HUHTAMÄKI OYJ STOCK EXCHANGE RELEASE April 12, 2007 AT [17:10]
Huhtamäki Oyj's Annual General Meeting of Shareholders was held in Helsinki on April 12, 2007. The meeting adopted the Company's Financial Statements and the Consolidated Financial Statements for 2006 and discharged the Company's Board of Directors and the CEO from liability.
Dividend
Dividend for 2006 was set at EUR 0.42 per share, as proposed by the Board of Directors. The dividend is paid on April 24, 2007 to a shareholder who on the record date April 17, 2007 is registered as a shareholder in the Company's shareholder register.
Amendment of the Articles of Association
The meeting approved the proposal of the Board of Directors made on February 14, 2007, regarding the amendment of Huhtamäki Oyj's Articles of Association (Enclosure 1).
Board of Director's authorization to convey Company's own shares
The meeting approved the proposal of the Board of Directors, made on February 14, 2007, and granted the Board of Directors an authorization to resolve upon conveyance of the Company's own shares. The authorization is valid until December 31, 2009.
Composition of the Board of Directors
Seven members of the Board of Directors were elected for a term which lasts until the close of the Annual General Meeting of Shareholders following the election. Huhtamäki Oyj's Board of Directors was re-elected and the Board of Directors comprises: Ms. Eija Ailasmaa, Mr. George V. Bayly, Mr. Robertus van Gestel, Mr. Paavo Hohti, Mr. Mikael Lilius, Mr. Anthony J.B. Simon and Mr. Jukka Suominen.
The Board of Directors convened immediately after the Annual General Meeting of Shareholders and elected Mr. Mikael Lilius as Chairman of the Board and Mr. Jukka Suominen as Vice-Chairman of the Board.
Remuneration of the members of the Board of Directors
The Annual General Meeting of Shareholders confirmed the following remuneration for the Board of Directors: the annual compensation for the Chairman is EUR 90,000, for the Vice-Chairman EUR 55,000 and for the other members EUR 45,000. In addition, a meeting fee of EUR 500 per meeting shall be paid to all members for the Board and Board Committee meetings they attend. Traveling expenses were resolved to be paid in accordance with the Company policy.
Auditor
The Authorized Public Accountant firm KPMG Oy Ab was elected as Auditor. KPMG Oy Ab has announced Ms. Solveig Törnroos-Huhtamäki, APA, to be the auditor with principal responsibility.
Mr. Pekka Merilampi, lagman, chaired the meeting.
Inquiries:
Mr. Juha Salonen, Group Vice President, General Counsel
Tel. +358 (0)10 686 7851
Mr. Juha Salonen, Group Vice President, General Counsel
Tel. +358 (0)10 686 7851
HUHTAMÄKI OYJ
Group Communications
Enclosure 1: Articles of Association
Enclosure 2: CEO Heikki Takanen's review
ENCLOSURE 1 TO HUHTAMÄKI OYJ'S STOCK EXCHANGE RELEASE April 12, 2007
Articles of Association for Huhtamäki Oyj
1 § Name and registered office
The name of the Company is Huhtamäki Oyj. The domicile of the Company is Espoo.
2 § Line of business
The Company's line of business includes the packaging industry and associated activities either directly or through subsidiaries and affiliated companies.
3 § Shares and the book-entry system of securities
The shares of the Company are incorporated in the book-entry system of securities referred to in the Act on the Book-Entry System. Each share shall carry one vote.
4 § Board of Directors
The administration of the Company and appropriate organisation of its operations are the responsibility of a Board of Directors consisting of no less than six (6) and no more than nine (9) members. The term of office of a member of the Board of Directors shall expire at the close of the Annual General Meeting subsequent to the election.
The Board of Directors shall elect from among its members a Chairman and a Vice Chairman for a term to expire at the close of the next Annual General Meeting of Shareholders.
5 § Managing Director
The Board of Directors shall elect the Managing Director. The Managing Director shall be in charge of the day-to-day management of the Company in accordance with the instructions and orders of the Board of Directors.
