2004: A Year of significant changes
The versatility of the Raisio
Group’s business
operations combined with
a weakish balance sheet
structure had given rise to
serious discussions about
Raisio’s strategic
alternatives by the start of
2004. Significant strategic
and structural decisions
were made during the year.
In the past few years, Raisio has invested heavily in its paper chemical business,
among other things, by acquiring latex operations and establishing itself on
the Chinese markets. It had, however, become obvious that Raisio did not have
sufficient resources to further develop its 30-year-old worldwide paper chemistry
business. Raisio chose to build its strategy on more clearly focused business
operations and to develop the Group as a life science-oriented food and feed
company. This meant giving up Raisio Chemicals. The best restructuring
alternative, both for Raisio Chemicals and Raisio Group and its shareholders,
proved to be selling Raisio Chemicals as an entire business unit to an industrial
buyer. The acquisition agreement signed with Ciba Specialty Chemicals made
Raisio Group net debt-free and clearly increased its market value.
Business structure to serve the new strategy
The updated strategy put the focus of Raisio’s business operations on the
development and production of plant-based nutrition, as well as the promotion
of consumer well-being. Raisio also harnessed the Group’s structure to better
serve its new strategy.
The largest business area, Raisio Nutrition, produces food, feed and malt. In
addition to Finland, its domestic markets cover Russia, Poland and the Baltic
countries. Raisio Nutrition’s operations have been enhanced, for example, by
closing down the long-unprofitable grain starch business and withdrawing from
margarine production in Sweden. Strict control of working capital and a
rigorous cost-cutting regime have also contributed to improved efficiency. Raisio Nutrition’s operational result improved by more than EUR 10 million over the
year, while operating profit, excluding one-off items, amounted to EUR 5.6 million.
Approximately one-tenth of the Group’s turnover and a significant share of its
result is generated by Raisio Life Sciences, which produces functional food
ingredients and food diagnostics. Raisio Life Sciences’ business is global in
scope, but Europe still plays the main role. The business area’s annual growth
of more than 50%, largely thanks to the ingredients business, was very pleasing.
Past investments are gradually beginning to pay off as European consumers
have started to show interest in the opportunities offered by functional foods.
Operational results also saw a significant improvement, and operating profit,
excluding one-off-items, totalled EUR 3.3 million (EUR –5.4 million).
A new operational entity, Research and development, reporting directly to the
CEO, was launched in autumn 2004. Integrating our existing skills and
knowledge and investing in new top class individuals and research areas
enables Raisio to renew its product range and strengthen the role as a pioneer
in plant-based nutrition.
The divestment of the chemicals business also required the administration and
service functions to be streamlined. Key service units – finance, human resources,
legal affairs and communications – were made into Group-level operations
and streamlined to better correspond to the Group’s needs. Despite the ongoing
cost-cutting programmes, the increasing R&D input and slightly higher administrative
costs, in relative terms, will burden Raisio’s operating result by some EUR 3
million in the future.
Future in well-being
In accordance with our mission, we develop advanced solutions for nutrition that creates well-being.
Raisio has all the tools to promote consumer well-being. Plant-based raw materials – grain, oil plants
and potato – provide a good basis for developing and producing healthy, easy and tasty foods and
food ingredients true to the spirit of our time. These raw materials enable Raisio to develop valueadded
products that promote heart health, weight management and the well-being of the intestines.
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Raisio’s goal is to raise the share of value-added products from approximately one fourth, as is
currently the case, to half of the product portfolio. New products are being developed both for the
breakfast table and snacks, as well as to facilitate cooking. The move towards increasing the share
of fresh products calls for investments in product development, as well as in production technology
and packaging.
Safe and high-quality feeds that ensure the quality of farm animal production also promote the wellbeing
of consumers. Advanced product development, efficiency and continuous quality control play
a key role in the further development of the feed business.
Confidence in the safety of food has been shaken in many countries. Raisio’s profound expertise in
the entire food chain, from raw material procurement through the production process to store shelves,
supports our efforts to develop food diagnostics. Our focus in 2004 was on strengthening the
foundation of our diagnostics business, and we created prerequisites for the development of rapid
testing methods. Facing good growth prospects, this business will contribute to ensuring the quality
of production of Raisio’s industrial customers and consequently the safety of food enjoyed by consumers.
Added value to shareholders
The new strategy also led to Raisio’s financial objectives being updated. The goal for profitability
remains at a 12-per-cent return on capital invested in business operations. The”excess” capital will
be used for business development, carefully selected acquisitions in line with the Group’s strategy
and for increasing shareholder return. I consider debt-freeness to be a “positive problem” at this point!
In addition to the extra dividend of 12 cents paid in October, Raisio’s Board of Directors proposes
an extra dividend of 18 cents at the Annual General Meeting in spring 2005. This means that EUR
50 million of the sales profit from Raisio Chemicals will be distributed to shareholders.
In accordance with our dividend policy, a EUR 0.03 per-share dividend based on the result of
ongoing business will also be proposed at the Annual General Meeting. Authorisation for the
repurchase of our shares will also be sought.
Responsible progress
Raisio’s basic objectives – profitability, customer satisfaction and well-being – are supported by our
values: expertise, responsibility and open co-operation. Raisio employs numerous top professionals
and it will keep investing in the development of their competence. I was pleased to note that the
work atmosphere survey conducted last autumn indicated that expertise, as well as the opportunities
to develop it, were widely considered to be at a high level.
Responsible operations are also characteristic of Raisio and its employees. Our mission, which aims
to offer well-being to our customers and generate profit to our shareholders, obliges us to engage
in responsible operations, paying attention to financial, environmental and social aspects.
Raisio’s third value, open co-operation, emphasises the importance of working together both within
the company and with our interest groups. Increased synergies of our businesses offer excellent
opportunities for this. I believe that the Finnish food industry should further develop internal co-operation
and create more extensive networks to succeed in the increasingly stiffer competition.
Our work to renew Raisio has started. I am convinced that we can produce well-being to our
customers, shareholders, personnel and other interest groups in the future, and would like to take this
opportunity to thank all of Raisio’s employees for the good work done amid all of the changes in
2004.
Rabbe Klemets
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In Finnish
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