerations of the management of the Parent company President and CEO Kiiski, Tapani President and CEO TOTAL Members of the Board of Directors Pehu-Lehtonen, Erkki Chairman of the Board as of April 2, 2009 Rytilahti, Jarmo Chairman of the Board until April 2, 2009 Mustakallio, Sinikka Vice-Chairman of the Board Helander, Ilpo Member of the Board Mustakallio, Mika Member of the Board Mustakallio, Panu Member of the Board Hautamäki, Risto Member of the Board as of April 2, 2009 Wiitakorpi, Jorma Member of the Board until April 2, 2009 Paasikivi, Pekka Member of the Board until April 2, 2008 TOTAL Management interest The company's Board of Directors, President and CEO and Presidents of the subsidiaries owned a total of 96,223 pieces series A shares and 98,990 pieces series K shares at December 31, 2009. Management's ownership corresponds to 4.9 percent of the shares in the company and 9.1 percent of associated total voting rights. The figures include the holdings of their own, minor children and control entities. Loans and guarantees on behalf of the related party No loans are granted to the company's management. On December 31, 2009 the Parent company Raute Corporation had loan receivables from the subsidiary Raute Canada Ltd. EUR 737 thousand (EUR 3 186 thousand) and from Raute Service LLC EUR 355 thousand (EUR 0 thousand). Raute Corporation had EUR 100 thousand (EUR 110 thousand) liability to Raute Corporation's Sickness Fund. Raute Corpo- 2009 2008 294 294 256 256 27 10 18 18 18 18 13 3 0 127 0 39 20 15 20 20 0 17 5 134 ration has written off loan receivables from Raute Canada Ltd. in the amount of EUR 3 761 thousand (EUR 968 thousand). Raute Corporation has given a counter guarantee of EUR 200 thousand for the loan of the foreign subsidiary. No pledges or other commitments have been given on behalf of the company's management and shareholders. Sickness Fund Raute Group has an insurance fund, which pays its members additional benefits on top of compensations paid according to the Sickness Insurance Act. Raute's Sickness Fund covers personnel in Raute Corporation and its domestic subsidiaries as well as personnel in the former subsidiary Lahti Precision Oy. Raute's Sickness Fund has deposited its assets in Raute Corporation. The amount of deposits was EUR 100 thousand at December 31, 2009 (EUR 110 thousand) and 1.5 percent (4.0%) of interest was paid to it. EUR 1 000 34 OTHER LEASES AND OPERATING LEASE LIABILITIES Group as lessee Minimum rents paid on the basis of other non-cancellable leases: - Within one year - After the period of more than one and less than five years - More than five years TOTAL The Group has rented in a part of office and production premises. The rental agreements are made for the time being or for the fixed-term. The agreements made for the fixed-term include an option to extend the rental period after the date of initial expiration. Minimum direct leasing rents paid on the basis of non-cancellable direct leasing contracts: - Within one year - After the period of more than one and less than five years TOTAL 2009 2008 551 1 013 782 2 346 273 464 0 737 25 67 92 12 2 14 34 FINANCIAL STATEMENTS 2009 / GROUP Group as lessor The Group has rented out the office and plant facilities that it does not need. The facilities have been classified as tangible fixed assets in the financial statements. Lease income has been recognized in other operating income in the financial statements and totaled EUR 21 thousand (EUR 21 thousand) in 2009. EUR 1 000 35 CURRENCY DERIVATIVES Currency derivatives are used for hedging purposes. Nominal values of forward contracts in foreign currency Economic hedging - Related to financing - Related to the hedging of net sales Fair values of forward contracts in foreign currency Economic hedging - Related to financing - Related to the hedging of net sales 2009 2008 661 1 615 3 186 532 35 98 170 -8 The nominal value is the value of underlying instruments converted into euros using the exchange rate of the balance sheet date. The market value is the profit generated, if the derivatives position would have been closed to the market price on the balance sheet date. EUR 1 000 36 PLEDGED ASSETS AND CONTINGENT LIABILITIES Debts and other contingent liabilities have been secured by mortgages and contingencies Bank credit limits, of which used Business mortgages (1) Pension loans (TyEL) - Bank guarantees as collateral given for the TyEL loan Business mortgages (1) Deposits of money (2) - Credit insurance agreements as collateral for the TyEL loan Right of recourse of the party providing collateral Financial liability/Raute's Sickness Fund - Real estate mortgages (1) Commercial bank guarantees on behalf of the Parent company and subsidiaries - Counter guarantees (3) Mortgage agreements on behalf of subsidiaries - Counter guarantees (3) Mortgages and contingencies total - Secured by mortgages total (1) - Secured by deposits of money (2) - Counter guarantees (3) 2009 2008 10 000 2 400 5 300 18 000 12 400 4 700 3 000 5 600 5 600 100 134 7 125 7 125 17 000 3 000 10 000 10 000 3 000 0 0 7 000 7 000 110 134 8 928 8 928 200 0 10 134 3 000 7 325 10 134 0 8 928 35 FINANCIAL STATEMENTS 2009 / GROUP Other own obligations Pledges on behalf of the company's management or shareholders are presented in the note number 33 to the financial statements. 37 OTHER FINANCIAL INSTRUMENT DATA Note EUR 1 000 Carrying amount Dec. 31, 2009 Fair value Dec. 31, 2009 Carrying amount Dec. 31, 2008 Fair value Dec. 31, 2008 Financial assets Financial assets at fair value through profit or loss Available-for-sale financial assets Loans and other receivables Long-term deposits Short-term deposits Accounts receivables and other receivables* Cash and cash equivalents TOTAL Financial liabilities Financial liabilities recognized at amortized cost Bank and other financial loans Trade and other payables Accrued expenses Currency derivates - of which used for hedging cash flow TOTAL Aggregated by measurement category Loans and receivables Available-for-sale financial assets Financial liabilities recognized at amortized cost 19 20 22 22 23 486 1 000 2 000 7 832 27 900 39 217 486 1 000 2 000 7 832 27 900 39 217 499 499 16 561 21 109 38 169 16 561 21 109 38 169 29­30 32 32 35 18 533 2 104 4 554 18 533 2 104 4 554 10 457 3 465 5 037 34 18 993 10 457 3 465 5 037 34 18 993 25 191 25 191 38 731 486 25 191 38 731 486 25 191 37 670 499 18 993 37 670 499 18 993 *Balance sheet item Account receivables and other receivables includes accrued income of EUR 3 246 thousand from customers' long-term projects corresponding to revenues by percentage of completion (EUR 11 819 thousand). The table shows the fair values and carrying amouts of each financial item as carried in the balance sheet. The Group's principles of fair value determination related to financial instruments are described below. Other investments Available-for-sale financial assets mainly consist of investments in unquoted shares. Investments in unquoted shares have been valued at cost since their value cannot be determined reliably. There are no active market for unquoted shares. The Group has so far no intention to abandon these investments. Derivatives The fair values of derivative instruments have been deter- mined using the market values of the contract determined to the similar period at the balance sheet date. The fair values correspond prices, which the Group should pay or receive, if the derivative contract was terminated. Bank and other loans Fair values of liabilities correspond the carrying amout in the balance sheet. Accounts receivables and other receivables The original carrying amout of the receivables corresponds their fair value. Discounting has no material effect when maturity is taken into account. Trade payables and other payables The carrying amout of trade payables and other payables corresponds their fair value. Discounting has no material effect when maturity is taken into account. 