MARIMEKKO CORPORATION’S INTERIM REPORT, 1 JANUARY - 30 JUNE 2012

Marimekko Corporation, Interim Report, 14 August 2012 at 8.30 a.m.

During the January-June period of 2012, the Marimekko Group’s net sales grew by 13 percent and international sales by 28 percent. Operating result was low, as expected, due to seasonality, structural changes and increased costs related to the expansion of business operations. Net sales and operating profit forecasts for the full year 2012 remain unchanged.

January to June

• Net sales grew by 13.1% to EUR 38.5 million (34.0).
  • International sales grew by 28.1% to EUR 16.0 million (12.5). Strong growth in the Asia-Pacific region continued and sales rose by 35.7%. Growth in North America amounted to 60.9%.
  • Sales in Finland rose by 4.4% with strong growth in retailing, reaching EUR 22.5 million (21.6).
• Operating result was EUR -1.5 million (-0.4). A drag on earnings was exerted by a decrease in wholesale sales in Finland, North America and Scandinavia, increased costs of the Helsinki head office and the country organizations in the United States and Sweden, and a rise in depreciation.
• Cash flow from operating activities was EUR -0.5 million (-2.3).
• Investments were EUR 3.9 million (3.2).
• Brand sales* grew by 4.2%, reaching EUR 83.2 million (79.8).

April to June

• Net sales grew by 17.2% to EUR 19.7 million (16.8).
• Operating result was EUR -0.5 million (-0.8).
• Cash flow from operating activities was EUR 2.0 million (-0.4).

Market outlook and growth targets
The new stores opened during 2011 will, together with other significant investments in the expansion of the distribution network, generate a substantial increase in sales in 2012. In addition, the company aims to open between 10 and 20 new stores during this year, about half of which would be owned by Marimekko. Four stores were opened in the first half of the year; the number of openings scheduled for the second half of the year has currently been confirmed as 14. This total of 18 new Marimekko stores is divided as follows: 11 company-owned stores, four retailer-owned stores and three shop-in-shops.

The planned total investments for 2012 of the Marimekko Group are estimated as being in excess of EUR 6 million. The majority of investments will be directed at building new store premises and purchasing new furniture.

Financial guidance
The forecast for the whole of 2012 remains unchanged: the Marimekko Group's net sales are estimated to grow by over 10% and operating profit is forecast to at least double. The increased share of retail sales adds to the seasonality of the business, and thus the operating profit will be generated entirely in the second half of the year.

Key indicators

* Estimated sales of Marimekko products at consumer prices. Brand sales are calculated by adding together the company’s own retail sales and the estimated retail value of Marimekko products sold by other retailers. The estimate, based on Marimekko’s actual wholesale sales to these retailers, is unofficial and does not include VAT. This key figure is not audited.

** Includes the company’s own retail stores, retailer-owned Marimekko stores and shop-in-shops with an area exceeding 30 sqm. The company’s own retail stores numbered 40 (28). Information on changes is available in the section Internationalization and changes in the store network.

Mika Ihamuotila, President and CEO:

“I am pleased that our recent efforts are now showing up in the form of strong growth in net sales even in the current, challenging state of the market. Our internationalization has also proceeded rapidly. For the first time in the company’s history, the majority of brand sales of our products were generated outside Finland. The strategic decision we made the year before last to invest more in opening new, company-owned stores appears to have been correct. Similarly, our decision to be cautious in Central Europe and especially in Southern Europe and instead to devote effort to growth in East Asia and the United States in particular has also proved correct. Our growth in net sales in these regions was very robust in the first half of the year; sales in the Asia-Pacific region rose by 35.7% and in North America by 60.9%. The challenging state of the economy has also made itself felt in the form of cautious purchasing behavior among consumers in Scandinavia. However, we have unwaveringly expanded our network of stores and we can already see that this is bearing fruit. During the period under review, we opened two company-owned stores in Sweden.

“Our operating result was, as expected, in the red during the first half of the year. Our net sales were seasonally low in relation to operating expenses, as profits from retail sales operations are generated predominantly in the last quarter of the year. Since a larger share of our net sales is generated by retail sales, this trend is likely to continue in the future. The second-quarter operating result and particularly the cash flow from operating activities were better than last year. I am also pleased that we were able in the second quarter simultaneously to reduce our stocks and to improve the sales margins of both wholesale and the company-owned stores.

