Annual Report 2004 - nordkalk.pl · ground and crushed limestone, enriched calcite, and quick and...

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Annual Report 2004

Transcript of Annual Report 2004 - nordkalk.pl · ground and crushed limestone, enriched calcite, and quick and...

Page 1: Annual Report 2004 - nordkalk.pl · ground and crushed limestone, enriched calcite, and quick and slaked lime. Its range of products also includes dolomite products and the rare mineral

Annual Report 2004

Page 2: Annual Report 2004 - nordkalk.pl · ground and crushed limestone, enriched calcite, and quick and slaked lime. Its range of products also includes dolomite products and the rare mineral

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Lime wins

As early as the 17th century the Japanese invented a unique method for solving difficult problems, Jan Ken Pon - stone breaks scissors, scissors cut paper and paper covers stone. Today the game has spread across the entire world, and there is even a world champion of Jan Ken Pon.

If you wish to preserve a thriving environment, manufacture durable steel and high-quality paper, then limestone provides the right answer. Its characteristics create added value, both for international corporations and private households. As in Jan Ken Pon, when using limestone it is a question of a carefully considered strategy – the right stone at the right place.

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Nordkalk is ...................................................................... 4From the President ......................................................... 6

Financial Statements Annual Report of the Board of Directors .......... 8 Consolidated Income Statement .......................... 10 Consolidated Balance Sheet ................................ 11 Consolidated Financial Analysis ........................ 12 Parent Company Income Statement ................... 13 Parent Company Balance Sheet .......................... 14 Parent Company Financial Analysis ................. 15 Accounting Principles ......................................... 16 Notes to the Financial Statements ................. 18-29 Calculation of Financial Ratio ............................ 29 Five-year Review .................................................. 30 Auditors’ Report ................................................... 31

Board of Directors, Management Group ................... 32Group Structure ............................................................. 33

Personnel Report Personnel 2004 ..................................................... 35 Developing the Personnel ................................... 36 The 55+ Programme ............................................ 36 Health and Safety ................................................. 37

Environmental Report Our Aim is Sustainable Development .............. 39 Environmental Impact ........................................ 40 Environmental Products ..................................... 42 Environmental Improvement 2004 ................... 43 Emissions and By-Products ................................ 45 Nordkalk on the Map ........................................... 46

Table of contents

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– number one in Northern Europe

Nordkalk extracts limestone and processes it into ground and crushed limestone, enriched calcite, and quick and slaked lime. Its range of products also includes dolomite products and the rare mineral wollastonite. The raw material is extracted from Nordkalk’s own deposits, of which 8 are situated in Finland, 6 in Sweden, 3 in Estonia and 3 in Poland. Nordkalk is also part owner of a lime company in Norway. The mines and production plants are strategi-cally placed around the Baltic Sea, which is a basic condition for efficient exploitation of sea transport.

Versatile raw material for different purposesLimestone-based products are used in industry, agri-culture and environmental care. Most of us know that lime is spread on fields in order to reduce the natural acidity of the soil. Lime can be used for the same pur-pose in environmental care, to neutralise the acidity of watercourses and forests. Air pollution can be reduced when the flue gases from coal-fired power plants are cleaned with limestone-based products. They can also be used to regulate the acidity of our drinking water and clean our wastewater.

Nordkalk’s largest group of customers is industry, which accounts for just over 80 per cent of Nordkalk’s sales. Many stages in the manufacture of a multitude of products that we use in our daily lives require lime-stone-based products in some form. To the largest cus-tomer group, the paper industry, Nordkalk sells lime-stone and quicklime for the production of filler and coating pigments. The making of steel calls for lime to remove impurities at various stages of the manufactur-ing process. In sugar refining, too, lime is needed to purify the product at different stages. In the building materials industry limestone products constitute the raw material for cement, concrete, bricks, wallboard, plasters and levelling compounds. Building materials form one of the oldest uses for limestone products and the industry is today Nordkalk’s next largest single customer group. Lime is used in the manufacture of glass and paint. Dolomite is an important raw material for the fertiliser industry, and wollastonite is used for making plastics and ceramics, etc.

In road and ground engineering lime is used to sta-bilise the soil. Deep stabilisation is used as a method to strengthen the ground when building roads and railways in order to prevent subsidence and to improve bearing qualities. Lime is used in surface stabilisation to improve the characteristics of the soil when making roads. The asphalt used for surfacing roads also con-tains limestone powder.

SHAREHOLDERS OFNORDKALK CORPORATION %

Ahlström Capital Oy 26.2 *

Funds managed by CapMan 26.2Åbo Akademi University Foundation 8.0The Veritas Group 7.7The Alandia Group 7.7Svenska litteratursällskapet i Finland r.f. 6.4Furuvik Invest Ab 5.8Nordkalk s management 4.7Stiftelsen Eschnerska Frilasarettet 1.9Rettig Group Ltd 1.9Stiftelsen Brita Maria Renlunds minne 1.0William Thurings stiftelse 1.0K.H. Renlunds stiftelse 1.0Petter och Margit Forsströms stiftelse till 0.5 Karl och Olivia Forsströms minne 100.0 %

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Nordkalk’s aim is to be a leading player on the European market for lime. This will be achieved by - maintaining our present position in Northern Europe- expanding while at the same time sustaining our profitability- creating new concepts and uses for lime- maintaining interest in Nordkalk as a rewarding company to invest in.

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Success factors

Nordkalk’s deposits provide a versatile raw material representing all the different types of limestone that are in demand on the market.

Effective and well-planned logistics are the key to being able to transport the heavy stone in a profitable manner.

Nordkalk’s broad spectrum of customers made up of many different industries, local government authorities and farmers protect the company from the economic effects of cyclical fluctuations.

Nordkalk’s skilled and motivated personnel guaran-tee our customers an informed partner.

Our values – trust, competence and quality – are refl ected in our operations

We rely on ourselves and our companions and we believe that partnership means advantages for both parties.

We are experts in extracting, refining and supplying lime-stone and we foresee opportunities for making improve-ments in both our own and our customers’ processes.

The quality of our raw material, our products and our work is reflected in our customers´ products.

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The year 2004 proceeded largely according to plan at Nordkalk. Nordkalk’s principal groups of custom-ers - paper, steel and building materials - developed favourably. Poland’s membership of the EU acceler-ated development of the country’s infrastructure, which Nordkalk was able to profit from by reason of the favourable geographical location of its production plants. In the spring of the year Nordkalk concluded an agreement with Imerys Mineral AB for the long-term supply of burnt lime for the manufacture of PCC paper pigment to M-real’s new production line at the Husum paper mill. This is Nordkalk’s first contract in this field in Sweden.

Deliveries of soil improvement lime were held back for the second year running by the poor weather condi-tions in both Finland and Sweden. At the same time there reigned uncertainty about the future of the two countries’ agriculture because of EU decisions regard-ing farming subsidies.

Rapid progress in the Chinese markets has indirectly affected Nordkalk. Demand for coal as well as for shipping has been keen, which has raised the prices of these important commodities needed by Nordkalk.

Nordkalk’s structure changed during the year under review when the company was merged with NK-Holding, which in turn changed its name to Nordkalk. At Miedzanka in Poland Nordkalk acquired the remaining shares held by the Polish state and the small shareholders so that Nordkalk now owns the entire equity of the Miedzanka company. This will be followed by the merging of Nordkalk Sp. z o.o. and Nordkalk Miedzanka in early 2005.