36 FINANCIAL STATEMENTS 2009 / GROUP 38 MANAGEMENT OF FINANCING RISKS The Group is exposed to financing risks which have been classified into market, counterparty and liquidity risks. The key risk areas of the Group's international business operations have been recognized as credit risks of the counterparty risks and currency risks of the market risks. The Group is also exposed to liquidity risks as well as interest and price risks, which are part of market risks. The aim of the Group's financing risk management is to minimize the negative effects of the changes in the financial markets on the Group's performance and ensure sufficient liquidity in all market conditions. The Group implements a financing policy approved by the Parent company' Board of Directors, which defines the limiting values that guide operations, the adopted financial and hedging instruments, and the acceptable counterparties. The Parent company's financing unit is responsible for the management of financing risks. It identifies, assesses, and hedges financing risks in cooperation with operating units. The Board regularly monitors the extent of the financing risks based on, among others, the net currency position, the age distribution and the hedging of receivables as well as cash flow estimates and financial stress tests. MARKET RISKS Market risks include currency, interest and price risks. Currency risks are further divided into transaction and translation risks. Raute Corporation's consolidated financial statements of December 31, 2009 and those of the comparison year do not include equity and interest fund investments. Currency risks The Group operates in international markets and is thus exposed to currency risks resulting from changes in currency exchange rates. The Group's currency risks consist of foreign currency denominated sales and purchases as well as balance sheet items (transaction risks) and investments in foreign subsidiaries (translation risks). The Group's main currency is the euro. Other significant currency risks result from the Canadian dollar (CAD) and US dollar (USD). Other currencies which are monitored to ensure the competitiveness and operations of the Group are the Russian rouble (RUB) and the Chinese yuan (CNY). The distribution of the Group's sales varies annually according to market area. In 2009, 39 percent (50%) of net sales were generated outside the euro zone. The Group primarily uses each Group company's functional currency as the primary trading currency, of which the most important is the euro. The Group's operative units hedge foreign currency denominated accounts receivables based on binding sales contracts through the Parent company's financing unit when the contracts take effect. Currency forward contracts are used to hedge sales payments operatively. Primarily, cash flows accumulating from unhedged accounts receivables in the same currency are used in the hedging of currency risks related to procurement contracts. Future cash flows, which are not based on binding sales contracts, are usually not hedged with derivative contracts. Currency clauses are used to hedge against currency risks during the quotation period. Depending on the case, currency risks related to preliminary sales contracts are hedged with currency option contracts. The value of forward contracts used to hedge business operations was EUR 1.6 million (MEUR 0.4) at the balance sheet date. The internal loans taken out by the Group companies and their deposits are mainly in the functional currency of the subsidiary in question. The net currency exchange risks of internal loans are hedged with forward contracts, with the exception of equity loans. The Group's external loans are in each company's functional currency. Forward contracts related to the hedging of the Group's internal financing in Canadian dollars had a nominal value of EUR 0.7 million (MEUR 3.3) at the end of the financial year. The forward contract receivables and liabilities related to business payments and denominated in foreign currency, to which hedge accounting is not applied, increase the currency risk to the Group at the reporting date. This currency risk is recognized in profit or loss when the value of the forward contracts exceeds the income recognition of the respective binding sales contracts. The measurement of the forward contracts and the percentage of completion receivables improved the Group's operating profit by EUR 90 thousand (EUR +10 thousand) during the financial period which ended on December 31, 2009. The Group can decrease the temporary effect on the operating profit related to the fair value of derivative contracts resulting from changes in exchange rates by applying hedge accounting to the derivatives connected to the binding, fixed-price sales contracts according to the IAS 39 standard. Hedge accounting was not used during the financial year or the comparison year. Transaction risks The Group regularly monitors transaction risks in the main currency pairs. Currency flows related to binding contracts, and derivate contracts used for their hedging, are taken into account in the net currency position from the reporting date onwards regardless of which year's profit or loss the currency risk will effect. The aim of managing currency risks is to keep the open net currency positions of each Group currency pair at less than EUR 500 thousand for each currency pair. The Group's net currency position and its portion included in the balance sheet at the reporting date ("Net balance sheet risk") is presented in currency pairs in the table "Group transaction risks". Group transaction risks Net currency position 2009 2008 183 231 374 -225 295 321 0 0 0 0 Net balance sheet risk 2009 2008 183 243 402 -119 972 682 0 0 0 0 EUR 1 000 USD/EUR CAD/EUR USD/CAD CNY/EUR RUB/EUR 37 FINANCIAL STATEMENTS 2009 / GROUP Translation risks The Group has foreign subsidiaries and is exposed to translation risks. The currency risks related to the conversion of the foreign subsidiaries' net investments to the Group's home currency, the euro, have not been hedged. The Group's subsidiaries' non-euro denominated equities equaled altogether EUR -9,835 thousand on December 31, 2009 (EUR 5,886 thousand on December 31, 2008). Net investments according to currency are detailed in the table "Net investments in subsidiaries by currency". Net investments in subsidiaries by currency Net investments in subsidiaries 2009 2008 17 17 821 3 270 493 493 355 0 15 15 terest rate levels focuses on the future returns from liquid assets. In a normal financial market situation, the Group invests its cash and cash equivalents in money-market funds as well as fixed-interest funds and is thus exposed to price risks arising from the changes in the market prices of listed fixed-interest funds. No interest rate derivatives or investments in fixed-interest funds were included in the financial statements of December 31, 2009 or the comparison year. Price risk The raw materials used by the Group are reprocessed steel products, other raw materials, components, and commodities; it is not possible to actively hedge against their market price risk with derivatives, and their price risk is a part of the business risk. The price risk of steel is managed by regularly analyzing and following the price fluctuation. The price risk of components is reduced by making blanket agreements with suppliers. The price risk of the electric power used in the Group's production processes is followed and managed through fixed-price contracts. At the balance sheet date, there were no derivatives hedging price risk that would affect the profit or loss in the consolidated financial statements. In a normal financial market situation, the Group invests its cash and cash equivalents in equity funds as well as fixedinterest funds and is thus exposed to price risks arising from the changes in the market prices of listed funds. On the balance sheet date, there were no significant fund or other investments held for sale, the change of which in fair value price would essentially affect the Group's profit or loss. COUNTERPARTY RISK The Group's most significant counterparty risks are customer credit risks related to contractual counterparties in the project business and counterparty risks related to the Group's investment activities. The maximum amount of credit risk at the balance sheet date is the book value of financial assets. At the end of the financial period the maximum amount of credit risk on December 31, 2009 was EUR 39.2 million (MEUR 38.2). Customer credit risk Default risks related to contractual counterparties in project deliveries are managed by expecting bank guarantees or confirmed letters of credit for customer payments, and by accelerated payment terms with long-term customers approved by the Board of Directors. Default risks related to technology services are managed by regularly monitoring the maximum amounts of the customer-specific receivables and customers' payment behavior. Due to the global recession and uncertainty in the financial markets, the market position of the Group's customer industries continued to be difficult throughout 2009, increasing the Group's default risks. Accounts receivables do not include significant default risks at the balance sheet date, however, the risk level for some unhedged receivables has risen to some extent. The maximum default risk relating to customers' solvency is the amount of receivables relating to binding sales con- EUR 1 000 USD CAD CNY RUB Muut Sensitivity analysis Table "Sensitivity analysis of main currencies", presents a sensitivity analysis in the main currency pairs on the transaction risk, i.e. the effect of reasonable potential changes in the exchange rates on the Group's profit or loss before tax and on equity on December 31, 2009 and at the comparison date. The foreign currency denominated receivables and liabilities recognized in the balance sheet on the reporting date, as well as the currency derivative contracts and net investments in subsidiaries, have been taken into account in the effect of exchange rate changes on the balance sheet fair values. In the analysis, the change in exchange rate has been estimated to be +/-10 percent from the reporting date, and other factors are estimated to remain unchanged. Sensitivity