Short-term risks

August 2010

The good development of Biohit’s business operations in the first months of the year continued during the second quarter. After the first quarter, there have been no significant changes in the short-term risks reported by the company, with the exception of the impact of its convertible bond and raw material prices.

Earlier, the EUR 4.05 million convertible bond maturing in October of the present year posed the greatest risk to the Group’s liquidity. However, the company restructured the bond after the end of the review period by issuing a new convertible bond of the same size. The lenders have committed to subscribing for the bond in October. The new convertible bond replaces the earlier bond. The restructuring of the bond and the Group’s positive earnings trend improves the Group’s liquidity, which nevertheless remains at a merely satisfactory level.

Therefore, the company’s business risks still mainly concern the diagnostics business and the expectations for it. If the diagnostics business does not achieve its growth goals, this may be negatively reflected on the entire Group’s profitability. Long-term failure to meet these growth expectations might also result in a EUR 2.6 million impairment of goodwill associated with the diagnostics products. That said, the long-term development of the diagnostics business continued during the review period, and seems to be yielding results. The company thus estimates that this risk has not grown.

The rise in raw material prices – particularly in the case of plastics – has burdened the profitability of the liquid handling business. Insofar as the increase in costs cannot be passed on to product prices due to price competition, this will also strain the profitability of the business. The company seeks to hedge itself against this risk by means such as contractual terms.

The trend in the external value of the euro still poses a major risk to the company’s business profitability. The company hedges itself against currency risks by means such as making procurements in currencies other than the euro and planning the Group’s cost structure such that a significant share of fixed costs are in non-euro currencies.