In Sweden Nordkalk has sold its lake-liming opera-tions to the Movab AB company, which has been set up specifically for this purpose. Nordkalk owns 19.5 per cent of the new company. Other owners include entrepreneurs operating in the same field and Movab’s own employees. Transport and spreading entrepre-neurs play an important role in the liming of lakes and a joint-venture company can operate more competi-

tively in identifying and marketing liming projects. The transaction completed in early 2005 is a part of Nordkalk’s internal restructuring measures to improve its efficiency. A further step was to incorporate the division that manufactures carbonate products in Sweden into Nordkalk’s Industrial Lime division. This concentration of operations will mean a slight reduc-tion in the personnel in Sweden.

The 55+ programme, which continued for the third year, focuses on maintaining the professional skills and motivation of older employees and on handing down these skills to younger generations. Nordkalk also wants to ensure that it has a skilled workforce in the future. To this end a two-year apprentice scheme leading to a further qualification in mining was started at Tytyri, Finland, in the autumn. Nordkalk’s own workers participate in supervising the apprentices in practical training courses and the experiences hitherto have been promising.

The most important environmental matters during the past year have been linked to emissions of carbon dioxide and trading in emissions. From Nordkalk’s viewpoint the CO2 question means a weakening of competitiveness, not just for the company and its customers but for the whole of the EU. When emis-sions rights for the years 2005-2007 were distributed, Nordkalk did not get the amount it had applied for but the situation can nonetheless be coped with.

The future presents challenges to Nordkalk concern-ing energy and environmental costs. The fact that the same challenges also face Nordkalk’s most important customers emphasises the importance of continually improving efficiency. Progress in this work combined with a diversified customer base and the favourable geographical spread of Nordkalk’s production plants provide Nordkalk with good opportunities for main-taining its strong position in the future.

Christer SundströmPresident

From the President

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Group structure simplifi edNordkalk Corporation was merged with NK-Holding Oy Ab on 29 February 2004. At the same time NK-Holding changed its name to Nordkalk Corporation. The merger did not cause any changes in the com-pany’s operations or the personnel’s situation but the purpose of the merger was to simplify group structure and decrease costs.

Because of the above, the comparison figures for 2003 in the financial statement describe the financial situa-tion of the then NK-Holding Group.

The process of merging Nordkalk Miedzianka S.A. with the other Polish company Nordkalk Sp. z o.o was started during the year and it will be completed during the first quarter of 2005.

Positive development for the Nordkalk GroupIndustryNordkalk s sales increased compared with the previous year. Most of the increase comes from the industrial segment, where especially sales to the paper industry increased. Demand for paper has grown, which has led to increased use of capacity for the paper machines. During the year Nordkalk signed a remarkable agree-ment for delivery of quicklime for manufacturing the paper pigment PCC in Sweden. This meant a break-through for Nordkalk on the Swedish paper-pigment markets.

Deliveries to the steel industry were at a higher level than in 2003. Demand for steel was high on the world market, which, in turn, meant record lime deliveries from Nordkalk to the steel industry. Strong economic growth in Poland as well as the country’s membership of the EU strengthened the demand for lime products, especially limestone for the steel industry. Sales of products for soil stabilisation and road construction decreased both in Finland and Sweden while in Poland sales remained at a high level. This is, among other things, a consequence of various new EU-financed projects that aim to improve the Polish infrastructure. Total sales to the building material industry increased slightly.

AgricultureBoth in Finland and Sweden the official debate on farming subsidies granted by the EU has uncertainty among farmers. Combined with unfavourable lim-ing conditions this has led to decreased sales of soil improvement lime. In Poland, EU membership has brought about new forms of subsidies for the farmers but this has not yet increased the sales of soil improve-ment lime.

Environmental careSales of environmental products were at a higher level than in 2003. Because of the shortage of water at the beginning of the year, electricity generation was dependent on coal-fired power plants, which boosted the sales of flue gas cleaning products. Sales of water treatment products increased somewhat. The product FiltraP, which is used for cleaning wastewater, was well received on the markets. The product is aimed for

private households in rural areas that are not served by the communal wastewater system.

Financial result for the whole year 2004Net sales amounted to EUR 270.6 (259.8) million, an increase of 4 per cent.

Operating profit grew by 12 per cent and was EUR 37.9 (34.0) million, representing 14.0 (13.1) per cent of net sales. The result was affected by high energy prices in 2004.

Depreciation according to plan was EUR 24.5 (23.4) million.

Net financial expenses decreased by EUR 1.0 million compared with 2003 and were EUR 17.5 million. Profit before extraordinary items was EUR 20.4 (15.5) mil-lion representing 7.6 (6.0) per cent of net sales.

Cash flow from operating activities remained strong and rose to EUR 35.6 (25.3) million.

Return on capital employed was 13.7 (13.4) percent.

Total assets were EUR 344.2 (31.12.2003:343.1) mil-lion. The equity to total assets ratio rose to 24.9 (18.6) per cent as a consequence of improved result and repayment of loans.

When NK-Holding Oy Ab bought Nordkalk Corporation, a right arose for the holders of the Nordkalk 1999 Going Public Bond to request redemp-tion of the bonds. Of the original total of EUR 100 million, EUR 44.0 million was redeemed in 2003. The remaining EUR 56 million were repaid in October 2004 as the loan matured.

For full details reference is made to the Consolidated Income Statement and Balance Sheet and the parent company’s financial statements together with notes, additional details and financial analyses.

InvestmentsTotal investments during the period amounted to EUR 22.3 (22.0) million and consisted mainly of replacement investments. They were financed with Nordkalk’s own cash flow.

Nordkalk has bought the remaining shares in Nordkalk Miedzianka S.A. in Poland from the personnel and the Polish state for EUR 1.5 million and now owns the entire equity of the company.

ShareholdersNordkalk is owned by a Finnish investor group that comprises Ahlström Capital Oy (26.2% of which Ahlström Capital’s management owns 0.2%), the funds managed by CapMan (26.2%), a group of mainly institutional investors (42.9%) and the management of the company (4.7%).

PersonnelThe total number of employees in Nordkalk Group was 1288 (1310) at the end of the year.

Annual Report of the Board of Directors

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In Sweden, the division producing carbonate products has been merged into the Industrial Lime division. The aim of the structural change is to improve competi-tiveness and profitability, and it will lead to a small decrease in personnel in Sweden during 2005.

During 2003 the 55+ programme continued. The pro-gramme aims to improve the older employees´ ability to keep working until retirement. Another goal is to retain professional know-how within the company and to transfer it to the younger employees.

Occupational health and safety have been other important development issues during 2004 and in Lappeenranta, Finland, a project to decrease occupa-tional accidents has started successfully.

Training in personnel development and managing skills, which was started in 2003, was completed dur-ing the year. In Poland, the personnel had an opportu-nity to participate in an extensive training programme during the year.

Personnel issues are reported in more detail elsewhere in this Annual Report.

Research and DevelopmentTotal R&D expenditure was EUR 3.5 (4.5) million, which represents 1.3 (1.7) per cent of net sales.

A project to find new ways of using the by-products of Nordkalk’s and its customers’ processes, e.g. surplus stone from quarries and material from the building sector, was started during the year.

In the agricultural sector, development work has concentrated on new spreading technology for soil improvement lime. A new spreader was introduced in early 2004.

Environment and qualityAll production plants in Finland and all operations in Sweden have been certified according to the ISO 14001 environmental standard. In Poland and Estonia, environmental audits are performed on a regular basis. At all locations, Nordkalk continues its efforts to mini-mise the environmental impact of its operations, such as noise, vibration and dust.

The total amount of environmental investments was EUR 1.5 million.

All operations in Sweden have been certified accord-ing to the ISO 9001:2000 quality standard, as well as parts of the production in Finland. Training in quality and environmental management systems is continu-ously offered at all locations.

