Market situation
Demand has remained the same throughout the financial year. No significant changes are expected in the near future.
Persistent maintenance and development of competitiveness has enabled Vaisala to retain its market share, and its market position remains strong.
Net sales and order book
The Vaisala Group's net sales were EUR 180.6 million (EUR 189.2 million in 2003). The Group's operations outside Finland accounted for 97% of net sales (97%). New orders for the financial year totaled EUR 172.8 million (180.7). The order book at the end of the year stood at EUR 52.7 million (62.9).
Without the effect of exchange rate changes, the Group's net sales would have remained the same as in previous year.
Vaisala Solutions
The Vaisala Solutions division generated net sales of EUR 52.4 (53.0) million.
The profitability level for the financial year was satisfactory. The figure for the previous financial year has been adjusted to correspond with the structure in 2004. The efficiency of the capital employed was improved. Measures for the further development of the solutions business model were continued. Several contracts based on the new service concepts were won.
The market has picked up somewhat and the order intake has started to rise slightly. We are expecting slight growth in net sales in 2005.
Vaisala Instruments
The Vaisala Instruments division generated net sales of EUR 52.9 (50.3) million.
The division's profitability level was good in 2004. The figure for the previous financial year has been adjusted to correspond with the structure in 2004.
Vaisala Instruments continued to grow and the market situation is relatively stable. Profitability in 2005 is expected to be a good. In particular, we are expecting growth from the new weather transmitter launched in October. The new humidity and temperature transmitter series will strengthen our position in the field of demanding industrial and meteorological humidity measurements.
During the financial year, the Vaisala Instruments division also introduced a new portable meter for oil moisture measurements, a carbon dioxide probe for ecological measurements, a dewpoint meter for natural gas humidity measurements, and a ceilometer and transmissometer for airports. During the review period, the division discontinued its ammonia measurement business.
In October, Vaisala Instruments introduced a new type of compact weather transmitter. Based on technologies developed and patented by Vaisala, the weather transmitter measures temperature, relative humidity, barometric pressure, wind speed and direction, and liquid precipitation. The transmitter is suitable for weather sensitive businesses that require weather information for the success of their daily operations. The new weather transmitter is expected to open the door for Vaisala to a market worth approximately 20 million euros.
Vaisala Soundings
The Vaisala Soundings division generated net sales of EUR 55.8 (64.5) million.
The division's profitability level was good in 2004.
The market has remained unchanged, and customers are cautious in their investments. The market launch of the new generation radiosonde released in 2003 has progressed well. Some projects were postponed for reasons relating to customers, which was reflected in low net sales.
During the financial year, the Vaisala Soundings division introduced Ozone measurement in the radiosonde product series.
Some small growth and improvement in profitability can be expected in 2005.
Vaisala Remote Sensing
The Vaisala Remote Sensing division generated net sales of EUR 19.5 (21.5) million.
The result for the financial year was negative. No increase in net sales is expected in 2005, but the result should turn slightly positive.
In January, the Vaisala Remote Sensing division announced its new lightning detection system that combines the technologies acquired through two separate acquisitions into one modular product family. The new product line reduces the amount of equipment to be maintained and improves product profitability.
Divisions from the beginning of 2005
In the beginning of 2005, the Vaisala Sounding Systems and Vaisala Remote Sensing divisions, as well as the Vaisala Measurement Systems sales channel, were integrated into a single division. By distributing resources among the divisions, it is possible to further increase efficiency. The name of the new division is Vaisala Measurement Systems (VMS).
Other events
Decision has been made to establish a company in China to strengthen Vaisala's position in China's growing market. Vaisala has been present in China since 1986. A representative office was opened in Beijing in 1994 and a sales office in Shanghai in November 2003.
In October, Vaisala Oyj's Board of Directors decided to introduce a new profit and share-based incentive program for key personnel and senior management, including the President & CEO, as part of the Group's incentive and commitment systems.