“The Hong Kong store opened in May has been given an excellent reception and this encourages us to continue our investments in growth in the Asia-Pacific region. Our stores in the United States have also performed so well that we are continuing to expand our network of company-owned stores in this market, which is strategically important for us. Last week we opened a company-owned store in Boston and we will also open new ones later this year in Beverly Hills (L.A.) and Palo Alto in the heart of Silicon Valley. Our new products have been enthusiastically received internationally, and we will launch more new products and categories in the near future."

Financial calendar 2012
The interim report for January-September will be issued on Tuesday, 30 October 2012, at 8.30 a.m.

Further information:
Mika Ihamuotila, President and CEO, tel. +358 9 758 71
Thomas Ekström, Chief Financial Officer, tel. +358 9 758 7261

MARIMEKKO CORPORATION
Corporate Communications

Piia Kumpulainen
Tel. +358 9 758 7293
piia.kumpulainen@marimekko.fi

Distribution:
NASDAQ OMX Helsinki Ltd
Key media

Marimekko is a Finnish textile and clothing design company renowned for its original prints and colors. The company designs and manufactures high-quality interior decoration items ranging from furnishing fabrics to tableware as well as clothing, bags and other accessories. When Marimekko was founded in 1951, its unparalleled printed fabrics gave it a strong and unique identity. Marimekko products are sold in approximately 40 countries. In 2011, brand sales of Marimekko products worldwide amounted to approximately EUR 170 million and the company's net sales were EUR 77 million. The number of Marimekko stores totaled 90 at the year end. The key markets are North America, Northern Europe and the Asia-Pacific region. The Group employs around 500 people. The company’s share is quoted on NASDAQ OMX Helsinki Ltd. www.marimekko.com.

MARIMEKKO CORPORATION‘S INTERIM REPORT, 1 January - 30 June 2012

MARKET SITUATION

The overall uncertainty about the global economy continues, and this may impact consumers' purchasing behavior in all markets. Forecasts of world economic growth have held fairly steady, but the risks have increased. The world economy is forecast to grow, driven by the developing markets, although China’s economic trend has flagged somewhat. The economic forecasts for the U.S. are better than in Europe, but growth is fairly slow. EU states’ severe loan crisis is still continuing and even worsened during the early summer. Europe is thus stuck in recession and the debt crisis is still the main threat which could turn the global economic trend in a distinctly worse direction. In Finland, the situation is moderate, although prospects have deteriorated to some extent. At best, very slow growth is forecast for the rest of the year. All in all, the outlook is fragmented and no end to the uncertainty can be seen (Confederation of Finnish Industries EK: Business Tendency Survey, 8 August 2012).

The current business conditions for retail trade are slightly worse than usual. From January to June, retail sales in Finland grew by 2.1% (Statistics Finland: Turnover of Trade 2012, advance figures, June). In the January-May period of 2012, clothing retail sales (excluding sportswear) rose by 3.4% (Textile and Fashion Industries TMA). Sales of women’s clothing grew by 2.3%, menswear by 4.6% and children’s clothing by 5.3%. Sales of bags were up by 3.0%. According to advance figures from customs, Finland’s balance of trade in June was in surplus for the first time in almost a year. From January to May 2012, clothing (SITC 84) exports grew by 8% and imports declined by 3%; textile (SITC 65) exports were on a par with last year and imports grew by 1% (National Board of Customs, monthly review, May 2012).

INTERNATIONALIZATION AND CHANGES IN THE STORE NETWORK

On the basis of positive feedback in Northern Europe and the United States, Marimekko is investing more than before in the expansion of its network of company-owned stores. This will change the ratio of wholesale to retail sales somewhat, and it will tie up more of the company’s capital and resources.

In February, Marimekko reported it was expanding its operations in all its main market areas and aiming to open 10 to 20 new stores this year. In the second quarter of the year, three stores were opened: company-owned stores in Stockholm and Gothenburg, and a retailer-owned store in Hong Kong.