The Board of Directors may elect a deputy for the Managing Director.
6 § Right of representation
The Company shall be represented by the Managing Director jointly with a member of the Board of Directors; jointly by two (2) members of the Board of Directors; by a person authorized to represent the Company by the Board of Directors jointly with the Managing Director or with a member of the Board of Directors; or jointly by two (2) persons authorized to represent the Company by the Board of Directors.
The Board of Directors may grant procurations so that two (2) holders of the right represent the company jointly or each one jointly with the Managing Director, a member of the Board of Directors or with a person authorized to represent the Company.
7 § Auditor
The Company shall have one (1) auditor, which shall be an auditing firm accredited by the Central Chamber of Commerce.
8 § General Meeting of Shareholders
The General Meeting of Shareholders shall be held in Espoo or in Helsinki, as decided by the Board of Directors.
The Annual General Meeting must be held within six (6) months from the end of the financial period.
At the Annual General Meeting of Shareholders,
the following shall be presented:
1. the financial statements including the consolidated financial statements, and the Board of Directors' report;
2. the auditors' report;
the following shall be resolved:
3. the adoption of the financial statements and the consolidated financial statements included therein;
4. the use of the profit indicated by the balance sheet;
5. the discharge of members of the Board of Directors and the Managing Director from liability;
6. the remuneration of the members of the Board of Directors and the auditor;
7. the number of the members of the Board of Directors;
the following shall be elected:
8. the members of the Board of Directors; and
9. the auditor.
9 § Notice of the General Meeting of Shareholders
The General Meeting of Shareholders shall be convened by a notice published in a national daily newspaper, determined by the Board of Directors, not earlier than two (2) months and not later than 17 days before the General Meeting of Shareholders.
The Board of Directors may resolve that, in order to be entitled to attend the meeting, the shareholder shall have to notify the Company of his/her intention to attend by the date specified in the notice to the meeting by the Board of Directors, which date may not be earlier than ten (10) days prior to the meeting.
10 § Financial period
The financial period of the Company shall be the calendar year.
11 § Redemption obligation
A shareholder whose holding - either alone or together with other shareholders in a way defined hereinafter - of the total shares of the Company equals or exceeds 30 per cent or 50 per cent (shareholder subject to a redemption obligation) shall have the obligation, at the request of other shareholders (shareholders entitled to redemption), to redeem their shares, and any securities which entitle to shares under the Companies Act, as provided in this article.
In calculating a shareholder's proportion of the total number of shares in the Company, shares held by the following shall also be included:
- A corporation which, under the Companies Act, belongs to the same consolidated group as the shareholder,
- A company which, when compiling the consolidated annual accounts in accordance with the Accounting Act, is considered to belong to the same consolidated group as the shareholder,
- A pension foundation or pension fund of any corporations or companies referred to above, and
- A foreign corporation or company which, were it Finnish, would belong to the same consolidated group as the shareholder in the manner referred to above.
Where a redemption obligation is based on an aggregate shareholding, the shareholders subject to the redemption obligation shall jointly and severally be obliged to redeem the shares of the shareholders entitled to redemption.
In such a situation, a claim for redemption is always considered to be directed at all shareholders subject to the redemption obligation, even if this is not specifically requested.
Where two shareholders reach or exceed the threshold for the redemption obligation so that they become obliged to redeem shares simultaneously, a shareholder entitled to redemption may claim redemption from each of them separately.
The redemption obligation shall not apply to shares or securities that entitle to shares, which the shareholder claiming for redemption has acquired after the redemption obligation was borne.
Redemption price
The redemption price of the shares is the greater of the following:
(a) The weighted average trading price of the shares on the Helsinki Stock Exchange during the ten (10) business days prior to the day on which the Company was notified by the shareholder subject to the redemption obligation that his/her holding has reached or exceeded the threshold referred to above or, in the absence of such notification or its failure to arrive within due time, the day on which the Board of Directors of the Company otherwise became aware thereof;
(b) The average price, weighted by the number of shares, which the shareholder subject to the redemption obligation has paid for the shares he/she has acquired or otherwise obtained during the last 12 months preceding the date referred to in paragraph a).
