studsvik.se   |   På svenska   |   Files to download

Other information in the Administration Report

NET SALES AND EARNINGS

Net sales were SEK 1,216.3 million (1,285.9). Net sales fell in the USA and the UK. The fall in the USA is attributable to low waste volumes and the logistics business that was sold during the year. The fall in the UK is attributable to the restruc­turing of operations that was implemented, focusing on waste management and smaller projects.

The operating loss was SEK -30.0 million (12.7). The Group reported a loss in the USA and the UK. In the USA business conditions for the Erwin operations were changed in 2008 and Studsvik introduced a new business model. It was not until the end of 2009 that it had an effect in the form of satisfactory market coverage. The global financial crisis and weak economy meant a reduced order book, mainly for the Memphis-based operations. During the year the US logistics operations were sold. In the prevailing market­ they were unprofitable and the Memphis-based waste operations were rationalized.

In the United Kingdom Studsvik acted as main contractor for large decommissioning projects at Sellafield. The complexity of the projects was underestimated and a decision to discontinue the undertakings was made, resulting in considerable losses. In consequence the UK operations were restructured and the restructuring costs of SEK 22.8 million were charged to income.

The segments Sweden, Germany and Global Services all developed­ well.

The accounting profit for 2008 and 2009 includes restruc­turing costs and non-recurring items. The table below­ presents these items and the adjusted operating profit.


2009 2008
Reported operating profit -30.0 12.7
Capital gain -6.7 -
Restructuring costs, USA 10.2 12.6
Restructuring costs, UK 22.8 -
Adjusted operating profit
-3.7 25.3

 

PROFITABILITY

The Group's operating margin was negative (1.0 per cent) and the profit margin was negative (0.1 per cent).

Capital employed decreased by SEK 87.8 million to SEK 11.2 million. The turnover rate of capital employed was 1.3 (1.4) and the return on capital employed was negative (2.1 per cent).

FULFILLMENT OF FINANCIAL TARGETS

Studsvik's long-term targets are organic growth for the Group of at least 10 per cent per year, an operating margin of 8 per cent and an equity/assets ratio of at least 40 per cent.

The Group's net sales decreased in 2009 by 5 per cent. In local currency and adjusted for sales and acquisitions, net sales fell by 9 per cent. Consequently the Group did not achieve its growth target. This can be entirely attributed to developments in the USA and the UK. The Group reported a loss in 2009, which is also entirely attributable to develop­ments in the USA and the UK. The equity-assets ratio was 37.2 per cent, compared with 40.4 per cent in 2008.

The segments have different profit potential, depending on service mix, competitive situation and maturity. The segments' operating margin targets and actual outcome for 2009 were:

Foreign exchange effects in connection with the translation of foreign subsidiaries' operating profit amounted to SEK -3.2 million (2.1) in 2009.

Segment 2009 Target
Sweden 16 20
United Kingdom neg 10
Germany 6 9
USA neg 10
Global Services 17 15

Global Services reported organic growth of 22 per cent and an operating margin of 17 per cent, thereby being the only segment to exceed its profitability target. The Group's largest­ segment, Germany, reported growth of 6 per cent in local currency and improved its profitability to 6 per cent, though without achieving the profitability target. Segment Sweden reported growth of 13 per cent, but for the first time in the last three-year period did not reach its profit­ability target.

CAPITAL EXPENDITURE

The Group's capital expenditure amounted to SEK 81.6 million (108.4). The new facility for treatment of metallic waste in the United Kingdom accounted for SEK 55.1 million of this figure. Other expansion investments amounted to SEK 7.7 million. At the end of 2009 the Group's commitments in respect of investment projects still in progress amounted to SEK 17.1 million (17.4). It is estimated that invest­ments in progress will be financed using internal funds.

RESEARCH AND DEVELOPMENT

Development projects are initiated and implemented both in co-operation with customers in the form of consulting contracts and within the framework of Studsvik's internal product development. Research expenditure is expensed as it is incurred. Identifiable expenditure for the development of new processes and products is capitalized to the extent it is expected to bring economic benefits.