Since the end of the period, a company-owned store has been opened in Boston. Two more new company-owned stores will also be opened this year in the United States: one in the Stanford Shopping Center in Palo Alto in September-October, and one on Canon Drive in Beverly Hills toward the end of the year. Marimekko is also expanding its distribution in Canada; it has signed a partnership contract with the modern furniture company EQ3 with the aim of opening 10 Marimekko shop-in-shops by the end of 2014. The first of these will open in September in Toronto.

Of the remaining openings planned for the second half of the year, 10 have so far been confirmed. Five of these will be company-owned retail stores, three retailer-owned Marimekko stores and two shop-in-shops. In addition, some store premises are still under negotiation.

NET SALES

January to June
In the January-June period of 2012, the Marimekko Group’s net sales, fuelled by growth in international sales, were up by 13.1% to EUR 38,509 thousand (34,049). Net sales in Finland grew by 4.4% and international sales by 28.1%.

April to June
In the April-June period of 2012, the Group’s net sales grew by 17.2% to EUR 19,701 thousand (16,815), driven by international sales. Net sales in Finland rose by 10.1% and international sales by 31.0%.

NET SALES BY MARKET AREA

* Due to adjustments made in internal sales reporting structures, the previously reported sales figures by market area have changed.

Finland
In the January-June period of 2012, sales in Finland rose by 4.4% to EUR 22,511 thousand. Retail sales were up by 20.7%. Sales were boosted by the three stores opened in the last quarter of 2011 as well as one new store opened during the first quarter of this year. The comparable growth in sales by company-owned stores was 9.9%. Wholesale sales fell by 13.4%. This was partly due to changes effected in the distribution network in accordance with the company’s distribution strategy and differences in the timing of deliveries compared to the same period last year.

Scandinavia
Sales in Scandinavia grew by 11.6% to EUR 3,727 thousand. Retail sales were up by 62.9%. Three stores opened in 2011 boosted retail sales. Sales were also stimulated by two stores opened in Sweden in the second quarter of this year. The comparable trend in sales by company-owned stores was -12.9%. Wholesale sales fell by 6.3%. Consumers’ purchasing behavior continued to be cautious in all countries and especially in Sweden. A small improvement was in sight, as the Swedish fashion market bottomed out in March after a weak trend lasting for a year.

Central and Southern Europe
In Central and Southern Europe, net sales rose to EUR 3,741 thousand, up by 17.8% on the previous year. Retail sales grew by 8.9%, which was attributable to sales by the small company-owned store opened in London near the end of 2011. The comparable growth in sales by company-owned stores was 1.4%. Wholesale sales were up by 20.7%. Sales were particularly brisk in Belgium and Germany. The weak economic situation in Italy impacted consumer demand and sales took a downturn.

North America
Net sales in North America grew by 60.9% to EUR 2,720 thousand. Measured in the invoicing currency (mostly the US dollar), growth was roughly 48%. A major share of the growth was generated by the net sales of the flagship store in New York. Wholesale sales were below expectations and declined by 13.2%.

Asia-Pacific
By far the most positive trend among all of Marimekko’s market areas was recorded in the Asia-Pacific region. The strong trend in sales seen last year continued into the first half of this year. Sales grew by 35.7% to EUR 5,810 thousand. Sales were above expectations in all countries. A clear majority of the growth came from Japan. Sales were also boosted by a new store in Hong Kong which opened in the second quarter. Efforts deployed in Australia showed results, and sales there also grew. Strong growth in sales fuels confidence in growing interest in the company’s products in this market area.

FINANCIAL RESULT

January to June
The Group’s financial result for the first half of the year is typically weak as a consequence of seasonally low net sales in relation to operating expenses, and especially profits from retail sales operations are generated predominantly in the last quarter of the year. This was emphasized during the review period as the share of retail sales in net sales was larger than before. In the January-June period of 2012, the Group’s operating result was EUR -1,480 thousand (-438). A decline in wholesale sales in Finland, North America and Scandinavia also had a negative impact on the result. The fall in wholesale sales in Finland was partly due to changes made in the distribution network and differences in the timing of deliveries compared to the same period last year. In addition, the result was burdened by the increased costs of the country organizations in the United States and Sweden and the service organization at the Helsinki head office. On the other hand, profitability was boosted by an improvement in sales margins.