This Annual Report includes also an Environmental Report. A separate report is available at www.nord-kalk.com.

Board of Directors, President and Auditors Members of the Board of Directors:

Björn Mattsson chairmanMorten Ahlström memberJan Inborr memberJukka Järvelä memberOrvo Siimestö memberChristoffer Taxell member

The President is Christer Sundström.

The auditor was KPMG Oy Ab, Authorised Public Accountants, with Sixten Nyman, APA, as the main responsible auditor.

Board’s proposal for the distribution of profits Distributable equity for the Nordkalk parent com-pany is EUR 6.4 million and EUR 10.9 million for the Nordkalk Group. The Board proposes that no dividend be paid and that the annual profit be left in retained earnings in the balance sheet.

Prospects for the year 2005Nordkalk’s positive development is expected to con-tinue during 2005.

Helsinki, 27 January 2004

Björn Mattsson Morten Ahlström Jan Inborr Jukka Järvelä Orvo Siimestö Christoffer Taxell

Christer Sundström, president

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Consolidated Income Statement / Nordkalk Jan. 1 - Dec. 31, 2004

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Note 2004 2003 1000 euro % 1000 euro %

Net sales 1 270 573 100.0 259 794 100.0 Cost of goods sold 209 664 203 555

Gross profi t 60 909 22.5 56 239 21.6 Selling , marketing and and development expenses 11 960 11 992 Administration expenses 16 071 15 771 Other operating income 7 642 6 337 Other operating expenses 2 612 847 23 001 8.5 22 273 8.6

Operating profi t 2,3,4 37 908 14.0 33 966 13.1 Share of results of associated companies 5 -6 15 Financial income and expenses 6 -17 471 -18 481

Profi t before extraordinary items 20 431 7.6 15 500 6.0

Profi t before taxes and minority interest 20 431 7.6 15 500 6.0 Direct taxes 7 -3 940 -6 132 Minority interests -3 965 -2 945

Net profi t for the period 12 526 4.6 6 423 2.5

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Consolidated Balance Sheet / Nordkalk Dec. 31, 2004

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Note Dec. 31, 2004 Dec 31, 2003 1000 euro % 1000 euro %

Assets

Fixed assets and long-term investments 8 Intangible assets - Goodwill 1 138 1 440 - Other intangible assets 6 398 6 328 Tangible assets - Mineral deposits and land 89 709 88 707 - Buildings and constructions 35 576 36 889 - Machinery and equipment 115 414 113 605 - Other tangible assets 3 349 2 943 - Advance payments and construction in progress 3 880 6 892 Investments 9 - Shares in associated companies 1 251 657 - Other shares and participations 2 054 2 054 - Long term receivables 2 5

Total fi xed assets and long-term investments 258 771 75.2 259 520 75.6

Current assets

Inventories 10 36 769 33 152 Deferred tax assets 3 264 2 170 Short-term receivables 10 35 826 35 642 Cash and bank balances 9 558 12 611

Total current assets 85 416 24.8 83 574 24.4

Total assets 344 187 100.0 343 094 100.0

Shareholders’ equity and liabilities

Shareholders’ equity 11 Share capital 1 000 1 000 Net profi t/loss for previous years 4 328 -3 838 Net profi t for the period 12 526 6 423 Capital loan 54 755 49 000

Total shareholders’ equity 72 609 21.1 52 585 15.3

Minority interest 13 223 3.8 11 208 3.3

Provisions 13 1 673 0.5 7 245 2.1

Liabilities

Deferred tax liabilities 7, 14 17 208 17 213 Long-term liabilities 12, 14 183 248 210 420 Short-term liabilities 12, 15 56 226 44 423

Total liabilities 256 681 74.6 272 056 79.3

Total shareholders’ equity and liabilities 344 187 100.0 343 094 100.0

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Financial Analysis / Group

Group 2004 2003 1000 euro 1000 euro

Operating activities Operating profi t 37 908 33 966 Depreciation 24 852 23 295 Profi t/loss on sale of fi xed assets -397 -40

Cash fl ow before changes in working capital 62 364 57 221

Change in working capital Inventories (- = increase) -3 617 -33 152 Short-term receivables (- = increase) -1 275 -37 815 Non interest-bearing liabilities (- = decrease) -486 63 628 -5 377 -7 339

Financial items, taxes and extraordinary items Financial income and expenses -17 471 -18 481 Taxes -3 940 -6 132 -21 411 -24 613

Cash fl ow from operating activities 35 575 25 269

Cash fl ow from investments Gross capital expenditure -22 256 -21 969 Change in fi xed assets -261 208 Sale of fi xed assets 2 678 423 -19 578 -282 755

Cash fl ow before fi nancing 15 997 -257 486

Financing Share issue 1 000 Capital loan 105 020 Increase in interest-bearing liabilities 66 000 Decrease in interest-bearing liabilities -86 480 159 653 Translation differences and other changes 1 430 4 424 -19 050 270 097

Change in liquid funds -3 053 12 611

Liquid funds January 1 12 611 0 Liquid funds December 31 9 558 12 611

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Income Statement / Parent Company Jan.1 - Dec.31,2004

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Note 2004 2003 1000 euro % 1000 euro

Net sales 1 105 783 100.0 Cost of goods sold 79 761

Gross profi t 26 022 24.6 Selling, marketing and development expenses 3 443 Administration expenses 9 422 103 Other operating income 4 169 Other operating expenses 789 9 485 9.0 103

Operating profi t 2,3,4 16 537 15.6 -103 Financial income and expenses 6 -15 633 12 123

Profi t before extraordinary items 904 0.9 12 020

Profi t before appropriations and taxes 904 0.9 12 020 Depreciation in excess of plan -2 987 Direct taxes 7 -16 -3 485

Net loss/profi t for the period -2 098 -2.0 8 535

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Balance Sheet / Parent Company Dec. 31, 2004

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Note Dec. 31, 2004 Dec 31, 2003 1000 euro % 1000 euro %

Assets

Fixed assets and long-term investments 8 Intangible assets 5 086 242 Tangible assets - Mineral deposits and land 43 614 - Buildings and constructions 12 477 - Machinery and equipment 40 862 - Other tangible assets 1 712 - Advance payments & construction in progress 775 Investments 9 - Shares in subsidiaries 89 066 143 368 - Long-term receivables from subsidiaries 43 605 - Shares in associated companies 1 067 - Other shares and participations 2 044

Total fi xed assets and long-term investments 240 310 85.0 143 610 89.5

Current assets

Inventories 10 19 146 Short term receivables 10 20 559 16 773 Cash and bank balances 2 605

Total current assets 42 310 15.0 16 773 10.5

Total assets 282 620 100.0 160 383 100.0

Shareholders’ equity and liabilities

Shareholders’ equity 11 Share capital 1 000 1 000 Net profi t/loss for previous years 8 525 -6 Net loss/profi t for the period -2 098 8 535 Capital loan 54 755 49 000

Total shareholders’ equity 62 182 22.0 58 529 36.5

Accumulated excess depreciation 18 369 6.5

Provisions 13 151 0.1

Liabilities

Long-term liabilities 12, 14 169 630 96 300 Short-term liabilities 12, 15 32 289 5 554

Total liabilities 201 919 71.4 101 854 63.5

Total shareholders’ equity and liabilities 282 620 100.0 160 383 100.0

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Parent company 2004 2003 1000 euro 1000 euro

Operating activities Operating profi t 16 537 -103 Depreciation 8 796 55 Profi t/loss on sale of fi xed assets -393

Cash fl ow before changes in working capital 24 940 -48

Change in working capital Inventories (- = increase) -1 645 Short-term receivables (+ = decrease) 3 596 -16 773 Non interest-bearing liabilities (- = decrease) -9 487 5 544 -7 536 -11 229