analysis of main currencies Effect on profit before tax EUR 1 000 2009 2008 USD +/- 10% +/- 12 +/4 CAD +/- 10% +/- 238 +/- 101 RUB +/- 10% +/- 11 +/- 11 CNY +/- 10% +/- 35 +/- 14 Effect on equity 2009 2008 111 +/- 117 392 +/- 531 9 +/0 44 +/- 84 +/+/+/+/- Interest risk No significant interest risks were included in the Group's cash and cash equivalents and loans during the financial year or the comparison year. On the reporting date, cash and cash equivalents were invested in fixed interest rate accounts and money-market deposits. The Group's loans have fixed interest rates. The interest risk connected to the balance sheet's derivative contracts and other fair values has been low. The Group's objective is to hedge against interest risks related to liabilities through fixed-interest rate loans and sufficient liquid assets. In the present uncertain financial market situation, the Group is avoiding investment instruments which involve significant interest or price risks. For the Group, the most significant effect of the change in in- 38 FINANCIAL STATEMENTS 2009 / GROUP tracts that are not covered by bank guarantees, letters of credit or other securities. Received bank guarantees and letters of credit covered 33 percent (33%) of the accounts receivables and the percentage of completion receivables recorded in the balance sheet and 16 percent (23%) of the order book at the end of the financial year. The age analysis of accounts receivables and invoiced advance payments of binding sales contracts which are recorded in the percentage of completion receivables in the Age distribution of accounts receivables EUR 1 000 Accounts receivables Advance payments invoiced TOTAL Neither past due nor impaired Overdue 0­29 days Overdue 30­60 days Overdue more than 60 days TOTAL Counterparty risk for investment activities The financing instrument contracts that the Group has concluded with banks and financial institutions involve the risk that the counterparty is not able to fulfill its obligations according to the contract. In investment activities and when concluding derivative contracts, only those parties which have a good credit rating and which meet the other terms and conditions defined by the financing policy are accepted as counterparties. When making investments, or derivative and loan agreements, the Group applies counterparty-specific upper limits to avoid risk concentrations. On the balance sheet date, the investments related to the Group's cash management were in Nordic banks. The liquid assets in financial institutions outside the euro zone were EUR 3.0 million (MEUR 0.6) at the balance sheet date. LIQUIDITY RISKS The minimum amounts of cash and cash equivalents, current investments, and available credit liabilities have been defined in the Group's financing policy to ensure the Group's liquidity. Good liquidity is maintained primarily through efficient working capital and cash management. In the long term, risks related to the availability and pricing of funding are managed by using a variety of sources for financing. Investments are required to exhibit sufficient liquidity. The Group did not have interest-bearing 2009 2 712 1 020 3 731 1 871 761 211 888 3 731 2008 4 743 4 746 9 489 5 619 543 564 2 763 9 489 cash and cash equivalents is shown in the table "Age distribution of accounts receivables". The advance payments presented in the table are invoiced payments connected to binding contracts which are not included in the assets of the balance sheet at the balance sheet date. At the end of the reporting period, no overdue accounts receivables resulting from counterparties' permanent insolvency were known to exist. During the financial year 2009, EUR 0.1 million in returns were recognized for the credit losses (MEUR 0.1) from the previous year. net liabilities at the balance sheet date 31 December 2009 or in the comparison year. The cash and cash equivalents available to the Group are sufficient to cover the Group's short-term financing needs. The Group's cash and cash equivalents totaled EUR 27.9 million (MEUR 21.1) at the end of the reporting period. Due to the nature of the Group's project business, financing needs and the amount of liquid assets also fluctuate in the short term. Predicting working capital requirements is made especially challenging by new orders which have individual payment terms and involve uncertainties related to delivery schedules. The Group has made preparations for fluctuating working capital requirements and possible disturbances in the availability of money by raising a EUR 18 million TyEL loan (MEUR 9). Investments are made primarily in short-term deposits or marketable euro-denominated investments with good creditworthiness. The Group's financial liabilities include trade payables, derivative liabilities and interest-bearing liabilities. Trade payables are due within less than a month on average. The maturity of the Group's interest-bearing financing loans is presented in the table "Repayment of interestbearing loans based on loan contracts and cash flows from financial expenses and cash flows from other financial liabilities on December 31, 2009". Repayment of interest-bearing loans based on loan contracts and cash flows from financial expenses and cash flows from other financial liabilities on December 31, 2009. EUR 1 000 TyELloans Repayments Financial expenses Total 2010 4 000 573 4 573 2011 4 000 478 4 478 2012 4 000 330 4 330 2013 4 000 180 4 180 2014 2 000 50 2 050 Total 18 000 1 611 19 611 39 FINANCIAL STATEMENTS 2009 / GROUP EUR 1 000 Other loans Repayments Financial expenses Total Trade payables Repayments Financial expenses Total 2010 115 12 127 2011 415 1 416 2012 0 0 0 2013 0 0 0 2014 0 0 0 Total 530 13 543 1 649 0 1 649 0 0 0 0 0 0 0 0 0 0 0 0 1 649 0 1 649 Accrued expenses and prepaid income Repayments 4 554 Financial expenses 0 Total 4 554 In addition, bank credit limits and Raute Corporation's EUR 10 million (MEUR 10) domestic commercial paper program, which allows it to issue commercial papers maturing in less than one year, secure the Group's liquidity. The company also has bilateral non-current credit regulation agreements worth EUR 10 million (MEUR 17), of which EUR 8 million (MEUR 14) could be used as credit limits on December 31, 2009. CAPITAL STRUCTURE MANAGEMENT The objective of the Group's capital structure management is an effective capital structure that secures the Group's operational preconditions on the capital market. Soliditet Finland ranked the Group's Parent company in the highest AAA ranking category throughout 2009, as well as in the comparison year 2008. 0 0 0 0 0 0 0 0 0 0 0 0 4 554 0 4 554 The Group's capital structure is followed using the equity ratio, which has been set a strategic target value. During the financial year 2009, the Group's target was to maintain the equity ratio at over 40 percent. The Group has set in its loan and credit contracts, as well as in the security agreements related to them, the following key covenants: - equity ratio > 31 percent and - gearing < +100 percent. At the end of the financial year, the equity ratio was 46.0 percent (60.5%) and gearing -40.6 percent (-31.0%). During the financial year and the comparison year, the Group met the conditions of the covenants. 39 EXCHANGE RATES USED IN CONSOLIDATION OF THE SUBSIDIARIES 2009 EUR 1.3933 1.5852 2.0230 776.0007 44.1391 9.5160 2008 EUR 1.4706 1.5593 2.0761 761.6427 36.4231 10.2247 2009 EUR 1.4406 1.5128 2.0194 734.0420 43.1540 9.9777 2008 EUR 1.3917 1.6998 2.0040 870.6680 41.2830 9.2205 Income statement USD CAD SGD CLP RUB CNY Balance sheet USD CAD SGD CLP RUB CNY EUR 1 000 40 ADJUSTMENTS TO OPERATING CASH FLOW Non-cash transactions in operating activities Depreciation and amortization Employee benefits Impairments Exchange rate differences Profit or loss from change in fair value of financial assets through profit or loss TOTAL 2009 2008 2 670 8 13 282 0 2 972 -2 751 -24 0 -83 -15 -2 873 41 EVENTS AFTER THE BALANCE SHEET DATE Raute Corporation has received a significant order comprising almost all production lines for a plywood mill in the Asia-Pacific region. The customer is a well-established plywood producing company (stock exchange release January 25, 2010). 40 FINANCIAL STATEMENTS 2009 / PARENT COMPANY Parent company's income statement, FAS EUR Note 2, 3 NET SALES Increase (+) or decrease () in inventories of finished goods and work in progress 4 5 6 8, 13 9 Other operating income Materials and services Personnel expenses Depreciation, amortization and impairment charges Other operating expenses Total operating expenses OPERATING PROFIT (LOSS) Financial income and expenses Income from investments in other non-current assets Interest and other financial income Impairments from investments in non-current assets Interest and other financial expenses Total financial income and expenses PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES 11 12 Appropriations Income taxes PROFIT (LOSS) FOR THE FINANCIAL YEAR 1.1.­31.12.2009 1.1.