Marketing expenses during the period were EUR 1,998 thousand (2,543), or 5.2% (7.5) of the Group’s net sales.

As a result of considerable investments, the Group’s depreciation grew to EUR 1,599 thousand (916), which represented 4.2% (2.7) of net sales.

The operating result margin decreased to -3.8% (-1.3).

Net financial income was EUR 5 thousand (net financial expenses 17), or 0.01% (0.1) of net sales.

Result for the review period before taxes was EUR -1,475 thousand (-455). Result after taxes was EUR -1,034 thousand (-308) and earnings per share were EUR -0.13 (-0.04).

April to June
In the April-June period of 2012, the Group’s operating result was EUR -545 thousand (-798). Operating result was improved by a 17 percent increase in net sales which was mainly due to growth in comparable sales by company-owned stores. Net sales were also boosted by new store opening. In addition, sales margins increased markedly. On the other hand, profitability was eroded by higher costs of the country organizations in the United States and Sweden as well as those of the service organization at the Helsinki head office.

BALANCE SHEET

The consolidated balance sheet at 30 June 2012 amounted to EUR 54,687 thousand (41,641). Total equity attributable to the equity holders of the parent company was EUR 27,176 thousand (29,579), or EUR 3.38 per share (3.68).

Non-current assets were EUR 23,316 thousand (12,598 on 30 June 2011; 17,418 on 31 December 2011). As of March 2012, tangible assets include the present value of future lease payments for the new 30-year land lease on the property of the Helsinki head office and printing factory. The present value of the future lease payments is EUR 3,460 thousand.

Net working capital at the end of the period totaled EUR 19,821 thousand, which was EUR 1,984 thousand more than a year previously and EUR 607 thousand more than at the end of 2011. Inventories were EUR 20,783 thousand, which was EUR 826 thousand more than a year previously but EUR 565 less than at the end of 2011.

CASH FLOW AND FINANCING

In the January-June period of 2012, cash flow from operating activities was EUR -530 thousand (-2,297), representing EUR -0.07 per share (-0.29). Cash flow before financing activities was EUR -4,420 thousand (-5,449).

In the April-June period of 2012, cash flow from operating activities was EUR 1,988 thousand (-361), representing EUR 0.25 per share (-0.04). Cash flow before financing activities was EUR 317 thousand (-1,913).

The Group’s financial liabilities were EUR 17,141 thousand at the end of the reporting period, compared to EUR 2,391 a year ago and EUR 4,944 thousand at the end of 2011. As of the end of March, financial liabilities include the present value of future lease payments for the new 30-year land lease on the property of the Helsinki head office and printing factory. The present value of the future lease payments is EUR 3,460 thousand.

Cash and cash equivalents were EUR 1,548 thousand at the end of the period under review (2,187 on 30 June 2011; 1,620 on 31 December 2011). Additionally, the Group had unused committed credit lines amounting to EUR 6,286 thousand (4,609).

The Group’s equity ratio was 49.7% at the end of the period (71.1 on 30 June 2011; 67.2 on 31 December 2011). Gearing was 57.1%, while it was 0.7% at the end of the corresponding period of the previous year.

INVESTMENTS

The Group’s gross investments amounted to EUR 3,890 thousand (3,152), representing 10.1% (9.3) of net sales. Most of the investments were devoted to building new stores and renovating the Herttoniemi property.

PERSONNEL

In the January-June period of 2012, the number of employees averaged 475 (392). At the end of the period, the Group had 493 (385) employees, of whom 75 (27) worked outside Finland. The breakdown of the number of employees working abroad by market area was as follows: Scandinavia 26 (14), Central and Southern Europe 12 (12), North America 35 (1) and Asia-Pacific 2 (0). The personnel of the company’s own stores numbered 203 (114) at the end of the period.

DECISIONS OF THE ANNUAL GENERAL MEETING

The decisions of Marimekko Corporation’s Annual General Meeting were declared in a stock exchange release on 17 April 2012 and in the interim report of 9 May 2012.