In 2009 total costs of company-funded research and devel­op­ment amounted to SEK 46.1 million (44.8). Most resources­ were allocated to Studsvik's in-core fuel management codes. In software development the expenditure is a combination of maintenance of existing software and new development. As the economic benefits of the new development work are allocated over a very long period this expen­diture is expensed as it arises.

PARENT COMPANY

Parent company operations comprise the co-ordination of tasks for the Group and assets mainly consist of shares in subsidiaries. The parent company's net sales were SEK 11.2 million (10.8). The operating loss was SEK -31.0 million (-28.7). Profit after financial items was SEK 0.4 million (-25.8). This includes dividend from subsidiaries of SEK 32.0 million (0).

The parent company's investments amounted to SEK 0 million (0.2). Cash and cash equivalents amounted to SEK 49.3 million (84.1) and interest-bearing liabilities to SEK 201.9 million (221.2).

BENEFITS TO SENIOR MANAGEMENT

The Annual General Meeting held on April 22, 2009 adopted­ the following principles for benefits to senior manage­ment.

Senior management executives will be offered a commercially competitive fixed salary based on the individual executive's responsibilities and powers. Salary will be fixed per calendar year. Senior management may be offered bonuses­ of a maximum of 50 per cent of the fixed salary. Bonuses will be primarily based on the Group's financial targets­. A bonus plan will be determined for the financial year.

Senior management may arrange pension solutions on an individual basis in addition to the provisions of collective agreements or other agreements. They may thus convert salary and bonuses to extra pension contributions, given that the cost to Studsvik is unchanged over time.

A maximum period of notice of 12 months from either senior management or Studsvik is applicable. A severance payment equivalent to a maximum of 12 months' salary, in addition to salary during the period of notice, may be payable.

There is more information concerning benefits to senior management in note 38.

EMPLOYEES

The average number of employees in 2009 was 1,132 (1,130). The Group has adopted a common Code of Conduct­ that focuses on four areas of responsibility:

  • Employees and organization
  • Society
  • Customers and suppliers
  • Environment

Studsvik has a program to reduce the number of work-­related injuries. In 2008, the number of work-related injuries­ resulting in sickness absence fell from 40 in 2007 to 22 in 2008. In 2009 the number of injuries increased to 28. The increase is related to absence shorter than three days.

 

field_670.jpg

ENVIRONMENT

The Group conducts activities requiring licenses in Sweden, the United Kingdom and the USA. Activities at the Group's Swedish facilities are licensed under the Swedish Environmental Code, the Act on Nuclear Activities and the Radiation Protection Act. Activities in the USA and the UK are conducted in a corresponding way in accordance with national­ legislation.

The Swedish nuclear facilities that require a license under­ the Act on Nuclear Activities include nuclear reactors, laboratories where radioactive materials are used, facilities for treatment of low and intermediate level waste and a facility­ for storage of nuclear material.

The main environmental impact from the Group's facilities is from emissions and discharges to air and water. The licenses under which the nuclear facilities are operated state limit and recommended values for emissions and dis­charges to the exterior environment.

DECOMMISSIONING OF NUCLEAR FACILITIES

The operations at Studsvik's nuclear facilities in Sweden are conducted under license pursuant to the Swedish Act on Nuclear Activities and it is therefore Studsvik's responsibility to decommission the facilities. Under the Act the holder of the license has both the technical and the financial respon­sibility for decommissioning.

However, under the Act on Financing the Handling of Certain Radioactive Waste etc (1988:1597), "the Studsvik Act", the Swedish nuclear power producers pay a certain fee per generated kWh of electricity to the Government. The fees are funded for the purpose of covering costs for decommissioning a large part of Studsvik's nuclear facilities in Sweden. For its other nuclear facilities in Sweden the Group makes provision in its own balance sheet for the obliga­tion. The Group also provides collateral for performance in the form of bank guarantees to the Swedish Radiation Safety Authority and the County Administrative Board.

A new Act that came into force in 2007 (2006:647) will replace the Studsvik Act at the end of 2011. It is the intention of the legislator that the obligation under the Studsvik Act will have been fully settled at that time. The Group's facilities­ that are not covered by the Studsvik Act will be covered­ by the new legislation.