­31.12.2008 31 355 663.80 87 712 893.97 683 443.44 431 251.25 14 509 818.73 16 842 067.83 1 912 053.83 5 977 676.29 39 241 616.68 6 771 258.19 382 865.22 571 433.75 49 984 043.29 20 678 795.86 1 949 003.39 9 546 292.17 82 158 134.71 6 509 058.23 10 10 10, 14 10 78 905.00 342 428.84 3 774 357.62 488 722.31 3 841 746.09 10 613 004.28 418 073.66 1 851 477.45 8 343 453.17 132 574.00 1 267 792.74 -967 679.50 -691 406.76 -258 719.52 6 250 338.71 354 932.10 -2 119 824.80 4 485 446.01 41 FINANCIAL STATEMENTS 2009 / PARENT COMPANY Parent company's balance sheet, FAS EUR Note ASSETS Noncurrent assets Intangible assets Tangible assets Investments Noncurrent assets total Current assets Inventories Long-term receivables Short-term receivables Cash and cash equivalents Current assets total TOTAL ASSETS LIABILITIES Shareholders' equity Share capital Share premium Retained earnings Profit (loss) for the financial year Shareholders' equity total Appropriation reserve Provisions Liabilities Long-term liabilities Short-term liablities Liabilities total TOTAL LIABILITIES 1.1.­31.12.2009 1.1.­31.12.2008 13 13 14 1 254 853.90 8 063 109.55 2 397 292.61 11 715 256.06 1 572 084.71 8 736 409.91 4 503 991.15 14 812 485.77 5, 15 16 16 3 359 386.03 2 798 447.20 9 814 741.35 27 415 432.24 43 388 006.82 55 103 262.88 3 344 924.58 0.00 19 470 157.14 20 507 425.87 43 322 507.59 58 134 993.36 17 17 17 17 8 009 516.00 6 498 341.93 15 770 262.36 8 343 453.17 21 934 667.12 0.00 1 430 153.48 8 009 516.00 6 498 341.93 14 226 644.47 4 485 446.01 33 219 948.41 418 073.66 2 416 754.94 18 19 20 20 14 115 400.00 17 623 042.28 31 738 442.28 55 103 262.88 8 230 800.00 13 849 416.35 22 080 216.35 58 134 993.36 42 FINANCIAL STATEMENTS 2009 / PARENT COMPANY Parent company's cash flow statement, FAS EUR CASH FLOW FROM OPERATING ACTIVITIES Proceeds from sales Proceeds from other operating income Payments of operating expenses Cash flow before financial items and taxes Interests and other operating financial expenses paid Interests received from operating activities Dividends received from operating activities Income taxes paid Cash flow before extraordinary items NET CASH FLOW FROM OPERATING ACTIVITIES (A) CASH FLOW FROM INVESTING ACTIVITIES Capital expenditure in tangible and intangible assets Purchases of available-for-sale investments Proceeds from sale of tangible and intangible assets Loans granted to subsidiaries Repayments of loan receivables NET CASH FLOW FROM INVESTING ACTIVITIES (B) CASH FLOW FROM FINANCING ACTIVITIES Repurchase of own shares Increase of long-term and short-term receivables Increase of short-term liabilities Repayments of short-term liabilities Increase of long-term liabilities Repayment of long-term liabilities Dividends paid Group contributions, paid and received NET CASH FLOW FROM FINANCING ACTIVITIES (C) NET CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C) increase (+) / decrease (-) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR EFFECT OF EXCHANGE RATE CHANGES ON CASH CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 138 497.52 3 000 000.00 1 084 271.02 147 137.32 10 000 000.00 2 000 000.00 2 803 330.60 0.00 2 995 305.58 6 940 935.03 0.00 0.00 354 663.44 -528 291.83 10 069 240.00 0.00 -4 004 758.00 885 000.00 6 775 853.61 10 181 456.61 946 725.31 0.00 77 381.96 1 770 917.97 0.00 2 640 261.32 -1 687 617.86 -50 000.00 30 011.51 0.00 27 000.00 -1 680 606.35 44 486 162.82 363 454.42 38 923 990.92 5 925 626.32 90 078 251.74 541 422.24 -82 660 088.13 7 959 585.85 1.1.­31.12.2009 1.1.­31.12.2008 477 062.69 496 818.33 78 905.00 561 603.81 6 585 890.77 6 585 890.77 -249 530.78 800 700.85 132 574.00 -3 557 120.57 5 086 209.35 5 086 209.35 20 507 425.87 32 928.66 27 415 432.24 10 357 851.97 31 882.71 20 507 425.87 43 FINANCIAL STATEMENTS 2009 / PARENT COMPANY Notes to the Parent company's financial statements 1 ACCOUNTING PRINCIPLES The accounting principles of the Parent company's financial statements are presented only for those parts that differ from the IFRS accounting principles of the consolidated financial statements. The Group's derivatives include currency derivative contracts. Changes in the fair value of derivative contracts related to operating activities have not been treated as an item through profit or loss. Currency derivative contracts related to financing are measured and the gains and losses arising from them have been presented under financial income or expenses. Basis of preparation The Parent company's financial statements have been prepared in accordance with the Finnish Accountancy Act (FAS). Acquisition and transfer of the company's own shares The acquisitions of the company's own shares have been recognized in the balance sheet under earnings at the acquisition price, which is made up of the market price of the shares at the acquisition date and other costs arising from the acquisition. The shares have been transferred as part of the payments under the share-based incentive plan (2006) and the transfer has been recognized in the acquisition price through loss and profit. Foreign currency items Other than euro-denominated transactions have been recognized at the exchange rate effective on the transaction date. Receivables and liabilities denominated in other currencies have been translated into euro at the average rate of the balance sheet date, except for business operations where the associated currency risk is hedged by a currency derivative contract. The items have been measured at the value hedged through the derivative contract. Advances paid and received have been recognized in the balance sheet at the exchange rate effective on the payment date. The exchange rate gains or losses resulting from the extension of forward exchange contracts hedging accounts receivables against changes in currency exchange rates have been capitalized into accrued expenses or receivables. Other exchange gains and losses related to changes in the exchange rates have been recognized through profit or loss. Research and development costs Research and development costs have been recognized as expenses in the income statement in the year in which they are incurred. Pensions Statutory pension coverage of the Parent company has been arranged through an external pension insurance company. Pension expenses have been recognized as expenses according to accrual over time. Financial income and expenses Permanent impairment of loan receivables and shares has been presented in the income statement under financial expenses. Fixed assets Tangible and intangible assets have been recognized in the balance sheet at original cost less accumulated depreciation, with the exception of some property items, which have been revaluated, and shares, which have been subject to impairment. Variable costs arising from the acquisition and production of a product have been included in the carrying amount. Depreciations of tangible and intangible assets have been recorded with the straight-line method over the expected economic lives of the assets as follows: Other intangible assets Buildings and structures Machinery and equipment Other fixed assets 3­10 years 25­40 years 4­12 years 3­10 years. Extraordinary items Extraordinary items include significant and exceptional income and expenses that are not a part of the usual operating activities and group contributions. Raute Corporation's financial statements of December 31, 2009 and those of the comparison year do not include extraordinary items. Income taxes Income taxes presented in the income statement include direct taxes for the period and tax adjustments for previous periods. On the period's unconfirmed tax loss, deferred tax receivables have been recognized to the extent that it is probable that taxable profits will be available against which temporary differences can be utilized. The deferred tax liability included in the depreciation difference has been presented in the note number 18 to the financial statements. Depreciations are recorded from the start of the month in which the asset was taken into use. Residual expenditures on decommissioning and disposal of property, plant and equipment are presented under depreciation, amortization and impairment in the income statement. Gains and losses on disposal of property, plant and equipment are presented in other operating income or expenses. Comparability of the information from the previous financial year When comparing the information from the financial year with that of the previous your, it must be taken into account that Mecano Group Oy was merged to Raute Corporation on December 31, 2008. Measurement of financial instruments Financial assets have been measured at the lower of acquisition cost or likely disposal price. 