SHARES AND SHAREHOLDERS

Share capital
At the end of the review period, the company's fully paid-up share capital, as recorded in the Trade Register, amounted to EUR 8,040,000 and the number of shares totaled 8,040,000.

Shareholdings
According to the book-entry register, Marimekko had 6,979 (6,900) shareholders at the end of the period. Of the shares, 11.9% (13.4) were registered in a nominee’s name and 15.9% (15.9) were in foreign ownership. The number of shares owned either directly or indirectly by members of the Board of Directors and the President of the company was 1,168,930 (1,150,930), representing 14.5% (14.3) of the total share capital and of the votes conferred by the company’s shares.

The largest shareholders according to the book-entry register on 30 June 2012

Share trading and the company’s market capitalization
During the period, a total of 544,467 Marimekko shares were traded, representing 6.8% of the shares outstanding. The total value of Marimekko’s share turnover was EUR 7,038,897. The lowest price of the Marimekko share was EUR 9.92, the highest was EUR 14.33 and the average price was EUR 13.01. At the end of the period, the closing price of the share was EUR 12.90. The company’s market capitalization on 30 June 2012 was EUR 103,716,000 (104,520,000 on 30 June 2011; 79,435,200 on 31 December 2011).

Flaggings
SEB Asset Management S.A.’s share of Marimekko Corporation’s share capital and voting rights declined to 1.64%, or 132,152 shares, due to a stock loan on 11 April 2012 and rose to 6.00%, or 482,752 shares, on the maturity date of the stock loan on 22 May 2012.

Authorizations
The Annual General Meeting of 17 April 2012 authorized the Board of Directors to decide on a directed offering of shares to the personnel, in deviation from the shareholders’ pre-emptive right, in one or more offerings. The total number of new shares to be offered for subscription pursuant to the authorization may not exceed 150,000 shares, representing approximately 1.9% of the total number of the company’s shares. The authorization includes the right of the Board of Directors to decide on all the other terms of the share issue. The authorization is in effect for two years from the date of the Annual General Meeting’s decision.

At the end of the period, the Board of Directors had no other valid authorizations to carry out share issues or issue convertible bonds or bonds with warrants, or to acquire or surrender Marimekko shares.

Personnel share offering
Marimekko Corporation’s Board of Directors decided on 25 April 2012 to arrange a share issue in which new shares in the company are offered for subscription to the personnel and to designers employed by the company on a freelance basis. The personnel share offering is reported in more detail in the stock exchange release of 26 April 2012 and in the interim report of 9 May 2012.

EVENTS AFTER THE CLOSE OF THE REVIEW PERIOD

Changes in management
Marimekko’s Marketing Director and member of the Management Group Malin Groop is to resign from the company as of 15 August 2012 and will serve the company as a consultant for strategic projects related to brand development. Tiina Alahuhta-Kasko, who served as Acting Marketing Director during Groop’s maternity leave, has been appointed as the Group’s Marketing Director and member of the Management Group as from 15 August 2012. Alahuhta-Kasko has been in the company’s employ since 2005.

MAJOR RISKS AND FACTORS OF UNCERTAINTY

The key strategic risks are associated with overall economic trends and the consequent uncertainty in the operating environment as well as the management of expansion. Factors of uncertainty and trends in the world economy affect consumers’ purchasing behavior and buying power in all of the company’s market areas. The severe problems of the international financial markets dampen the prospects for retail sales as well as Marimekko’s growth and earnings outlook. Consumers’ purchasing behavior has been cautious, especially in Scandinavia.

Marimekko is undergoing a phase of extensive internationalization and change. The distribution of products is being expanded in all key market areas, particularly North America and the Asia-Pacific region. Unlike before, the focus of growth lies increasingly in opening company-owned stores outside Finland. This calls for larger or brand-new country organizations in these market areas, which will exert a substantial drag on the cost-effectiveness of the company, especially in the early stages of expansion. Moreover, expanding the network of company-owned stores will increase the company’s investments, lease liabilities of store premises, and inventories. It follows from this that a larger portion of Group net sales will come from sales by the company’s own retail stores, which will add to the seasonality of the business and shift the bulk of net sales and profit accumulation to the last quarter, thus having a negative impact on profitability in the first half of the year. Furthermore, growth through partnerships in some of the company’s key market areas also includes risks related to long-term partnership commitments and the selection of partners.

