Profitability of big business on the good performance level of 1994

The profitability of large industrial enterprises declined last year compared to the peak year of 1995, but was still on a par with the good performance of 1994. The decline was attributable to lower prices and reduced deliveries in the forest industry as well as to increased costs in the metal industry. The results for 1996 were, however, sufficient to cover debt instalments, giving improved equity ratios for companies. This appears from Statistics Finland's Financial Statements Statistics of Large Industrial Enterprises.

The turnover of large industrial enterprises amounted to FIM 261 billion in 1996, which is close on 3 billion more than the year before. The operating margin amounted to FIM 28.4 billion after deduction of ordinary operating expenses. The margin declined by FIM 6.5 billion on the previous year, reaching the same level as in 1994. The turnover and operating margins of large companies in the forest industry fell by over 6 billion on the year before. The margin in this sector remained a few billion lower than in 1994. Turnover in the metal industry improved by about 12 per cent. However, the positive development in turnover was drained into the rise in costs, providing large companies in this sector a margin of only a couple of hundred million more than the year before.

With net financial expenses remaining at the same level as the year before, the poor development in turnover and the increase in costs were reflected as such in the financial and net results of large industrial enterprises. The overall result, i.e. the result after extraordinary items exceeded the net result due to profits on the sale of fixed assets. Net profit for the accounting period amounted to FIM 12.7 billion and it was decided that 6.6 billion be paid in dividends.

The exports of large companies amounted to FIM 146 billion, which is 6.4 per cent more than in 1995. The exports of companies in the metal industry rose by almost 14 per cent, whereas those of forest industry companies fell by 7 per cent. Exports accounted for 73.6 per cent of the turnover of all metal industry companies and for 70.3 of the turnover of all forest industry companies.

The balance sheets of large companies have become much healthier in the past few years. Good performances have enabled companies to reduce gearing, raising the equity ratio by 17 percentage points on the record low year of 1992. Last year's equity ratio, i.e. the proportion of shareholders' equity of the balance sheet total amounted to 47.8 per cent. This is an improvement of one percentage point on the previous year.

The proportion of net liabilities in the turnover was down by 3 percentage points compared to the year before, to 26.1 per cent, falling in all industries except the forest industry. With a financial result equivalent to that of 1996 large companies would be able to clear their interest-bearing debts in about six years, the same as in 1994.

Large companies invested FIM 13.5 billion in tangible assets, i.e. 5.2 per cent of their turnover. The financial result was one and a half times greater than all investments. Over half of the investments made by large companies took place in the forest industry.

Large companies employed a total of 200 000 people on average last year, which is about 3 000 more than a year earlier.

Profitability of large construction companies improved

The construction business was more profitable last year than the year before. The operating margin of large construction companies amounted to FIM 710 million, representing nearly 5 per cent of their turnover. The net result was 260 million, almost 2 per cent of turnover. It was decided that FIM 80 million of the 1996 profits were paid in dividends, which was 30 million more in dividends than those paid out on the profits of the previous accounting period.

The turnover of large construction companies amounted to FIM 15 billion last year. Although the construction industry is gradually recovering, the turnover figures of large companies have not improved much in the past few years. At the same time the number of employees grew by 3 000, amounting to 17 000 last year.

The shareholders' equity of large companies totalled FIM 5 billion last year. The proportion of the balance sheet total was 38 per cent, 10 percentage points more than the year before. The equity ratio rose largely due to the increase in the share of capital loans, which amounted to one fifth of shareholders' equity.

Total liabilities amounted to FIM 8 billion. The proportion of liabilities of the turnover declined by 10 percentage points, down to 53 per cent. Interest-bearing debts amounted to FIM 5 billion, i.e. 34 per cent of the turnover.

The Financial Statements Statistics of Large Industrial Enterprises in 1996 comprises data on the financial statements of 227 large industrial enterprises and 43 large construction companies. The statistics describe enterprises and do not provide data on business groups. Major mergers and spin-offs have been taken into account. The turnover of large industrial enterprises accounted for 67 per cent of the turnover in the whole of industry and that of large construction companies for one third of the turnover in the whole of the construction sector.

Large industrial enterprises, adjusted profit and loss account and other key items in 1995-6

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	1995	1996	Change	Change
			1995-96	1995-96
	FIM mill.	FIM mill.	FIM mill.	%
Net sales	258 103.7	260 895.5	2 791.8	1.1
Materials and supplies	-139 141.3	-145 437.6	6 296.3	4.5
Wages, salaries and other social exp.	-39 508.3	-40 376.9	868.6	2.2
Other expenses	-44 571.5	-46 706.1	2 134.6	4.8
Operating margin	34 882.6	28 375.0	-6 507.7	-18.7
Dividend income	3 139.2	4 433.4	1 294.2	41.2
Interest income	7 031.4	6 181.7	-849.7	-12.1
Interest expenses	-12 297.4	-10 825.6	-1 471.8	-12.0
Exchange rate differences	718.4	-1 047.2	-1 765.6	. .
Other financial income and expenses	-70.7	-164.7	94.0	. .
Direct taxes/tax refunds	-3 594.5	-4 224.5	629.9	17.5
Financial result	29 809.0	22 728.0	-7 081.0	-23.8
Depreciation	-11 371.2	-12 478.7	1 107.5	. .
Net result	18 437.8	10 249.3	-8 188.5	-44.4
Other operating income	4 022.5	4 480.7	458.2	11.4
Depreciation on long-term investments	-1 401.8	-1 797.6	395.8	. .
Group contributions received	15 315.9	12 469.2	-2 846.7	-18.6
Group contributions paid	-15 739.4	-12 963.4	-2 776.1	-17.6
Other extraordinary income and expenses	-2 493.8	2 077.9	4 571.7	-183.3
Total result	18 141.2	14 516.1	-3 625.1	-20.0
Increase (-) /decrease (+) in depreciation	-5 741.8	-4 393.0	-1 348.8	. .
Change in voluntary reserves, total	1 549.3	2 579.3	1 030.0	. .
Adjusted taxes	0.1
Profit/loss for the accounting period	13 948.8	12 702.5	-1 246.4	-8.9
Key indicators:
Operating margin, per cent of turnover	13.5	10.9	. .	. .
Financial result, per cent of turnover	11.5	8.7	. .	. .
Net result, per cent of turnover	7.1	3.9	. .	. .
Total result, per cent of turnover	7.0	5.6	. .	. .
Return on investment	11.1	7.3	. .	. .
Total liabilities/turnover ratio	83.7	80.8	. .	. .
Net liabilities/turnover ratio	29.2	26.1	. .	. .
Liabilities/financial result ratio	7.2	9.3	. .	. .
Equity ratio	46.7	47.8	. .	. .
Net investments in tangible assets, FIM mill.	12 739.0	13 511.0	772	6.1
Personnel	196 465	199 809	3 344	1.7
Balance Sheet total, FIM mill.	413 269.8	409 781.8	-3 488	-0.8
Dividend distribution, FIM mill.	. .	6 578.6	. .	. .

Source: Financial Statements Statistics, Large Enterprises (Industry & Construction) 1996
Further information: Marjatta Laine, tel. +358-9-1734 3392/Industry, Raimo Pihlajamäki,
tel. +358-9-1734 3398/Construction.