Financial items, taxes and extraordinary items Financial income and expenses -10 931 12 123 Taxes -16 -3 485 -10 947 8 638

Cash fl ow from operating activities 6 457 -2 639

Cash fl ow from investments Gross capital expenditure -10 978 -143 665 Sale of fi xed assets 2 226 -8 752 -143 665

Cash fl ow before fi nancing -2 295 -146 304

Financing Share issue 992 Redemption of convertible capital loan -56 375 Capital loan 5 755 49 000 Change in interest-bearing liabilities (+ = increase) 41 196 96 304 Change in long-term receivables (+ = decrease) 1 929 -7 495 146 296

Change in liquid funds -9 790 -8 Liquid funds January 1 0 8 Liquid funds February 29.2 merge 12 395 0 Liquid funds December 31 2 605 0

Financial Analysis / Parent Company

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The consolidated financial statements of the Nordkalk Corporation are prepared in accordance with cur-rent regulations in Finland. The year reviewed covers the months January-December and the financial statements are presented in euros. When preparing financial statements in conformity with applicable regulations and generally accepted accounting princi-ples, the company’s management makes estimates and assumptions that affect the valuation and allocation of the reported figures. Actual results may deviate from such estimates.

Consolidation principlesThe consolidated financial statements cover the parent company Nordkalk Corporation, and all companies in which the parent company, directly or indirectly, holds more than fifty per cent of the voting rights at the end of the financial year. Companies acquired during the financial year have been included in the consolidated income statement from the date of acquisition and divested companies to the date of disposal. All trans-actions together with and internal profits and losses between companies within the group are eliminated as part of the consolidation process. Acquisitions of com-panies are recorded according to the purchase method of accounting. The difference between the acquisition cost of the shares of a subsidiary and equity at the time of acquisition is allocated to fixed assets by the amount that their current value exceeds the book value. In this calculation untaxed reserves net of tax, is included in the equity. The excess value allocated to fixed assets is written off according to the depreciation plan of the fixed asset item in question. The remaining differ-ence is carried as goodwill on consolidation, which is amortised over its expected useful life, 10 years. That portion of surplus value assigned to a deposit is writ-ten off linearly over a period of 30 years. Deferred tax liability on allocated acquired surplus value has been taken partly into account in the consolidated balance sheet.

Associated companies are consolidated in accordance with the equity method. The group’s share of the earn-ings of associated companies, less amortisation of the goodwill recorded on acquisition, is presented in the consolidated income statement. Dividends received from associated companies are eliminated. In the con-solidated balance sheet, investment in associated com-panies and the group’s equity are adjusted in accord-ance with the group’s share in associated companies’ increased net worth following acquisition and goodwill less accumulated amortisation of goodwill.

Minority interests in earnings and shareholders’ equity are presented separately in the income statement and balance sheet.

Transactions in foreign currenciesForeign currency transactions are recorded at the exchange rates prevailing at the time of transaction.At the end of the accounting period receivables and

Accounting principlesliabilities are translated at the rates prevailing on the balance sheet date. Exchange-rate differences relating to sales and purchases are treated as adjustments to the underlying items. Exchange-rate gains and losses associated with financing are entered as net amounts under financial income and expenses.

Foreign subsidiariesIn the consolidated accounts all items in the income statements of foreign subsidiaries are translated into euros at the average exchange rates for the accounting period and all balance sheet items at the rates on the balance sheet date. Translation differences arising are treated as an adjustment affecting consolidated equity.

Current assetsInventories are valued at the acquisition value or the lower of the replacement value or net realisable value. The cost of inventories includes a proportionate share of overhead arising from the purchase and production of the goods.

Fixed assetsFixed assets are stated in the balance sheet at the his-torical cost less accumulated depreciation. Theestimated useful life of assets used to calculate depre-ciation and amortisation is as follows:

• Goodwill 10 years • Goodwill on deposits 30 years • Other capitalised expenditure 3-10 years • Buildings and constructions 10-40 years • Machinery and equipment 3-25 years • Other tangible assets 5-10 years

Depreciation for decrease of substance has been made on some deposits.

Long-term financial assets include investments that are recorded at their historical cost less depreciation of permanent decreases in value. Profits and losses on the disposal of fixed assets are included in other operating income and expenses.

LeasingOperating and financial leasing payments are treated as rentals. Commodities are not treated as fixed assets. Annual leasing charges on the basis of existing leasing agreements are shown in the notes. For financial leas-ing the differences between Finnish and international accounting practice are shown in the notes together with their impact on certain key figures.

Revenue recognitionSales are recorded in accordance with the invoiced value of products or performance of services, net of indirect taxes and discounts. Sales of products and services are recorded at the time each individual transaction takes place.

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Research and developmentResearch and development costs are recorded in the financial period during which they are incurred. Research and development costs and their proportion of net sales are presented in the five-year review.

Pension liabilitiesThe group companies’ pension obligations are based on local regulations and practices. In the parent com-pany and in Finnish subsidiaries pension liabilities are covered by insurance. Costs of pensions are recorded as they are earned. Changes in uncovered pension liabilities are entered in the income statement. Pension liabilities are included in the balance sheet.

Income taxesIncome taxes in the income statement include taxes of the group companies for the financial period, calcu-lated in accordance with local regulations, as well as adjustments to prior year taxes and deferred taxes. Deferred tax assets and liabilities are determined for temporary differences between the tax basis of assets and liabilities and their carrying values for financial

Exchange rates

Country Currency Rates at end of period Average rates December 31 2004 2003 2004 2003

Finland Euro 1.0000 1.0000 1.0000 1.0000Sweden SEK 9.0206 9.0800 9.1250 9.1258Estonia EEK 15.6466 15.6466 15.6466 15.6466Poland PLN 4.0845 4.7019 4.5323 4.3989

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reporting purposes. The current tax rate is used to cal-culate deferred tax income. Differencies resulting from tax rate changes are included in the income statement. The balance sheet includes all deferred tax liabilities and the probable realisable amount of deferred tax assets. No deferred tax liability is recognised for the undistributed earnings of subsidiaries. Deferred tax liability on allocated goodwill is included in the con-solidated balance sheet in the case of Storugns, but not in the case of Miedzianka, Pargas and Lappeenranta.

Financial ratiosNordkalk Corporation has two capital loans. In the calculation of financial ratio gearing, they have been treated as equity.

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Notes to the Financial Statements1000 euro

Note 1 Net sales by geographical area and product groups 1000 euro

Geographical area Group Parent company 2004 2003 2004 2003 Finland 177 448 168 489 102 620 Sweden 52 363 53 624 198 Poland 20 056 16 463 65 Germany 8 858 8 871 388 Estonia 2 651 2 235 3 Other EU 5 893 6 478 1 885 Other Europe 3 009 3 370 386 Others 295 264 238 Total 270 573 259 794 105 783

Product groups Group 2004 2003 Limestone & paper pigments 196 840 190 650 Quick and hydrated lime 82 563 80 033 Internal sales -8 830 -10 889

Total 270 573 259 794

Note 2 Personnel 1000 euro Group Parent company 2004 2003 2004 2003

Wages and salaries Salaries and payments to Board Members and Managing Directors 901 858 286 To others 31 863 32 039 15 748 Bonus to Board Members and Managing Directors 99 138 23 Total 32 863 33 035 16 057

Other personnel expenses Pensions and pension premiums 5 213 5 026 2 558 Other payroll costs 6 510 5 747 1 750 Total 11 723 10 773 4 308

Personnel expenses 44 585 43 808 20 365

Personnel

As an average during the year 1 317 1 330 605 At year end 1 288 1 310 582 The President of Nordkalk Corporation is entitled to retire at the age of 62 (Jan. 1, 2006).