44 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 2 NET SALES BY MARKET AREA Rest of Europe Russia Finland South America Asia Oceania North America Others TOTAL REVENUE RECOGNITION METHOD BASED ON PERCENTAGE OF COMPLETION Net sales by percentage of completion Other net sales TOTAL Project revenues entered as income from currently undelivered non-current projects recognized by percentage of completion Amount of long-term project revenues not yet entered as income (order book) Specification of combined asset and liability items Advance payments paid Advance payments included in inventories Accrued income corresponding to revenues by percentage of completion Advance payments received from project customers Balance sheet project receivables included in current receivables 4 OTHER OPERATING INCOME Capital gain on sale of property, plant and equipment Other income from Group companies Other operating income TOTAL MATERIALS AND SERVICES Materials and supplies - Purchases during the period - Change in inventories External services TOTAL PERSONNEL EXPENSES Wages and salaries Pension costs Other personnel expenses TOTAL Salaries and remunerations of management President and CEO Kiiski, Tapani President and CEO Members of the Board of Directors Pehu-Lehtonen, Erkki Chairman of the Board as of April 2, 2009 Rytilahti, Jarmo Chairman of the Board until April 2, 2009 2009 % 2008 % 10 348 9 904 4 607 3 831 1 275 960 265 166 31 356 33 32 15 12 4 3 1 1 100 31 133 33 441 14 182 4 123 1 195 786 2 573 280 87 713 35 38 16 5 1 1 3 0 100 3 25 362 5 994 31 356 76 765 10 948 87 713 25 754 19 227 83 687 22 778 0 0 25 856 22 596 3 260 427 427 83 788 -72 385 11 403 68 326 38 431 30 494 48 571 5 13 036 209 1 266 14 510 45 118 -205 5 071 49 984 6 13 887 2 285 670 16 842 17 026 2 710 943 20 679 294 256 27 10 0 39 45 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 Mustakallio, Sinikka Helander, Ilpo Mustakallio, Mika Mustakallio, Panu Hautamäki, Risto Wiitakorpi, Jorma Paasikivi, Pekka TOTAL Vice-Chairman of the Board Member of the Board Member of the Board Member of the Board Member of the Board as of April 2, 2009 Member of the Board until April 2, 2009 Member of the Board until April 2, 2008 2009 18 18 18 18 13 3 0 421 2008 20 15 20 20 0 17 5 389 During the financial year, Raute Corporation conveyed on March 27, 2009 a total of 18,900 pieces Raute's series A shares held by the Company gratuitously to 17 key persons of the Group's share-based incentive plan (2006) as reward payment earned during earning period 2006­2008. The effect of the sharebased and cash payment to the operating profit of Raute Corporation was EUR 120 thousand in the financial year. The basic information and earnings criteria on the share-based incentive plan is presented in the note number 26 to Raute Group's consolidated financial statements. 7 PERSONNEL Employed at Dec. 31, persons Workers Office staff TOTAL - of which personnel working abroad Average, persons Workers Office staff TOTAL - of which personnel working abroad Effective, on average, persons Workers Office staff TOTAL - of which personnel working abroad 8 DEPRECIATION, AMORTIZATION AND IMPAIRMENT CHARGES Depreciation and amortization from tangible and intangible assets TOTAL OTHER OPERATING EXPENSES Indirect production costs Losses on Group companies' accounts receivables Sales and marketing costs Administration costs Other costs TOTAL Auditor's remunerations Authorized Public Accountant Ernst & Young Corporation Annual audit, statutory Tax services Other services TOTAL 148 260 408 4 155 278 433 6 151 262 413 5 157 249 406 6 92 211 303 5 151 243 394 5 1 912 1 912 1 949 1 949 9 1 171 0 1 662 1 382 1 762 5 978 1 348 754 2 638 1 729 3 077 9 546 47 18 2 67 39 57 5 100 46 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 10 FINANCIAL INCOME AND EXPENSES Income from investments in other noncurrent assets Dividends TOTAL Other interest and financial income From Group companies Dividends and yield on investment funds from others Other interest and financial income from others TOTAL Total financial income Impairments from investments in noncurrent assets From Group companies Other impairments TOTAL Interest and other financial expenses To Group companies To others TOTAL Total financial income and expenses Exchange rate gains (+) / losses (-) included in total financial income and expenses 11 APPROPRIATIONS Difference in planned and taxed depreciations TOTAL INCOME TAXES From operations, current financial year From operations, previous financial years Change in deferred taxes TOTAL NONCURRENT ASSETS Development costs Intangible rights 2009 2008 79 79 133 133 69 0 273 342 421 141 85 1 141 1 368 1 500 3 761 13 3 774 968 0 968 0 489 489 3 842 22 22 770 791 -259 25 418 418 355 355 12 10 63 1 798 1 851 -1 963 -157 0 -2 120 13 EUR 1 000 Intangible assets Carrying amount at Jan. 1, 2009 Additions Disposals Carrying amount at Dec. 31, 2009 Accumulated depreciation at Jan. 1, 2009 Depreciation for the financial year Accumulated depreciation at Dec. 31, 2009 Book value at Dec. 31, 2009 Book value at Dec. 31, 2008 Other long-term expenditure TOTAL 679 679 183 -236 419 260 496 1 047 110 -1 1 156 676 -66 743 414 371 4 133 193 4 326 3 428 -317 3 745 581 705 5 859 303 -1 6 162 4 287 -619 4 907 1 255 1 572 47 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 Tangible assets Carrying amount at Jan. 1, 2009 Additions Disposals Transfers between items Carrying amount at Dec. 31, 2009 Land and water Buildings and structures Machinery and equipment Other tangible assets Assets in progress and advance payments TOTAL 301 -4 297 0 0 297 301 9 014 11 48 9 073 4 753 -281 5 034 4 039 4 261 19 368 165 -20 35 19 549 15 342 -1 007 16 349 3 200 4 027 336 124 466 -84 507 0 0 507 124 336 313 -3 316 20 23 29 144 642 -24 0 29 762 20 407 -1 291 21 699 8 063 8 736 Accumulated depreciation at Jan. 1, 2009 Depreciation for the financial year Accumulated depreciation at Dec. 31, 2009 Book value at Dec. 31, 2009 Book value at Dec. 31, 2008 Book value for production machinery Dec. 31, 2009 Dec. 31, 2008 14 NONCURRENT INVESTMENTS 2 485 2 998 EUR 1000 Carrying amount at Jan. 1, 2009 Additions Disposals Carrying amount at Dec. 31, 2009 Accumulated impairments at Jan. 1, 2009 Additions Accumulated impairments at Dec. 31, 2009 Book value at Dec. 31, 2009 Book value at Dec. 31, 2008 Shares, Group companies 6 987 Shares, others 497 Receivables, Group companies 8 734 2 113 -445 10 402 5 549 -3 761 9 310 1 092 3 186 TOTAL 16 218 2 113 -445 17 885 11 715 -3 774 15 489 2 396 4504 6 987 6 166 6 166 821 821 497 0 -13 13 484 497 Shares owned by the company are presented in the note number 22 to the financial statements. 48 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 15 INVENTORIES Materials and supplies Work in progress Finished products/goods Advance payments TOTAL SPECIFICATION OF RECEIVABLES Longterm receivables Long-term receivables from Group companies - Loan receivables Total from Group companies Long-term receivables from others Deferred tax receivable Other receivables Total from others TOTAL Shortterm receivables Short-term receivables from Group companies - Accounts receivables - Accrued income and prepaid expenses - Other receivables Total from Group companies Short-term receivables from others - Accounts receivables Loan receivables - Accrued income - Other receivables, interest-bearing - Other receivables, non-interest-bearing Total from others TOTAL Substantial items included in accrued income - Project receivables entered according to percentage of completion - Other accrued income TOTAL 17 SHAREHOLDERS' EQUITY Share capital at Jan. 1 Share capital at Dec. 31 Premium fund at Jan. 1 Premium fund at Dec. 31 Retained earnings at Jan. 1 Changes during the financial year - Profit (loss) from the previous year - Dividends - Repurchase of own shares Retained earnings at Dec. 31 2009 2008 1 565 1 556 238 0 3 359 1 774 909 234 427 3 345 16 1 092 1 092 3 186 3 186 1 798 1 000 2 798 3 890 0 0 0 3 186 1 228 4 0 1 232 1 165 0 24 1 189 1 952 3 961 2 000 669 8 583 9 815 3 778 12 852 0 1 650 18 281 19 470 3 260 705 3 966 11 403 1 449 12 852 8 010 8 010 6 498 6 498 14 227 4 485 2 803 138 15 771 8 010 8 010 0 0 10 847 7 385 -4 005 0 14 227 49 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 Profit (loss) for the financial year SHAREHOLDERS' EQUITY AT DEC. 31 Distributable funds Retained earnings at Dec. 31 Profit (loss) for the financial year Distributable funds at Dec. 31 Shares of the company Shares, 1 000 pcs Nominal value, EUR Total nominal value, EUR 1 000 Series K shares (ordinary shares, 20 votes/share), 1 000 pcs Series A shares (1 vote/share), 1 000 pcs 18 APPROPRIATION RESERVE The appropriate reserve during the previous year consisted of accumulated depreciation difference of EUR 418 thousand, including deferred tax liabilities of EUR 109 thousand. PROVISIONS Estimated warranty accruals at Jan. 1 Amendment during the financial year Estimated warranty accruals at Dec. 31 Provision for loss/overheads from longterm projects in order book at Jan. 1 Amendment during the financial year Provision for loss/overheads from longterm projects in order book at Dec. 31 Other obligatory provisions at Jan. 1 Amendment during the financial year Other obligatory provisions at Dec. 31 TOTAL 20 SPECIFICATION OF LIABILITIES Longterm liabilities Long-term liabilities to others - Pension loans (TyEL) - Tekes loan TOTAL Long-term liabilities do not include items falling due after five years or later. Shortterm liabilities Short-term liabilities to Group companies - Accounts payable - Other short-term liabilities Total to Group companies 2009 8 343 21 935 2008 4 