If an acquisition which has an influence on the average price is denominated in a foreign currency, the equivalent value in euros shall be calculated according to the official rate of the European Central Bank for the currency in question seven (7) days prior to the date on which the Board notified shareholders of their right for redemption.
The above provisions on the determination of the redemption price of shares shall also apply to other securities to be redeemed.
A shareholder subject to the redemption obligation shall, within seven (7) days of the date on which the redemption obligation has arisen, notify the Board of Directors of the Company in writing at the Company's address. The notification shall contain information on the number of shares held by the shareholder subject to the redemption obligation, and on the number and prices of the shares acquired or otherwise obtained by the shareholder subject to the redemption obligation during the last twelve (12) months. The notification shall also contain the address at which the shareholder subject to the redemption obligation may be contacted.
The Board of Directors must notify the shareholders of the existence of the redemption obligation within 45 days of receiving the notification referred to above or, in the absence of such notification or its failure to arrive within due time, within 45 days of the day on which the Board of Directors otherwise became aware of the redemption obligation. The notice shall contain details of the date on which the redemption obligation had arisen and the basis for determination of the redemption price, to the extent known by the Board of Directors, and the date by which claims for redemption shall be made. Notice to the shareholders shall be given in compliance with the provisions of Article 9 of the Articles of Association concerning notice of a General Meeting of Shareholders.
A shareholder entitled to redemption shall make a written claim for redemption within 30 days from the publication of the Board of Directors' notice with respect to the redemption obligation. The redemption claim, which shall be delivered to the Company, shall indicate the number of shares and other securities covered by the claim. A shareholder claiming for redemption shall at the same time provide the Company with any share certificates or other documents carrying the right to shares to be handed over to the shareholder subject to the redemption obligation against the redemption price.
If a claim is not made by the due date in the manner described above, the shareholder shall forfeit his/her right to claim for redemption with respect to the redemption situation in question. As long as redemption has not taken place, a shareholder entitled to redemption shall have the right to withdraw his/her claim.
On the expiration of the period for making claims for redemption, the Board of Directors shall notify the shareholder subject to the redemption obligation of the claims made. The shareholder subject to the redemption obligation shall, within 14 days of receipt of the notice of the redemption claims, in the manner prescribed by the Company, pay the redemption price against receipt of shares and securities carrying the right to shares or, in case the shares to be redeemed are entered in the book-entry accounts of the shareholders in question, against a receipt issued by the Company. In such a case the Company shall be responsible for ensuring that the shareholder having redeemed the shares is without delay entered in the book-entry account as the owner of the shares redeemed.
Any redemption price that is not paid within the specified period shall accrue a delay interest of 20 per cent per annum as of the date on which the redemption should have been made at the latest. If the shareholder subject to the redemption obligation has, in addition, failed to observe the above provisions concerning the liability to notify, the delay interest shall be calculated as of the date on which the liability to notify should have been fulfilled.
Other provisions
The redemption obligation under this Article shall not apply to a shareholder who can prove that the threshold for the redemption obligation was reached or exceeded prior to the registration of this amendment to the Articles of Association in the Finnish Trade Register.
A resolution of a General Meeting of Shareholders to amend or delete the provisions of this Article shall be effective only if carried by shareholders representing not less than three-quarters of the votes cast and shares represented at the meeting.
Disputes concerning the redemption obligation referred to above, the related right to claim for redemption and the redemption price shall be settled in arbitration proceedings at the domicile of the Company, in accordance with the provisions in the Act on Arbitration Proceedings (967/92). The arbitration proceedings shall be subject to the laws of Finland.
ENCLOSURE 2 TO HUHTAMÄKI OYJ'S STOCK EXCHANGE RELEASE April 12, 2007
CEO Heikki Takanen at the Annual General Meeting of Shareholders in Helsinki on April 12, 2007
Honored Huhtamaki shareholders, Ladies and Gentlemen
Did you know that last year Huhtamaki produced 1.5 billion carton board hot cups for the European market. These hot cups and other consumer packages form a global market, today estimated at EUR 280 billion.