The Group expects that even in the future and in the context of the new legislation the obligation will be secured through bank guarantees issued to the government agencies­ concerned. The Nuclear Waste Fund will also finance­ the future decommissioning of the Group's materia­l testing reactor which ceased operation in 2005. Studsvik Nuclear AB, which is the permit holder for the materials testing reactor, has agreed with AB SVAFO that the facility will be transferred to AB SVAFO as soon as the Government has given its permission.

For its nuclear facilities in the USA and the United Kingdom the Group makes provision in its own balance sheet for future decommissioning. In the USA Studsvik also provides supplementary collateral for the obligation in the form of a bank guarantee.

INSURANCE

As a result of its geographical dispersion and its different lines of business, Studsvik is exposed to several types of third party risk. Studsvik's third party liability insurance is intended to cover Studsvik against the financial risks and consequences of its business. Studsvik's business is insured from two risk perspectives; nuclear liability and non-nuclear liability. The nuclear liability insurance is regulated by the Nuclear­ Liability Act in Sweden and by equivalent foreign legislation in the respective country. Nuclear liability insurance for the Swedish operations is provided by Nordic Nuclear­ Insurers (NNI) and European Liability Insurance for the Nuclear Industry (ELINI). Liability insurance for the UK operations is provided by Nuclear Risk Insurers Limited (NRI). Liability insurance for the American operations is provided by the American Nuclear Insurers (ANI) Liability Insurance Pool.

The non-nuclear operations are currently insured through a global liability insurance policy with the insurance company IFP&C Insurance Ltd. Property and consequential loss insurance policies for the Swedish nuclear risks have been written by Nordic Nuclear Insurers and the European Mutual Association for Nuclear Insurance (EMANI). A nuclear­ property and consequential loss insurance policy has also been taken out for the UK facility in Workington through EMANI. The US facilities in Erwin and Memphis are insured with Nuclear Risk Insurers (NRI). Non-nuclear property and consequential loss policies have been taken out in the respective countries.

INFORMATION ON THE ARTICLES OF ASSOCIATION AND THE STUDSVIK SHARE

There is no provision in Studsvik's Articles of Association that restricts the right to transfer shares. The company has not transferred any of its own shares or issued new shares during the financial year. The company is not aware of any agreements between shareholders that may result in restrictions on the right to transfer shares in the company. The company is not a party to any material agreement that is affected­ by any public take-over bid. The company's employees­ do not hold any shares for which the voting right cannot be exercised directly. The elected members of the Board of Directors are appointed by the Annual General Meeting. There is no provision in the Articles of Association concerning appointment and dismissal of Board members. Information on trading in the Studsvik share and ownership structure can be found on pages 60-61.

OUTLOOK

Modernization and increasing output of nuclear power plants is taking place in several of the countries where Studsvik operates. New nuclear power capacity is being planned and built in an increasing number of countries. Decom­missioning of nuclear facilities is continuing and is expected to continue by and large at an unchanged rate. Demand for the services of the type Studsvik offers, including waste treatment, materials testing and consulting services is strong, which is reflected in a good order book in the segments Sweden, Germany and Global Services.

With current contract volumes for the Erwin facility there is potential for long-term profitability in the USA opera­tions. However, the market continues to be affected by the weak economy. The British market is also influenced by the weak economy, which is reflected in a thin order book. With the new metal recycling facility Studsvik holds a strong market position in the United Kingdom. The recycling­ facility is in a development phase with its focus on successively securing a stable inflow of material.

PROPOSED DISTRIBUTION OF PROFITS

In view of the fact that the Group is reporting a loss and negative cash flow and that the financial position is not in parity with the Group's targets, the Board of Directors proposes that no dividend be distributed for 2009. The total profits at the disposal of the Annual General Meeting comprise­ the Parent Company's non-restricted equity, SEK 623,295,986.

The Board of Directors proposes that the profits be distributed as follows:

To be carried forward SEK 623,295,986

Total non-restricted equity in the parent company

SEK 623,295,986

crane_250.jpg

Studsvik AB | Tfn 0155 22 10 00 | E-post © Studsvik AB 2010