Vaisala Oyj's 2000 B option rights have been traded on the Helsinki Stock Exchange as of 1 December 2004, merged together with the listed 2000 A option rights.
On 14 December 2004, the Extraordinary General Meeting approved The Board of Directors' proposal for additional dividend of EUR 0.50 per share, totaling EUR 8.739.500, to be paid, in addition to the dividend approved by the Annual General Meeting on 18 March 2004 (EUR 0.75), on the basis of the Balance Sheet for the financial year that ended on 31 December, 2003.
Performance
Operating profit for the review period was EUR 23.8 million (25.9). Profit before extraordinary items was EUR 24.1 million (23.4), or 13.4% of net sales. Goodwill depreciation from acquisitions totaled EUR 3.0 (4.1) million. Profit for the accounting period was EUR 17.0 (14.5) million.
Balance sheet
The Vaisala Group's solvency ratio and liquidity remained strong. On 31 December, 2004, the balance sheet total was EUR 165.3 million (172.9). The Group's solvency ratio at the end of the review period was 83% (84%).
Research and development
R&D expenditure totaled EUR 22.3 million (21.1) in the review period, representing 12.4% of the Group's net sales.
Capital expenditure
Gross capital expenditure in fixed assets totaled EUR 4.8 million (14.1) during the review period.
Vaisala's shares
The price of Vaisala's A share on the Helsinki Exchanges was EUR 24.50 at the beginning and EUR 18.20 at the end of the review period. The highest quotation during the review period was EUR 24.50 and the lowest EUR 17.25.
Vaisala's share capital at the end of the review period was EUR 7.349.905.88 and the total number of shares was 17.479.000.
A total of 1.635.934 Vaisala shares were traded on the Helsinki Exchanges during the review period.
Novametor Oy acquired 365.000 Vaisala Oyj series A shares by sale outside the Helsinki Exchanges during the review period. Novametor Oy's ownership of Vaisala Oyj series A shares after the acquisition is 9.9% and series K shares 13.3%. Novametor Oy's ownership of Vaisala Oyj share capital is 10.6% and of voting rights held 12.7%. The internal arrangement was agreed upon within the current ownership.
Personnel
The total number of employees in the Vaisala Group at the end of the review period was 1.063, compared with 1.113 at the end of the corresponding period in 2003.
Some 22% (21%) of the personnel worked in research and development. Approximately 37% (37%) of the Group's personnel worked outside Finland.
Application of the International Financial Reporting Standards (IFRS)
The transition to the IFRS has proceeded according to schedule. Vaisala Oyj will report the most significant changes in its financial reporting brought about by the application of the IFRS in the beginning of April. IFRS compliant interim figures for 2004 will be published together with the interim reports for 2005, to enable comparisons.
Board of Directors and President & CEO
The members of the Board of Directors are Raimo Voipio M.Sc. (Eng.)(Chairman), Professor Pekka Hautojärvi, Professor Yrjö Neuvo, Mikko Niinivaara M.Sc. (Eng), Mikko Voipio M.Sc. (Eng) and Gerhard Wendt Ph.D. The Group's President & CEO is Pekka Ketonen, D.Tech. (h.c.).
Vaisala Oyj's Authorized Public Accountants are PriceWaterhouseCoopers Oy and Mr. Jukka Ala-Mello APA.
Dividend
The Board of Directors proposes to the Annual General Meeting held on 22 March 2005 that a dividend of EUR 0.75 per share be paid for the financial year 2004, corresponding to total of EUR 13.109.250, which is 77% of the review period's profit. The record date for dividend payment is 29 March, 2005, and it is proposed that the dividend will be paid on 5 April, 2005.
Outlook
The market outlook has not significantly changed. Slight improvement in net sales and profitability are expected in 2005.
Vaisala aims to be the global market leader in its selected business areas also in the future. Therefore investments in product development and competitiveness will continue to be substantial.
Vantaa, Finland, 14 February, 2005
Vaisala Oyj
Board of Directors
The full report including tables can be downloaded from the following link.