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Note 3 Depreciation 1000 euro Group Parent company 2004 2003 2004 2003Depreciation by function Production 22 330 21 420 7 845 Sales, marketing and development 173 153 82 Administration 1 002 1 048 744 55 Other operating expenses, goodwill 1 005 801

Total 24 510 23 422 8 671 55

Depreciation according to category of assets Goodwill 303 302 Intangible assets 1 267 1 148 947 55 Mineral deposits and land 3 082 3 062 1 351 Buildings and constructions 3 133 3 113 1 422 Machinery and equipment 16 298 15 378 4 737 Other tangible assets 428 419 214 Total 24 510 23 422 8 671 55

Note 4 Other operating income and expenses 1000 euro Group Parent company 2004 2003 2004 2003Income Rents 1 113 1 216 546 Profit on sale of fixed assets 1 058 87 1 054 Other income 5 472 5 034 2 569

Total 7 642 6 337 169

Expenses Depreciation on goodwill 303 302 Decrease in fixed asset value 0 6 Loss on sale of fixed assets 661 47 661 Taxes on real estate 517 414 128 Other expenses 1 132 78 0

Total 2 612 847 789

Note 5 Share of result and equity in associated companies 1000 euro Country Share- Share of result Share of equity holding % 2004 2003 2004 2003

Pargas Vatten Ab Finland 50,0 -6 0 473 479Lohjan Energiahuolto Oy Loher Finland 23,1 5 19 107 102Pargas Hyreshus Ab Finland 34,1 0 0 71 40Taftøy Kalk AS Norway 50,0 0 600Eliminations -5 -4

Total -6 15 1 251 621

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Note 6 Financial income and expenses 1000 euro

Group Parent company 2004 2003 2004 2003 Dividends from Nordkalk companies 1 719 13 792 Other dividends 52 31 754 5 633

Interest income from Nordkalk companies 1 846 Other interest income 188 218 117 23 Other interest expenses 16 530 16 322 14 667 8 243 Exchange rate differences 391 -692 -4 207 Other fi nancial income external 132 137 20 938 Other fi nancial expenses external 1 704 1 853 1 215 20 Total -17 471 -18 481 -15 633 12 123

Note 7 Direct taxes 1000 euro Group Parent company 2004 2003 2004 2003

Taxes in income statement Direct taxes for the year 4 157 4 096 17 3 485 Direct taxes from previous years 1 -10 -1 Change in deferred tax asset/liability -217 2 046 Total 3 940 6 132 16 3 485

Deferred tax assets From valuation and matching differences 3 264 2 170 Deferred tax assets 3 264 2 170

Deferred tax liabilities From untaxed reserves 14 192 13 681 From consolidation entries 2 788 3 245 From valuation and matching differences 228 287 Deferred tax liabilities 17 208 17 213

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Note 8 Fixed assets 1000 euro

Group Goodwill Intangible Mineral Buildings and Machinery Other Construction assets deposits constructions and equipment tangible in progress and land assets Acquisition cost Jan. 1, 2004 3 719 11 565 101 857 64 628 249 288 8 133 6 892Exchange rate difference 18 48 3 893 1 396 2 816 47 230+ Investments 1 224 832 912 15 636 659 2 392+ Other increases 212 513 562 1 933 166 - Decreases -128 -598 -1 049 -1 458 -5 635Acquisition cost Dec. 31, 2004 3 738 12 921 106 497 66 448 268 215 9 004 3 880 - Accumulated depreciation Jan. 1, 2004 -2 280 -5 237 -13 150 -27 740 -135 683 -5 190 Exchange rate differences -16 -14 -455 -446 -1 222 -34 - Depreciation during the year -304 -1 271 -3 184 -3 171 -16 490 -432 - Accumulated depreciation for decreases 0 0 485 595 Accumulated depreciation Dec. 31, 2004 -2 600 -6 523 -16 788 -30 871 -152 801 -5 655 Residual value Dec. 31, 2004 1 138 6 398 89 709 35 576 115 414 3 349 3 880

Parent Company Intangible Mineral Buildings and Machinery Other Construction assets deposits constructions and equipment tangible in progress and land assets

Acquisition cost Jan. 1, 2004 297 0 0 0 0 0+ Investments 1 171 0 410 5 331 373 775+ Other increases 9 714 45 553 26 286 103 320 4 198 - Decreases -572 0 -1 270 0Acquisition cost Dec. 31, 2004 11 182 44 981 26 696 107 381 4 571 775

- Accumulated depreciation Jan. 1, 2004 -55 0 0 0 0 0- Depreciation during the year -947 -1 351 -1 422 -4 737 -214 + Acc depr / disposal, sales and transfers 486 569 +/- Other changes -5 094 -16 -13 283 -62 351 -2 645 Accumulated depreciation Dec. 31, 2004 -6 096 -1 367 -14 219 -66 519 -2 859 Residual value Dec. 31, 2004 5 086 43 614 12 477 40 862 1 712 775

Group Parent Company

Shares and participations Shares and Shares and Shares and Shares and Shares and Long-term participations, participations, participations, participations, participations, receivable from associated others subsidiaries associated others subsidiaries companies companies

Acquisition cost Jan. 1, 2004 467 2 585 143 368 0 0 0+ Investments 600 1 502 600 + Other increases 467 2 575 43 605- Decreases -55 802 Acquisition cost Dec. 31, 2004 1 067 2 585 89 066 1 067 2 575 43 605 - Accumulated depreciation Jan. 1, 2004 190 -531 0 +/- Other changes -6 -531 Accumulated depreciation Dec. 31, 2004 184 -531 -531 Residual value Dec. 31, 2004 1 251 2 054 89 066 1 067 2 044 43 605

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Note 9 Shares and participations Dec. 31, 2004

Group holding Nominal value Book value euro Number % Currency Parent Group of shares Company

Subsidiaries: Inkoo Shipping Oy Ab, Inkoo, Finland 3 000 60.0 EUR 504 564 506 582 506 582Kalkproduktion Storugns AB, Lärbro, Sweden 30 000 66.7 SEK 300 000 366 273Nordkalk AB, Lärbro, Sweden 250 000 100.0 SEK 25 000 000 34 238 288 34 238 288Nordkalk AS, Vasalemma, Estonia 15 000 100.0 EEK 15 000 000 4 849 832 4 849 832Nordkalk GmbH, Lübeck, Germany 1 100.0 EUR 50 000 50 000 50 000Nordkalk i Köping AB, Stockholm, Sweden 100 000 100.0 SEK 10 000 000 1 662 861Nordkalk i Luleå AB, Stockholm, Sweden 2 500 100.0 SEK 250 000 27 936Nordkalk Miedzianka S.A., Miedzianka, Poland 1 746 541 100.0 PLN 17 465 410 35 136 759 35 136 759Nordkalk Sp. z o.o., Cracow, Poland 74 000 100.0 PLN 37 000 000 10 409 353 10 409 353Ab Pargas Broborg, Pargas, Finland 1 500 100.0 EUR 2 523 297 640 297 640Suomen Karbonaatti Oy, Lappeenranta, Finland 12 495 51.0 EUR 2 101 508 3 578 740 3 578 740 Total subsidiaries 89 067 194 91 124 264

Associated companies Lohjan Energiahuolto Oy Loher, Lohja, Finland 6 23.1 EUR 50 456 171 107 304Pargas Hyreshus Ab, Pargas, Finland 1 022 34.1 EUR 1 719 82 010 71 369Pargas Vatten Ab, Pargas, Finland 22 500 50.0 EUR 378 423 384 576 472 941Taftøy Kalk AS, Taftøy, Norway 5 000 50.0 NOK 5 000 000 600 432 600 432 Total associated companies 1 067 189 1 252 046