485 33 220 15 771 8 343 7 427 14 227 4 485 18 712 4 005 2.00 8 010 991 3 014 4 005 2.00 8 010 991 3 014 19 1 988 687 1 301 87 36 51 341 263 78 1 430 890 1 098 1 988 177 -90 87 0 341 341 2 416 14 000 115 14 115 8 000 231 8 231 489 1 453 1 941 663 506 1 168 50 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 Short-term liabilities to others - Pension loans - Advance payments received - Accounts payable - Accrued expenses and prepaid income - Other short-term liabilities Total to others TOTAL Interestbearing debts - Long-term - Short-term TOTAL Substantial items included in accrued expenses and prepaid income - Accrued income taxes - Accrued project expenses - Accrued employee related expenses - Other accrued expenses and prepaid income TOTAL 21 PLEDGED ASSETS AND CONTINGENT LIABILITIES Debts and other contingent liabilities have been secured by mortgages and contingencies Bank credit limits, of which used Business mortgages (1) Pension loans (TyEL) - Bank guarantees as collateral given for the TyEL loan Business mortgages (1) Deposits of money (2) - Credit insurance agreements as collateral for the TyEL loan Right of recourse of the party providing collateral Financial liability/Raute's Sickness Fund - Real estate mortgages (1) Commercial bank guarantees on behalf of the Parent company and subsidiaries - Counter guarantees (3) Mortgage agreements on behalf of subsidiaries - Counter guarantees (3) Mortgages and contingencies total - Secured by mortgages total (1) - Secured by deposits of money (2) - Counter guarantees (3) Leasing and rent liabilities - Within one year - More than one and less than five years 2009 2008 3 885 6 609 1 390 3 103 696 15 682 17 623 2 000 3 389 2 507 3 991 794 12 681 13 849 14 115 4 215 18 331 8 231 1 431 9 662 0 132 2 761 210 3 103 79 225 3 140 547 3 991 10 000 2 400 5 300 18 000 12 400 4 700 3 000 5 600 5 600 100 134 7 125 7 125 17 000 3 000 10 000 10 000 3 000 0 0 7 000 7 000 110 134 8 928 8 928 200 0 10 134 3 000 7 325 10 134 0 8 928 241 211 122 123 51 FINANCIAL STATEMENTS 2009 / PARENT COMPANY EUR 1 000 Nominal values of forward contracts in foreign currency - Nominal value, external forward contracts - Nominal value, internal forward contracts - Fair value, external - Fair value, internal 2009 2008 0 661 0 35 373 3 344 -4 166 The nominal value is the value of underlying instruments converted into euros using the exchange rate of balance sheet date. The market value is the profit generated, if the derivatives position would have been closed to the market price on the balance sheet date. Other own obligations Letter of Guarantee engagements have been issued on behalf of certain subsidiaries. Raute Corporation has given a counter guarantee of EUR 200 thousand for the loan of the foreign subsidiary. No other pledges or other contingent liabilities have been given on behalf of the management or shareholders. No loans are granted to the management and shareholders. 22 SHARES OWNED BY THE BY THE COMPANY Holding and voting right, % 100 100 100 100 100 100 50 100 Book value, EUR 1 000 203 9 398 95 84 17 15 0 821 Book value, EUR 1 000 326 51 50 16 41 484 Subsidiaries RWS-Engineering Oy, Lahti, Finland Raute WPM Oy, Lahti. Finland Raute (Shanghai) Machinery Co., Ltd, Shanghai, China Raute (Shanghai) Trading Co., Ltd, Shanghai, China Raute Canada Ltd., New Westminster, B.C., Canada Raute Inc., Delaware, USA Raute Chile Ltda., Chile Raute Group Asia Pte Ltd., Singapore TOTAL Other shares Lahden Seudun Puhelin Oy Electrosys Oy FIMECC OY PHP Holding Oy Others TOTAL Number of shares, pcs 1 717 600 50 110 52 FINANCIAL STATEMENTS 2009 Key ratios describing the 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 Dividend 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 0** 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 2 803 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 4 005 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 2 803 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 2 289 *Comparison years 2005­2008 have been changed to correspond the presentation used in the financial year 2009. **The Board of Directors' proposal to the Annual General Meeting. 53 FINANCIAL STATEMENTS 2009 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 Issue-adjusted weighted average number of shares Issue-adjusted number of shares at the end of the financial year 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 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 54 320 455 15.1 4 003 183 4 004 758 393 13.0 4 004 758 4 004 758 981 32.5 4 004 758 4 004 758 1 088 36.1 3 866 561 4 004 758 1 530 54.2 3 814 608 3 814 608 The deferred tax liabilities have been included in the calculation of the key ratios. *Board of Directors' proposal to the Annual General Meeting. **Series K shares valued at the value of series A shares. 54 FINANCIAL STATEMENTS 2009 Calculation of key ratios Return on investment (ROI), % = Profit (loss) before tax + financial expenses Shareholders' equity + interest-bearing financial liabilities (average of the financial year) Profit (loss) for the financial year Shareholders' equity (average of the financial year) Interest-bearing liabilities ./. (cash and cash equivalents + financial assets at fair value through profit or loss) Shareholders' equity Balance sheet total ./. advances received Profit (loss) for the financial year Equity issue-adjusted average number of shares during the financial year Diluted profit (loss) for the financial year Diluted equity issue-adjusted average number of shares Share of shareholders' equity belonging to the owners of the Parent company Undiluted number of shares at the end of the financial year Distributed dividend for the financial year Undiluted number of shares at the end of the financial year Dividend per share Earnings per share Dividend per share Closing share price at the end of the financial year Closing share price at the end of the financial year Earnings per share The trend in turnover of shares is given as the number of shares traded during the financial year and as the percentage of the average undiluted number of traded shares relative to issued share stock during the financial year. x 100 x 100 x 100 Return on equity (ROE), % = x 100 Interest-bearing net liabilities = Equity ratio, % = Earnings per share, undiluted, euros = Earnings per share, diluted, euros = Equity to share, euros = Dividend per share, euros = Dividend per profit, % = Effective dividend return, % = x 100 Price/earnings ratio (P/E ratio) = Trend in share turnover, in volume and percentage figures (series A shares) = Market value of capital stock = Undiluted number of shares at the end of the financial year (series A + series K shares) x closing price of the share on the last day of the financial year Interest-bearing net financial liabilities Shareholders' equity x 100 Gearing, % = 55 FINANCIAL STATEMENTS 2009 Shares and shareholders Current information on Raute's shares and shareholders can be found on the company's website at www.raute.com. SHARE CAPITAL AT DEC. 31, 2009 Shares Series K shares (ordinary shares) Series A shares Total shares at Dec. 31, 2009 Voting rights 20 votes/shares 1 vote/share Nominal value EUR/share 2.00 2.00 Number of shares 1 000 pcs 991 3 014 4 005 Total nominal value EUR 1 000 1 982 6 027 8 010 Changes in share capital from Jan. 1, 1994 to Dec. 31, 2009 Share capital at Jan. 1, 1994 Issue of share capital Sept. 21, 1994 Change of series K shares into series A shares 1998 Decrease of share capital (premium fund) June 30, 2000 Increase of share capital, capitalization issue June 30, 2000 Change of series K shares into series A shares 2003 Change of series K shares into series A shares 2004 Registration of shares with options Jan. 1­Dec. 31, 2006 Share capital at Dec. 31, 2009 Share capital EUR 5 359 073 1 069 285 -12 648 1 213 506 Number of series K shares 1 054 600 -14 000 Number of series A shares 2 124 240 635 768 14 000 -44 539 -4 900 380 300 8 009 516 991 161 44 539 4 900 190 150 3 013 597 Shares and share capital Raute Corporation's shares are registered in the book-entry securities system maintained by Euroclear Finland Ltd. As of December 31, 2009, Raute's paid up and registered share capital amounted to EUR 8,009,516.00. The capital stock totaled 4,004,758 shares, of which 991,161 pieces were series K shares (ordinary share, 20 votes/share), and 3,013,597 pieces were series A shares (1 vote/share). 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. 