Patria’s Financial Review for 2011 – preliminary data

The details provided here are preliminary only. The Patria Board of Directors will confirm the details on 23 March 2012.

Key figures     

As expected, 2011 was a strong year for Patria. The orders confirmed in late 2010 laid the foundations for a significant improvement in results. Balance sheet figures remained at a good level, and the performance targets for 2011 were almost completely achieved – net sales growth did not reach the planned level. Strong order stock creates a foundation for continued improvement of performance in 2012.

New orders and order stock in 2011

The value of new orders received during the 2011 financial year was EUR 456.3 million (EUR 1,017.6 million in 2010). Defence material and maintenance accounted for 86% (91%) and civilian products for 14% (9%) of the new orders. At the end of December, the value of new orders received by the Group was EUR 1,626.5 million (EUR 1,787.2 million).

The positive development of operations was influenced by various factors, including the production launch of 113 Patria AMV armoured wheeled vehicles to be delivered to Sweden, the contract for manufacturing AMOS mortar system vehicles for the Finnish Defence Forces, the smooth progress of the upgrade project for the Finnish Navy’s Rauma class fast attack crafts, and the sale of Patria Nemo mortar systems in connection with the United States Foreign Military Sales (FMS) project, for which the government granted an export licence in late 2011.

Other significant events in 2011 included the delivery of the first Hawk Mk 66 jet trainers to the Finnish Air Force, and the Finnish Defence Forces’ order for the ballistic protection for NH90 helicopters.

Net sales and profitability

Patria Group’s net sales for 2011 totalled EUR 618.4 million (EUR 564.3 million in 2010 and EUR 539.5 million in 2009), up by 9.6%. Defence material and maintenance accounted for 90% (88%) and civilian products for 10% (12%) of net sales. Sales outside Finland accounted for 63% (63%) of net sales.

The Group’s operating profit for January–December was EUR 60.3 million, representing 9.7% of net sales (EUR 10.5 million, 1.9%). Consolidated income before taxes amounted to EUR 57.6 million (EUR 7.2 million), and the Group’s return on equity was 17.7% (1.7%).

The Group results were heavily impacted by Patria’s subsidiary Millog and Nammo, a company owned by Patria and the Norwegian state with shares of 50% each. Millog provides life cycle support for the Finnish Defence Forces army material in various areas, including electronics, weapons and weapon systems, vehicles, and material supplies. Millog continued its strong development during its third year of business operations. In late 2011, M&A arrangements were agreed on for Millog to acquire the joint company formed by Oricopa Oy and the defence system integration services of Insta DefSec Oy. Millog’s operations are expected to continue to grow in 2012 as a result of the M&A measures.

Nammo Group develops and manufactures high-technology ammunition equipment and rocket engines for missiles, including life cycle support in the offerings. Nammo is a strong player in the international markets, and approximately 70% of its net sales are derived from outside the Nordic countries. In 2011, Nammo’s net sales totalled about EUR 407 million (about EUR 430 million), and its profitability was good. Nammo's results are based on a wide range of products, technology and expertise.

The investigations and trials concerning export projects in Egypt and Slovenia advanced in 2011. The bribery charges related to the Egyptian export project were dismissed in the district court; however, the proceedings will continue once the matter is presented to the Court of Appeal. As regards Slovenia, the preliminary investigation was completed by the end of last year, at which time the final statements of the relevant parties were submitted to the authorities. These processes can be lengthy, and will probably continue in the background for many years to come.

Outlook

Patria continues its stable operations in 2012 on account of orders secured in previous years. At the same time, the future diminishing of the domestic market and the defence force reform planned for the coming years may lead to adaptation measures within Patria’s domestic operations.

‘Our goal is to strengthen the production of life cycle services, especially in the Nordic countries. I believe that through enhanced operations and flexible approaches we are able to produce competitive and reliable life cycle support services for the defence, security and aviation sectors, as well as innovative technology solutions in the future', says Heikki Allonen, President and CEO.

The weakened world economic situation can be observed in Patria only in the longer term. Defence industry acquisitions are lengthy processes, and their impact extends over many years. Defence industry operations and competition are considerably affected by the EU Directive on defence procurement, entered into force in August 2011, which will open up the European markets to competition. The significance of countertrades, which had become standard practice in the industry, will diminish. 

‘We are waiting for projects suited to our line of export products to be launched in certain international markets that are important for us, mainly outside of Europe.

From the viewpoint of international project and export activities, it is important for Patria to be able to enter the competition with the same starting point as our European competitors in particular. Procedures related to export licences are essential for evaluating this starting point. For us, it is vital that those procedures are harmonised not only at the European level, but also from a wider perspective', Allonen stresses.

The Annual Review for 2011 is available on Patria’s website www.patria.fi starting from week 15.

For further information, please contact:

Birgitta Selonen, Vice President, Corporate Communications, tel. +358 40 869 2043, [email protected]

Patria is a trusted provider of defence, security and aviation life cycle support services and technology solutions. Patria is owned by the State of Finland (73.2%) and the European Aeronautic Defence and Space Company (EADS N.V.) (26.8%).