Other companies: Archipelagia Golf Ab Oy, Pargas, Finland 10 0.0 EUR 1 682 20 523 20 523OOO Kamennyi Lev, St Petersburg, Russia 1 100.0 RUR 200 000 0Köpings Företagarforum AB, Köping, Sweden 1 0.1 SEK 5 000 554Lappeenrannan Kerho Oy, Lappeenranta, Finland 15 0.0 EUR 0 138 138Lappeenrannan Urheilutalo, Lappeenranta, Finland 34 0.0 EUR 0 0 0Lohjan Puhelin Oy, Lohja, Finland 5 0.0 EUR 84 135Pargas Idrotts- och ungdomsgård Ab, Pargas, Finland 1 500 0.0 EUR 12 614 12 816 12 816Pargas Telefon Ab, Pargas, Finland 4 100 0.0 EUR 2 758 10 061 10 061Päijät-Hämeen Puhelinyhdistys , Lahti, Finland 17 0.0 EUR 0 1 293 1 293AS Rocca al Mare Suurhall, Tallinn, Estonia 4 0.1 EEK 40 9 587Savonlinnan Puhelinyhdistys, Savonlinna, Finland 9 0.0 EUR 3 027 3 252 3 252Specialty Minerals Nordic Oy Ab, Lappeenranta, Finland 11 680 4.7 EUR 330 394 1 434 643 1 434 643Suur-Savon Sähkö Oy, Mikkeli, Finland 250 0.0 EUR 420 86 86Vaasan Läänin Puhelin Oy, Ylistaro, Finland 2 0.0 EUR 27 342 342Vakka-Suomen Puhelin Oy, Uusikaupunki, Finland 9 0.0 EUR 151 1 170 1 170Vasa Telefon Ab, Vaasa, Finland 2 0.0 EUR 27 740 740Verdalskalk AS, Verdal, Norway 30 10.0 NOK 3 000 000 456 983 456 983Viljavuuspalvelu Oy, Mikkeli , Finland 6 490 13.0 EUR 109 154 101 779 101 779 Total other companies 2 043 825 2 054 101

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Note 10 Current assets 1000 euro

Inventories Group Parent Company Dec 31, 2004 Dec. 31, 2003 Dec 31, 2004 Dec. 31, 2003 Materials and supplies 18 800 15 720 9 781 Finished goods and work in progress 17 968 17 418 9 365 Advance payments 1 14 0 Total 36 769 33 152 19 146

Short-term receivables Group Parent Company Dec 31, 2004 Dec. 31, 2003 Dec 31, 2004 Dec. 31, 2003 Accounts receivable Group 2 734 Associated companies 58 80 58 Others 29 208 28 339 12 170 Total 29 266 28 418 14 962 Prepaid expences and accrued income Group 2 069 Others 4 118 2 078 3 523 Total 4 118 2 078 5 592 Other receivables Others 2 442 5 145 5 16 773 Total 2 442 5 145 5 16 773 Summary Group 4 803 Associated companies 58 80 58 Others 35 768 35 562 15 698 16 773 Total 35 826 35 642 20 559 16 773 Specifi cation of prepaid expenses and accrued income, external Financial items 1 178 Tax receivables 3 006 84 2 868 Others 1 111 816 655

Total 4 118 2 079 3 523

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Note 11 Change in shareholders’ equity 1000 euro Group Parent Company 2004 2003 2004 2003 Share capital Jan.1 1 000 0 1 000 8Share issue 1 000 992Share capital Dec. 31 1 000 1 000 1 000 1 000 Capital loan Jan.1 49 000 0 49 000 0Increase 5 755 49 000 5 755 49 000Capital loan Dec. 31 54 755 49 000 54 755 49 000 Net profi t/loss for previous years Jan.1 2 585 0 8 529 -6Translation differences 1 321 -3 485 Other changes 422 -353 -4 Net profi t/loss for previous years Dec. 31 4 328 -3 838 8 525 -6 Net profi t/loss for the period 12 526 6 423 -2 098 8 535 Total shareholders’ equity 72 609 52 585 62 182 58 529

Distributable equity Net profi t/loss for previous years 4 328 -3 838 8 525 -6Net profi t/loss for the period 12 526 6 423 -2 098 8 535Equity share of untaxed reserves -5 729 Other non-distributable equity -185 -191 Total distributable equity 10 940 2 395 6 427 8 529

SHAREHOLDERS OF NORDKALK CORPORATION Ownership % Quantity Ahlström Capital Oy 26.2 * 261 650 Funds managed by CapMan 26.2 261 650 Åbo Akademi University Foundation 8.0 79 838 The Veritas Group 7.7 77 398 The Alandia Group 7.7 77 398 Svenska litteratursällskapet i Finland r.f. 6.4 63 854 Furuvik Invest Ab 5.8 58 049 Nordkalk’s management 4.7 47 601 Stiftelsen Eschnerska Frilasarettet 1.9 19 350 Rettig Group Ltd 1.9 19 350 Stiftelsen Brita Maria Renlunds minne 1.0 9 675 William Thurings stiftelse 1.0 9 675 K.H. Renlunds stiftelse 1.0 9 675 Petter och Margit Forsströms stiftelse till 0.5 4 837 Karl och Olivia Forsströms minne Total 100.0 % 1 000 000 shares

* 0.2% is owned by Ahlström Capital’s management.

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Note 12 Financing

The fi nance structure of Nordkalk aims to be balanced. It consists of equity, two capital loans of joint value of 54.7 MEUR, a debenture loan of 40 MEUR, a vendor note of 20 MEUR, a bank loan of 31.5 MEUR and a committed credit line of 104.5 MEUR. At the end of 2004 a reserve of 19.5 MEUR of the line was unused. The present fi nancing arrangements are valid up to 2008-2009.

Note 13 Provisions 1000 euro Group Parent Company Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003

Provision for fi nancial costs 5 378 Provision for restructuring 946 1 139 Provision made for future environmental responsibilities 727 728 151 Total 1 673 7 245 151

Note 14 Long-term liabilities 1000 euro Group Parent Company Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003

Loans from fi nancial institutions 118 054 85 346 109 500 35 000Pension fund loans 2 247 2 260 Deferred tax liabilities (Note 7) 17 208 17 213 Other interest-bearing liabilities 62 816 122 652 60 000 61 300Other non interest-bearing liabilities 130 162 130 Total 200 456 227 633 169 630 96 300 Long-term interest-bearing liabilities 183 118 210 258 169 500 96 300

Repayments of long-term liabilities Year 2-5 Over 5 Year 2-5 Over 5 Loans from fi nancial institutions 117 482 572 109 500 Pension fund loans 2 247 Deferred tax liabilities (Note 7) 17 208 Other interest-bearing liabilities 62 179 637 60 000 Other non interest-bearing liabilities 130 130 Total 179 661 20 795 169 500 130

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Not 15 Short-term liabilities 1000 euro