12.37). The company's market capitalization at the end of the reporting period was EUR 29.9 million (MEUR 25.6), with series K shares valued at the closing price of series A shares on December 31, 2009. Shareholders The number of shareholders totaled 1,528 at the beginning of the year and 1,820 at the end of the reporting period. Series K shares were owned by 46 (46) private individuals. The combined share ownership of the Board of Directors and the President and CEO and the corporations under their authority on December 31, 2009 was 192,278 pieces Raute shares, which corresponds to 4.8 percent (4.7%) of the company's combined series A and K shares and 9.1 percent (9.1%) of the votes. Nominee-registered shares accounted for 2.3 percent (2.4 %) of shares. No flagging notifications were given to the company in 2009. Market capitalization and trade Raute Corporation's series A shares are listed on the NASDAQ OMX Helsinki Ltd in the Industrials sector. The trading code is RUTAV. Raute Corporation has signed a market making agreement with Nordea Bank Finland Plc in compliance with the Liquidity Providing (LP) requirements issued by NASDAQ OMX Helsinki Ltd. In 2009, 454,798 pieces of Raute Corporation's series A shares were traded (392,693 pcs). The total value of trading was EUR 3.3 million (MEUR 4.9). The highest share price was EUR 8.90 (EUR 15.20) and the lowest EUR 6.50 (EUR 6.24). At the end of the year, the share price was EUR 7.47 (EUR 6.40). The average price was EUR 7.29 (EUR Board authorizations The company repurchased a total of 18,900 pieces of the company's series A shares during the period February 19­ March 17, 2009 to be used in the remuneration systems of the company's key employees. On March 27, 2009, the company transferred the acquired shares to the 17 key employees covered by the Group's share-based incentive plan as the share portion of the remuneration paid for the period 2006­2008. The repurchase and transfer of the company's own shares was carried out under the authority granted to the Board of Directors at the 2008 Annual General Meeting. 56 FINANCIAL STATEMENTS 2009 No decisions on share issues were made during the reporting period, nor were any convertible bonds or stock options issued. The company did not possess company shares or hold them as security at the end of the financial period. The Annual General Meeting held on April 2, 2009 authorized the Board to decide on the repurchase of a maximum of 400,000 pieces of Raute Corporation's series A shares with assets from the company's non-restricted equity, such that the repurchase would reduce the company's distributable assets. The number of shares is less than ten percent (10%) of the company's overall shares. Under the authority granted to it, the Board may repurchase the company's own series A shares to be used for the development of the company's capital structure, as consideration for funding or carrying out acquisitions or other arrangements, or to be otherwise disposed of or canceled. The consideration to be paid for the shares repurchased based on the authorization granted must be based on the public trading price of the company's series A share, such that the minimum price of the repurchased shares is the lowest listed market price in public trading during the validity of the authorization. Correspondingly, the maximum price is the highest listed market price in public trading during the validity of the authorization. The authorization includes the right to acquire shares other than in proportion to the holdings of the shareholders. A targeted repurchase of the company's own shares can take place, for example, by purchasing shares in public trading in markets where, according to the regulations, the company is permitted to engage in the trade of its own shares. Repurchasing shares in public trading as mentioned above or otherwise in a targeted way, requires that the company has a weighty financial reason to do so. Series K shares can be converted to series A shares, in accordance with Article 3 of Raute Corporation's Articles of Association. The Board of Directors will decide on the other conditions related to share repurchases. By the authority granted to the Board at the Annual General Meeting held on April 2, 2009, the Board can decide on a directed issue of Raute Corporation's series A shares, as well as on all of the related terms and conditions, including the recipients and the sum of consideration to be paid. The Board of Directors may decide to issue either new shares or company shares held by Raute. The maximum number of shares that can be issued is 400,000 pieces series A shares. As proposed, the authorization will be used to fund or carry out acquisitions or other arrangements or for other purposes decided by the Board of Directors. The authorizations are valid until the end of the next Annual General Meeting, at the latest until May 31, 2010. By the end of the financial year, the Board had not yet used the authorizations granted to it at the 2009 Annual General Meeting. As of December 31, 2009, the company had no valid share issues, option schemes or share- or option-based incentive plans. Sharebased incentive plan 2006 On March 22, 2006 the Board of Directors of Raute Corporation approved a share-based incentive plan for the strategy period 2006­2008. The reward from the plan was based on the Group's operating profit for 2006­2008 and on the Board of Directors' assessment of the success of the strategy. The incentive plan encompassed the Group's Executive Board (5 members) and 12 other key employees. The rewards were paid partly in shares and partly in cash in the 2009 financial year. The cash portion was intended for the payment of taxes and tax-related costs. The shares are subject to a two-year transfer prohibition, which ends on March 28, 2011. 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 Indus- Market value of capital stock at Dec. 31, EUR million 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 Trading in series A shares EUR 1 000 600 500 400 300 200 100 0 1 000 pcs 60 50 40 30 20 10 0 1/09 2/09 3/09 4/09 5/09 6/09 7/09 8/09 9/09 10/09 11/09 Trading EUR 1 000 Trading 1 000 pcs 12/09 57 FINANCIAL STATEMENTS 2009 tries 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 project-specific insiders in accordance with the Finnish Securities Markets Act. The company's public insiders include the Board of Directors, the 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 information on insiders subject to disclosure requirements is kept available in the NetSire system maintained by Euroclear Finland Ltd. The insider registers of issuers are available for public display at Euroclear Finland Ltd, Urho Kekkosen katu 5 C, FI-00100, Helsinki. In addition, the public information on the insiders is available on Raute Corporation's website at www.raute.com. DISTRIBUTION OF OWNERSHIP BY SHAREHOLDER CATEGORY AT DEC. 31, 2009 Series A and series K shares Number of by shareholder category shareholders Households 1 679 Financial and insurance institutions 6 Foreign shareholders 7 Non-profit institutions 10 Public institutions 2 Companies 111 Nominee-registered 5 Total 1 820 Number of shares 3 424 520 9 227 162 650 25 839 60 350 231 608 90 564 4 004 758 Number of voting rights 22 256 579 9 227 162 650 25 839 60 350 231 608 90 564 22 836 817 % 92.3 0.3 0.4 0.5 0.1 6.1 0.3 100.0 % 85.5 0.2 4.1 0.6 1.5 5.8 2.3 100.0 % 97.5 0.0 0.7 0.1 0.3 1.0 0.4 100.0 DISTRIBUTION OF SERIES A SHARE OWNERSHIP AT DEC. 31, 2009 Series A shares Number of by shareholder category shareholders Households 1 672 Financial and insurance institutions 6 Foreign shareholders 7 Non-profit institutions 10 Public institutions 2 Companies 111 Nominee-registered 5 Total 1 813 Number of shares 2 433 359 9 227 162 650 25 839 60 350 231 608 90 564 3 013 597 Number of voting rights 2 433 359 9 227 162 650 25 839 60 350 231 608 90 564 3 013 597 % 92.2 0.3 0.4 0.6 0.1 6.1 0.3 100.0 % 80.7 0.3 5.4 0.9 2.0 7.7 3.0 100.0 % 80.7 0.3 5.4 0.9 2.0 7.7 3.0 100.0 Series A shares by number of shares 1­1 000 1 001­5 000 5 001­10 000 10 001­50 000 50 001­100 000 100 001­ Total Number of shareholders 1 586 170 20 25 11 1 1 813 % 87.5 9.4 1.1 1.4 0.6 0.1 100.0 Number of shares 496 858 359 545 152 833 725 389 753 972 525 000 3 013 597 % 16.5 11.9 5.1 24.1 25.0 17.4 100.0 Number of voting rights 496 858 359 545 152 833 725 389 753 972 525 000 3 013 597 % 16.5 11.9 5.1 24.1 25.0 17.4 100.0 DISTRIBUTION OF SERIES K SHARE OWNERSHIP AT DEC. 31, 2009 Series K shares by shareholder category Households Total Number of shareholders 46 46 Number of shares 991 161 991 161 Number of voting rights 19 823 220 19 823 220 % 100.0 100.0 % 100.0 100.0 % 100.0 100.0 58 FINANCIAL STATEMENTS 2009 Series K shares by number of shares 1­1 000 1 001­5 000 5 001­10 000 10 001­50 000 50 001­100 000 Total Number of shareholders 2 3 12 25 4 46 Number of shares 900 8 809 74 433 685 139 221 880 991 161 Number of voting rights 18 000 176 180 1 488 660 13 702 780 4 437 600 19 823 220 % 4.3 6.5 26.1 54.3 8.7 100.0 % 0.1 0.9 7.5 69.1 22.4 100.0 % 0.1 0.9 7.5 69.1 22.4 100.0 20 LARGEST SHAREHOLDERS AT DEC. 31, 2009 Number of series K shares 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 Number of series A shares 60 009 22 009 53 539 43 201 74 759 64 159 62 316 30 862 20 162 35 862 42 670 51 116 26 200 27 964 525 000 43 256 43 256 96 900 85 000 70 000 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 Total number of shares 120 489 82 489 104 179 93 481 122 759 112 159 110 316 78 102 63 402 78 102 82 420 84 716 56 200 52 924 525 000 55 256 55 256 96 900 85 000 70 000 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 % of total shares 3.0 2.1 2.6 2.3 3.1 2.8 2.8 2.0 1.6 2.0 2.1 2.1 1.4 1.3 13.1 1.4 1.4 2.4 2.1 1.7 