Demographic changes, as well as changes in consumer lifestyle and habits, are directing the demand for consumer packaging. The emerging markets, such as South-East Asia and India, are growing rapidly: according to forecasts, the emerging markets will represent 1/3 of the global consumer packaging markets by the year 2009. Mature markets, such as the United States and Europe, keep growing at the rate of the gross domestic product. However, rapid movements are taking place in these markets and some packaging segments are growing as fast as in the emerging markets.
Huhtamaki is one of the world's largest manufacturers of consumer packaging. We operate globally with 66 plants in 36 countries. At the end of last year we employed some 14,800 people.
Last year was a period of intense development for Huhtamaki. We continued to implement the change programs and improved our operational efficiency. As part of the North American strategy, the rough molded fiber operation in Mexico was sold in March. The expanded polystyrene packaging units in France and Portugal were sold in June, while continuing to grow capabilities and capacity in alternative technologies.
Last year was also a proof of our willingness and ability to change. In the mature markets, on a comparable basis, Huhtamaki's net sales grew slightly faster than the markets - and by a two-digit figure in the emerging markets. We achieved growth in important product groups, such as films and flexibles, and in the emerging markets. Our profitability in the Americas increased considerably. In addition, the restructuring programs in Europe were completed for the most part and in savings we reached a run-rate of EUR 25 million by the end of the year compared with the initial stage.
In parts of Europe and Oceania the considerable increase in raw material and energy costs caused margin erosion, and in the UK, the changing market dynamics resulted in reduced sales volume. Otherwise, the markets witnessed positive development and offered a stable business environment. Growth continued particularly strongly in the emerging markets, accounting for approximately 17% of the Group's net sales.
Let us have a look at key figures for the year. Net sales amounted to almost EUR 2.3 billion. The 2% growth indicates a stable market situation. The Flexibles and Films Divisions grew intensively, as did the Foodservice division in the emerging markets. On a comparable basis, growth in North America and Europe was better than market development. I will return to regional development in more detail later.
The underlying EBIT for the whole year, EUR 158 billion, was slightly below last year's result. Our reported full-year EBIT was EUR 146 million. It includes restructuring charges of approximately EUR 12 million.
The significant improvement compared to the previous year's reported result is due to the restructuring and goodwill impairment charges that put pressure on the 2005 result. Free cash flow was negative EUR 8 million. This was due to the growth in investments and costs related to restructuring.
I will begin the regional reviews with Europe, which share of the Group's total net sales is approximately 50%. The full year net sales increased slightly but varied within the region.
Approximately 11% of the region's net sales came from the emerging Eastern European markets, and growth was especially strong in Russia and Poland. In the mature markets we concentrated on the completion of the restructuring. The production of rigid packaging in Göttingen, Germany, was relocated mainly to Poland. Net sales were low in certain rigid units, and the decline in volume was strongest in the UK. The global Flexibles and Films Divisions succeeded, once again, excellently. Sales development in the Molded Fiber business was stable as well.
High raw material and energy costs as well as operational inefficiencies in units with major change programs had a negative impact on the region's result. This was shown in the EBIT, especially at the closing of the year.
Approximately 31% of the Group's net sales come from the Americas region. In 2006 net sales were sustained on a good level, while profitability improved significantly. The 33% growth in underlying EBIT reflects both continuous improvement in operational efficiency and successful management of the supply chain and pricing. Within Foodservice, performance was driven by the successful extension of the product offering of the Chinet® brand with the Chinet Casuals® product line. Within Consumer Goods, the sales of ice cream packages witnessed strong growth throughout the year.
The Asia-Oceania-Africa region represented 17% of the Group's net sales. There are interesting emerging markets in the region, and volume growth in 2006 was 6%. The markets in India, China and South-East Asia are growing 15-20% a year, which encourages investments. The positive development of the economy is increasing demand also for Huhtamaki packaging. The emerging markets represent approximately 43% of the region's net sales.