Short-term non interest-bearing liabilities Group Parent Company Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003 Accounts payable Group 864 Associated companies 15 15 Others 17 664 16 588 7 327 Total 17 679 16 588 8 206 Advances received Others 33 34 Total 33 34 Accrued expenses and deferred income Group 1 Others 19 660 13 571 13 434 5 413 Total 19 660 13 571 13 435 5 413 Other non interest-bearing liabilities Group contribution 136 Others 6 771 8 815 2 648 1 Total 6 771 8 815 2 648 137 Summary Group 865 Group contribution 136 Associated companies 15 15 Others 44 128 39 008 23 409 5 414 Total short-term non interest-bearing liabilities 44 143 39 008 24 289 5 550 Short-term interest-bearing liabilities Repayment of long-term liabilities Others 12 007 3 213 7 000 Other interest-bearing liabilities Group 1 000 Others 76 2 202 4 Total short-term interest-bearing liabilities 12 083 5 415 8 000 4 Total short-term liabilities 56 226 44 423 32 289 5 554 Specifi cation of accrued expenses and deferred income, external Sales related items 1 004 749 259 Personnel costs 5 920 4 283 3 493 Guarantee liabilities 90 90 Taxes 498 936 Financial items 9 174 6 497 9 120 5 413 Others 2 974 1 106 472

Total 19 660 13 571 13 434 5 413

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Note 16 Pledged assets, contingent liabilities and leasing contracts 1000 euro

Group Parent Company Dec. 31, 2004 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2003

Pledged assets Real estate mortgages as security for own debts Loans from fi nancial institutions 116 500 40 106 116 500 Mortgages 199 740 199 801 198 782 Other mortgages Mortgages 554 551 Total mortgages 200 294 200 352 198 782 Other pledged assets Other pledges 130 007 129 574 128 156 Total other pledged assets 130 007 129 574 128 156 Pledged assets for other own liabilities than debts Real estate mortgages 959 959 Other mortgages 34 34 34 Pledged assets, total 331 294 330 918 326 972

Contingent liabilities Guarantees: For subsidiaries 11 383 For associated companies 269 269 269 For others 901 1 000 0 Pension fund liability 45 45 Other contingent liabilities 52 Total 1 215 1 366 11 652

Leasing contracts In accordance with current leasing contracts leasing fees during the next years will amount to: Next 12 months 5 991 4 344 Later 29 972 26 309 Total 35 963 30 653

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Note 17 Adjustment for fi nancial leasing in Nordkalk Group

The effects of recording fi nancial leasing contracts in the balance sheet as assets and liabilities and the leasing charges as depreciation, repayments and interest expenses:

MEUR Operating profi t Financial items Profi t before extra- ordinary items Income statement 2004 2003 2004 2003 2004 2003 As shown in the Income Statement 37.9 34.0 -17.5 -18.5 20.4 15.5Adjustment for interest expenses included in leasing charges 1.1 1.1 -1.1 -1.1 Adjusted profi t 39.0 35.1 -18.6 -19.6 20.4 15.5 Fixed assets Liabilities Balance sheet total Balance sheet 2004 2003 2004 2003 2004 2003 Balance Sheet values as shown 258.8 259.5 256.7 272.1 344.2 343.1Residual value of leased assets 34.7 28.8 29.9 28.8 34.7 28.8Adjusted Balance Sheet 293.5 288.3 286.6 300.9 378.9 371.9

Solvency (%) According to the Financial Statement 24.9% 18.6% After adjustments in the Income Statement and in the Balance Sheet 22.7% 17.2%

Note 18 Nominal values of derivative instruments 1000 euro Dec. 31, 2004 Dec. 31, 2003 Nominal value Foreign exchange forward contracts 83 296 76 347 of which closed contracts 1 763 Forward contracts of electricity 10 117 11 994 Interest rate swap 87 000 87 000 Market value Foreign exchange forward contracts -2 886 1 435 Forward contracts of electricity -98 1 255 Interest rate swap -931 623

The principle observed in calculating market value:

Foreign exchange forward contracts, forward contract of electricity and interest rate swap are valued at market values on the balance sheet date.

Derivative instruments are used to reduce currency, purchase and interest risk of the Group.

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Note 19 Financial Risk Management

The fi nancial policy of Nordkalk states, that Nordkalk protects part of its signifi cant equity positions in foreign subsidiaries, namely Swedish crowns and Polish zlotys. In accordance with the Board’s deci¬sion both currencies are hedged by currency forwards up to 75 per cent of the total equity. The degree of hedging depends on market prospects for the two currencies. The main principle is to avoid risk and operate on a long-term basis. Translation differences are recorded under equity.

Nordkalk also uses currency forwards to protect half of its operating net currency position for the next 6 month period. Hedging is done on monthly basis.

Electricity forwards are used to guarantee prices for Nordkalk’s budgeted electricity needs. Hedging is based on minimum and maximum degrees of protection. The maximum degree decreases for long periods. For the 52-week period following the time of reporting the maximum degree of protection is 80 per cent.

Interest rate swap agreements are used to manage interest rate risks. Nordkalk protects the majority of its interest costs by substituting variable rates of interest for fi xed rates.

The market value at the end of the reporting period of currency and electricity forwards and interest rate swaps is reported in quarterly and annual reports.

Calculation of Financial Ratios

Return on capital employed (ROC), %Profi t before extraordinary items + fi nancial expenses x 100 Balance sheet total - non interest-bearing liabilities, average over the year

Return on equity (ROE), %Profi t before extraordinary items - taxes in the income statement x 100Shareholders’ equity + minority interest, average over the year

Interest coverageOperating profi t + fi nancial incomeInterest expenses

Value addedOperating profi t + personnel costs + depreciationPersonnel on average

Gearing, %Interest bearing liabilities - cash and bank balances - other interest-bearing receivables x 100Shareholders’ equity + minority interest

Solvency ratio, %Shareholders’ equity + minority interest x 100Balance sheet total - advances received

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Five-years review 2004 2003 2) 2002 1) 2001 1) 2000 1)

From income statement Net sales MEUR 270.6 259.8 252.0 215.9 202.8 change % 4.1 3.1 16.7 6.5 8.2 foreign sales % 34.4 35.1 33.7 35.7 35.9 Operating profi t MEUR 37.9 34.0 35.2 24.1 20.3 % of net sales % 14.0 13.1 14.0 11.2 10.0 Profi t before extraordinary items MEUR 20.4 15.5 20.0 18.0 15.7 % of net sales % 7.6 6.0 7.9 8.3 7.8 Profi t before taxes and minority interest MEUR 20.4 15.5 16.4 4.5 15.2 % of net sales % 7.6 6.0 6.5 2.1 7.5 Net profi t/loss for the period MEUR 12.5 6.4 8.1 -0.1 7.9 From balance sheet Fixed assets MEUR 258.8 259.5 225.2 223.9 209.6 Inventories MEUR 36.8 33.2 29.3 30.0 28.5 Other current assets MEUR 48.6 50.4 46.2 43.3 53.2 Minority interest MEUR 13.2 11.2 11.7 9.0 8.5 Equity MEUR 72.6 52.6 202.0 201.6 199.8 Interest-bearing liabilities MEUR 195.2 215.7 21.3 20.1 15.1 Non interest-bearing liabilities MEUR 63.2 63.6 65.6 66.6 67.9 Balance sheet total MEUR 344.2 343.1 300.7 297.2 291.3 Financial ratios Gross capital expenditure MEUR 22.3 22.0 29.4 33.0 49.1 % of net sales % 8.2 8.5 11.7 15.3 24.2 Depreciation MEUR 24.5 23.4 22.2 21.2 19.3 Research and development costs MEUR 3.5 4.5 4.5 3.9 3.7 % of net sales % 1.3 1.7 1.8 1.8 1.8 Capital employed CB MEUR 281.0 279.5 235.1 230.7 223.4 Return on capital employed % 13.7 13.4 15.3 11.0 10.4 Return on equity % 22.0 10.6 13.6 14.0 9.5 Gearing % 216.3 318.3 4.8 4.1 -1.3 Interest coverage times 2.3 2.1 4.3 3.3 3.1 Solvency ratio excl capital loan % 9.0 4.3 37.9 37.2 37.2 Solvency ratio incl capital loan % 24.9 18.6 37.9 37.2 37.2 Per employee Net sales 1000 euro 205 195 188 151 156 Value added 81 76 74 60 59 Wages and salaries 34 33 31 28 29 Profi t before extraordinary items 16 12 15 13 12 Personnel on average 1 317 1 330 1 341 1 433 1 302 Personnel at year end 1 288 1 310 1 311 1 308 1 435 1) Old Nordkalk Group 2) NK-Holding Group

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to the shareholders of Nordkalk CorporationWe have audited the accounting records and the financial statements, as well as the administration by the Board of Directors and the President of Nordkalk Corporation for the year ended 31 December 2004. The financial statements prepared by the Board of Directors and the President include the report of the Board of Directors, consolidated and parent company income statements, balance sheets, cash flow state-ments and notes to the financial statements. Based on our audit we express an opinion on these financial statements and the company’s administration.