The company’s ability to develop and commercialize new products that meet consumers’ expectations whilst maintaining profitable and effective in-house production has an impact on the company’s sales and profitability.

The company’s key operational risks prominently include those related to the management of expansion projects, the operational reliability of procurement and logistics processes, and changes in cost of raw materials and other procurement items. As a result of introducing new products, the share of in-house production has diminished, and Marimekko uses subcontractors to an increasing extent. Therefore, the company’s dependence on the supply chain has increased. Any delays or disturbances in supply or fluctuations in the quality of products may have a temporary harmful impact on business. As the operations are being expanded and diversified, risks related to the management of inventories also increase.

Among the company’s economic risks, those related to the structure of sales, increased investments, price trends for factors of production, customers’ liquidity, and changes in exchange rates may have an impact on the company’s financial status.

MARKET OUTLOOK AND GROWTH TARGETS

The negative effects of the structural problems of the international financial markets on general economic trends continue to dampen the outlook for retail sales and make it difficult to predict consumers’ purchasing behavior in different market areas.

The new stores opened during 2011 will, together with other significant investments in the expansion of the distribution network, generate a substantial increase in sales in 2012. In addition, the company aims to open between 10 and 20 new stores during this year, about half of which would be owned by Marimekko. Four stores were opened in the first half of the year; the number of openings scheduled for the second half of the year has currently been confirmed as 14. This total of 18 new Marimekko stores is divided as follows: 11 company-owned stores, four retailer-owned stores and three shop-in-shops.

The planned total investments for 2012 of the Marimekko Group are estimated as being in excess of EUR 6 million. The majority of investments will be directed at building new store premises and purchasing new furniture.

FINANCIAL GUIDANCE

The forecast for the whole of 2012 remains unchanged: the Marimekko Group's net sales are estimated to grow by over 10% and operating profit is forecast to at least double. The increased share of retail sales adds to the seasonality of the business, and thus the operating profit will be generated entirely in the second half of the year.

Helsinki, 14 August 2012

MARIMEKKO CORPORATION
Board of Directors

Information presented in the interim report has not been audited.


APPENDICES
Accounting principles
Formulas for the key figures
Consolidated income statement and comprehensive consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in shareholders' equity
Key figures
Segment information
Quarterly trend in net sales by market area
Net sales by product line
Quarterly trend in net sales and earnings

ACCOUNTING PRINCIPLES
This interim report was prepared in accordance with IAS 34: Interim Financial Reporting. The same accounting principles were applied as in the 2011 financial statements.

FORMULAS FOR THE KEY FIGURES

Earnings per share (EPS), EUR:
(Profit before taxes - income taxes) / Number of shares (average for the financial period)

Equity per share, EUR:
Shareholders’ equity / Number of shares, 30 June

Return on equity (ROE), %:
(Profit before taxes - income taxes) X 100 / Shareholders’ equity (average for the financial period)

Return on investment (ROI), %:
(Profit before taxes + interest and other financial expenses) X 100 / (Balance sheet total - non-interest-bearing liabilities (average for the financial period))

Equity ratio, %:
Shareholders’ equity X 100 / (Balance sheet total - advances received)

Gearing, %:
Interest-bearing net debt X 100 / Shareholders’ equity

Net working capital:
Inventories + trade and other receivables + current tax assets - trade and other payables

CONSOLIDATED INCOME STATEMENT

COMPREHENSIVE CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

The Group has no liabilities resulting from derivative contracts, and there are no outstanding guarantees or any other contingent liabilities which have been granted on behalf of the management of the company or its shareholders.

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

KEY FIGURES

SEGMENT INFORMATION

QUARTERLY TREND IN NET SALES BY MARKET AREA

* Due to adjustments made in internal sales reporting structures, the previously reported sales figures by market area have changed.

NET SALES BY PRODUCT LINE

* Due to adjustments made in internal sales reporting structures, the previously reported sales figures by product line have changed.

QUARTERLY TREND IN NET SALES AND EARNINGS