Net sales in Flexibles and Rigid Packaging grew in Asia, and developed positively in South Africa. In Oceania - that is, Australia and New Zealand - the sales volume of rigid packaging decreased and growth slowed down.
In order to meet the increasing demand in the emerging markets, we continued implementing capacity expansions. A new flexibles plant was constructed in Rudrapur, Northern India. We also expanded the existing flexibles unit in Vietnam, and began the construction of a new production facility in Guangzhou, Southern China.
We manufacture packaging for the consumers. What are the consumers' expectations?
In the mature markets, for example in Europe and the United States, the familiar trends continued. Light meals and health food, such as drinkable yoghurts, packed salads, fish and seafood products, represented the largest growth categories within consumer packaging last year. Busy people are enjoying meals out more often, and eating breakfast prepared in a restaurant is also becoming a popular habit. Convenience, indulgence and high quality are important for consumers, and environmental awareness has also increased. In the competitive markets, the appearance of the packaging is an ever more important factor when building a brand and promoting sales.
In the growth markets, such as the South-East Asian countries, consumers are quick to adopt Western habits. Fast food restaurant and coffee shop chains are expanding their operations and attracting an ever-wider clientele. In consumer packaging, attractive packaging and single-serve packaging are catching the attention of customers in retail shops.
We are meeting the consumer needs by bringing new products to the market. Here are some of our success stories - products that were launched in 2006 and are capable of achieving considerable production volumes in the near future. Especially worth mentioning is Cyclero, a flexible packaging, and the Chinet Casuals product line made of recycled fiber.
We take sustainable development seriously. We are continuously developing ways to evaluate and improve our performance on the economic, social and environmental dimensions. The ongoing programs aim at reducing the environmental impacts of operations by improving eco-efficiency. In Europe our energy saving programs have produced good results, and for example, one of our occupational safety programs in the United States has reduced the number of safety incidents by 63%.
Our operations have even received external recognition: last year was the fifth time we were included in the Dow Jones Sustainability pan-European Index.
Huhtamaki's operations are based on our common values: we treat our world with respect, we know our business and we like to get it done. We produce packaging solutions that are safe and bring convenience to the consumer's everyday life. Our goal is to be an efficient and innovative packaging company that our customers choose to do business with. To get there we must ensure our competitiveness, grow in attractive areas and product segments, and make the most of the capabilities of a big group.
In order to secure competitiveness, we have launched several change programs. The restructuring program began in 2004. The first phase has been completed, the second phase continued last year and will be completed this year. Furthermore, we have concentrated on operational efficiency. The focus was on getting the other improvement programs up to speed and identifying ways to leverage group synergies. Towards the end of last year the emphasis was shifted to developing attractive growth platforms.
We also updated the Group's long-term financial targets. The target for earnings before interest and taxes is 9%. The return on investment is targeted at 15%. The long-term gearing ratio is targeted at around 100%. The aim is to keep an average dividend payout ratio of 40% of the profit.
As I mentioned earlier, during the year 2006 Huhtamaki proved its willingness and ability to change. However, our targets are even higher: we want to be the forerunner in the packaging industry that customers actively choose to do business with.
This year we will support organic growth by new investments. In Europe we will invest in hot cup production, silicone films production and the production of flexibles used for chocolate wraps. In the new flexibles plant in India production started at the beginning of this year.
We find it very important to concentrate on organic growth and to improve the operational efficiency. Completion of change programs and development of attractive growth platforms are key priorities.
Sales growth and cost savings should balance out the significant reduction in unallocated corporate income, reflecting the expiry of the royalty income relating to the previously divested pharmaceutical business. The volatility of polymer-based raw materials and energy prices may put pressure on margins. The underlying EBIT for 2007 is expected to be around the level of 2006.
I view the outlook for Huhtamaki with confidence. Consumers' habits and needs change, which creates a basis for continuous product innovation. In the emerging markets, growth will continue and the number of consumers will increase considerably. This is all going to create new possibilities for us. I believe this will increase the shareholders' and investors' interest in our company.