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 Total number of votes 1 269 609 1 231 609 1 066 339 1 048 801 1 034 759 1 024 159 1 022 316 975 662 884 962 880 662 837 670 723 116 626 200 527 164 525 000 283 256 283 256 96 900 85 000 70 000 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 % of voting rights 5.6 5.4 4.7 4.6 4.5 4.5 4.5 4.3 3.9 3.9 3.7 3.2 2.7 2.3 2.3 1.2 1.2 0.4 0.4 0.3 63.5 By number of shares 1 Sundholm, Göran 2 Suominen, Jussi Matias 48 000 3 Mustakallio, Kari Pauli 60 480 4 Suominen, Pekka Matias 48 000 5 Suominen, Tiina Sini-Maria 48 000 6 Siivonen, Osku Pekka 50 640 7 Hietala, Pekka Tapani 8 Kirmo, Kaisa Marketta 50 280 9 Lisboa De Castro Palacios Hietala, M. 10 Keskiaho, Kaija Leena 33 600 11 Särkijärvi, Riitta 60 480 12 Mustakallio, Mika 39 750 13 Mustakallio, Ulla Sinikka 47 240 14 Mustakallio, Risto 42 240 15 Sr Arvo Finland Value 16 Mustakallio, Marja Helena 43 240 17 Kirmo, Lasse 30 000 18 Särkijärvi-Martinez, Anu Riitta 12 000 19 Särkijärvi, Timo 12 000 20 Suominen, Jukka Matias 24 960 Total 650 910 Number of series K shares 60 480 60 480 50 640 50 280 48 000 48 000 48 000 47 240 43 240 42 240 39 750 33 600 30 000 24 960 By number of votes 1 Mustakallio, Kari Pauli 2 Särkijärvi, Riitta 3 Siivonen, Osku Pekka 4 Kirmo, Kaisa Marketta 5 Suominen, Jussi Matias 6 Suominen, Pekka Matias 7 Suominen, Tiina Sini-Maria 8 Mustakallio, Ulla Sinikka 9 Mustakallio, Marja Helena 10 Mustakallio, Risto 11 Mustakallio, Mika 12 Keskiaho, Kaija Leena 13 Kirmo, Lasse 14 Suominen, Jukka Matias 15 Sundholm, Göran 16 Särkijärvi-Martinez, Anu Riitta 12 000 17 Särkijärvi, Timo 12 000 18 Hietala Pekka, Tapani 19 Lisboa De Castro Palacios Hietala, M. 20 Sr Arvo Finland Value Total 650 910 59 FINANCIAL STATEMENTS 2009 The number of nominee-registered shares at Dec. 31, 2009 was 90,564 pieces (97,969 pcs). Management's shareholding at Dec. 31, 2009 The Board of Directors, the Group's President and CEO, and Presidents of subsidiaries owned at total of 96,223 pieces series A shares and 98,990 pieces series K shares. Management's ownership corresponds to 4.9 percent of the company's shares and 9.1 percent of associated total voting rights. The figures include the holdings of their own, minor children and control entities. Public insiders' shareholding at Dec. 31, 2009 The company's public insiders owned a total of 103,223 pieces series A shares and 98,990 pieces series K shares. Public insiders' ownership corresponds to 5.0 percent of the company's shares and 9.1 percent of associated total voting rights.The figures include the holdings of their own, minor children and control entities. EUR 25,00 Performance of series A shares, EUR 20,00 15,00 10,00 5,00 0,00 12/2005 12/2006 12/2007 12/2008 12/2009 Raute, average share price OMX Helsinki Industrials Index OMX Helsinki Benchmark Cap Index OMX Helsinki Cap Index 60 FINANCIAL STATEMENTS 2009 The Board of Directors' proposal for profit distribution, signatures for the Board of Directors' report and financial statements and the Auditor's note The Parent company's distributable assets total EUR 7 427 thousand, of which the loss for the financial year is EUR 8 343 thousand and the balance sheet amounts to EUR 55 103 thousand. The Board of Directors proposes to the Annual General Meeting 2010 that no dividend shall be paid for 2009 and that the loss for the financial year shall be transferred to retained earnings. Nastola, February 11, 2010 Erkki Pehu-Lehtonen Chairman of the Board of Directors Sinikka Mustakallio Risto Hautamäki Ilpo Helander Mika Mustakallio Panu Mustakallio Tapani Kiiski President and CEO The Auditor's note The Auditor's report has been issued today. Nastola, February 11, 2010 Anna-Maija Simola Authorized Public Accountant Antti Unkuri Authorized Public Accountant 61 List of the Parent company's common document types, accounting journal types and means of storaging FINANCIAL STATEMENTS DECEMBER 31, 2009 Common document types used Balance sheet book General journal and general ledger Accounts payable and accounts receivable Description of accounting journals Bank and cash vouchers Purchase invoices Sales invoices Transactions of purchase and sales invoices Fixed asset register Salary entries Memo vouchers Automatic contra entries of memo vouchers Imputed and entries of cost accounting Accounting journal 10,11 and 15 81, 82, 85 and 86 30, 31, 32, 35, 37 and 38 70, 71 and 80 65­67 6, 19, 20, 21, 22, 24 and 25 97 and 98 26­29, 39 and 89 Documents' means of storaging Separately bound In electronic format In electronic format Journals' means of storaging In paper In electronic format In paper In electronic format Printed list In paper In paper In electronic format In electronic format and in paper (28, 39, 89) 62 Development of quarterly results EUR 1 000 NET SALES Other operating income Increase (+) or decrease () in inventories of finished goods and work in progress Materials and services Expenses from employee benefits Depreciation, amortization and impairment charges Other operating expenses Total operating expenses OPERATING PROFIT (LOSS) % of net sales Financial income Financial expenses PROFIT (LOSS) BEFORE TAX % of net sales Income taxes TOTAL PROFIT (LOSS) FOR THE PERIOD % of net sales Attributable to Equity holders of the Parent company Earnings per share, EUR Undiluted earnings per share Diluted earnings per share Shares, 1 000 pcs Adjusted average number of shares Adjusted average number of shares, diluted Total 2009 36 638 153 Q4 2009 7 650 23 Q3 2009 8 057 -10 Q2 2009 9 565 108 Q1 2009 11 366 32 795 15 695 22 047 2 670 6 869 47 281 9 695 26 356 551 9 890 27 1 749 8 141 22 300 3 267 5 753 629 1 649 11 298 3 325 -43 70 -209 3 464 -45 574 2 889 -38 107 3 444 4 776 701 1 508 10 429 2 274 -28 46 -101 2 330 -29 514 1 816 -23 135 3 813 5 386 665 1 862 11 726 1 918 -20 -9 -38 1 965 -21 424 1 540 -16 252 5 171 6 132 674 1 851 13 828 2 179 -19 250 -204 2 132 -19 236 1 895 -17 8 141 -2 889 -1 816 -1 540 -1 895 2.03 2.03 -0.72 -0.72 -0.45 -0.45 -0.38 -0.38 -0.47 -0.47 4 003 4 003 4 003 4 003 4 003 4 003 4 002 4 002 3 998 3 998 63 Auditor's report To the Annual General Meeting of Raute Corporation We have audited the accounting records, the financial statements, the report of the Board of Directors and the administration of Raute Corporation for the year ended on December 31, 2009. The financial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, cash flow statement and notes to the consolidated financial statements, as well as the Parent company's balance sheet, income statement, cash flow statement and notes to the financial statements. The responsibility of the Board of Directors and the President and CEO The Board of Directors and the President and CEO are responsible for the preparation of the financial statements and the report of the Board of Directors and for the fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, as well as for the fair presentation of the Parent company's financial statements and the report of the Board of Directors in accordance with laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is responsible for the appropriate arrangement of the control of the company's accounts and finances, and the President and CEO shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. Auditor's responsibility Our responsibility is to perform an audit in accordance with good auditing practice in Finland, and to express an opinion on the financial statements, on the consolidated financial statements and on the report of the Board of Directors based on our audit. Good auditing practice requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements and the report of the Board of Directors are free from material misstatement and whether the members of the Board of Directors and the President and CEO have complied with the Limited Liability Companies Act. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and the report of the Board of Directors. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements or of the report of the Board of Directors, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the overall presentation of the financial statements and the report of the Board of Directors, appropriateness of the accounting principles of the financial statements as well as evaluating the reasonableness of accounting estimates made by management. The audit was performed in accordance with good auditing practice in Finland. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion on the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position, financial performance, and cash flows of the Group in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. Opinion on the company's financial statements and the report of the Board of Directors In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the consolidated and the Parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The information in the report of the Board of Directors is consistent with the information in the financial statements. Nastola, February 11, 2010 Anna-Maija Simola Authorized Public Accountant Antti Unkuri Authorized Public Accountant 64 65 66 67 www.raute.com