We have conducted our audit in accordance with Finnish Generally Accepted Auditing Standards. Those standards require that we plan and perform the audit in order to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall finan-cial statement presentation. The purpose of our audit of the administration has been to examine that the Board of Directors and the President have complied with the rules of the Finnish Companies Act.

In our opinion, the financial statements, showing a profit of EUR 12,526.000 in the consolidated income statement and a loss of EUR 2,098.000 in the par-ent company income statement, have been prepared in accordance with the Finnish Accounting Act and other rules and regulations governing the prepara-tion of financial statements in Finland. The financial statements give a true and fair view, as defined in the Accounting Act, of both the consolidated and par-ent company result of operations, as well as of the financial position. The financial statements can be adopted and the members of the Board of Directors and the President of the parent company can be dis-charged from liability for the period audited by us. The proposal made by the Board of Directors on how to deal with the result is in compliance with the Finnish Companies Act.

Helsinki, 27 January 2005

KPMG OY AB

Sixten NymanAuthorized Public Accountant

Auditors’ report

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Board of Directors 2004

Chairman of the BoardBjörn Mattsson b. 1941Lic. Phil.,Honorary CounsellorChairman of the Board, Patria Plc, Member of the Board, Hartwall Ltdand Åbo Akademi University Foundation, Member of the Nordic Advisory Board, DresdnerKleinworth-Wasserstein Ltd

Morten Ahlström b. 1943M.Sc. (Econ.)Chairman of the Board, Ahlström Capital OyChairman of the Board, Quartona Ltd, Member of the Board, Enics AG and Å&R Carton AB

Jan Inborr b. 1948B.Sc. (Econ.)President and CEO, Ahlström Capital OyChairman of the Board, Vacon Plc and Enics AG Member of the Board, Ahlstrom Corporation, Å&R Carton AB and Åbo Akademi University Foundation

Management Group

Christer Sundström b. 1943M.Sc. (Chem.)President, NordkalkEmployed by the company since 1974

Gunilla Bergmann b. 1956B.Sc. (Econ.) Communications DirectorEmployed by the company since 1998

Kjell Bärtzner b. 1943M.Sc. (Econ.)Managing Director, Nordkalk AB, SwedenEmployed by the company since 1971

Jarmo Ellmén b. 1953M.Sc. (Econ.)Financial DirectorEmployed by the company since 2003

Eelis Eskelinen b. 1953M.Sc. (Eng.)Director, Paper PigmentsEmployed by the company since 1980

Paavo Nikkari b. 1947M.Sc. (Agr.)Director, Carbonate FinlandEmployed by the company since 1981

Kim Nordell b. 1959M.Sc. (Econ.)Director, Business Control and ReportingEmployed by the company since 1983

Esa Tikka b. 1953M.Sc. (Econ.)Director, Poland & GermanyEmployed by the company since 1980

Tarmo Tuominen b. 1962M.Sc. (Geol.)Director, Industrial LimeEmployed by the company since 1982

Kari Vainio b. 1955LL.M.Director, legal affairs and personnelEmployed by the company since 1993

Jukka Järvelä b. 1969M.Sc. (Econ.)Partner, CapManChairman of the Board, Tokmanni Oy and Tamore Group Oy, Member of the Board, Tamore Oy andEspe Group Oy

Orvo Siimestö b. 1943M.Sc. (Econ.)Senior Advisor, CapManMember of the Board, Lumene Oy

Christoffer Taxell b. 1948LL.M.Chancellor of Åbo Akademi University, Chairman of the Boards of Finnair Plc, Confederation of Finnish Industries, Åbo Akademi University Foundation and Föreningen Konstsamfundet;Member of the Board, Raisio Group Plc, Sampo Plc,Stockmann Plc and Boliden AB, Finnish Business and Policy Forum (EVA), the Research Institute of Finnish Economy (ETLA), Member of the Investment Committee of the Svenska Litteratursällskapet

Orvo Siimestö (back row from left), Christoffer Taxell, Jan Inborr, Jukka Järvelä (front row from left), Björn Mattsson and Morten Ahlström

Board of Directors andManagement Group

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33

Group Structure

Nordkalk Oyj AbpFinland, Pargas

Nordkalk ABSweden, Gotland 100%

Nordkalk ASEstonia, Vasalemma 100%

Nordkalk GmbHGermany, Lübeck 100%

Nordkalk Sp. z o.o.Poland, Cracow 100%

Nordkalk Miedzianka S.A.Poland, Piekoszow 100%

Inkoo Shipping Oy AbFinland, Inkoo 60%

Suomen Karbonaatti Oy Finland, Lappeenranta 51%

Specialty Minerals Nordic Oy AbFinland, Helsinki 5%

Verdalskalk ASNorway, Verdal 10%

Other important companies

Kalkproduktion Storugns AB(KPAB), Gotland 67%

OOO Kamennyi LevRussia, St. Petersburg 100%

* Nordkalk Miedzianka S.A. was merged into Nordkalk Sp. z o.o. on 1 March 2005

*

*

33

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34

Personnel Report 2004

34

Maarit Visaheimo, Mine Surveyor (left), Jukka Viitala, Mining Supervisor and Tomas Österman, charger

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35

Personnel 2004At year-end 2004 Nordkalk employed 1288 people (2003: 1310). Of these 20 per cent were women and 80 per cent men. Hourly-paid workers formed 66 per cent and administrative personnel 34 per cent of the total. Almost two thirds of the personnel in Finland and Sweden and more than half in Poland have been in Nordkalk’s employ for more than ten years. This indi-cates not only a high level of commitment but also that Nordkalk has a great deal of professional know-how as a result of considerable experience.

In Sweden the division manufacturing carbonate prod-ucts was incorporated at the end of the year into the Industrial Lime division. Simplified and more efficient administration will mean a small reduction in jobs and for some workers new tasks have been found elsewhere in Nordkalk. It was decided to sell Nordkalk’s lake-liming operations in spring 2005 to a new company with the consequent transfer of personnel. Nordkalk owns 19.5 per cent of the new company, Movab AB.

The personnel in Poland numbered 276 at the end of 2004 (2003: 299). The process of merging Nordkalk’s Polish operations, which was started last year, will be completed on 1 March 2005, when Nordkalk Mied-zianka S.A. will be merged with Nordkalk Sp. z o.o.

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Page 36: Annual Report 2004 - nordkalk.pl · ground and crushed limestone, enriched calcite, and quick and slaked lime. Its range of products also includes dolomite products and the rare mineral

36

In Finland and Estonia 22.5 per cent and in Sweden 32 per cent of the personnel are over 55 years of age. The figures for employees over 50 are 36 per cent in Finland, 47.5 per cent in Estonia and 46 per cent in Sweden This means that a large proportion of Nordkalk’s skilled workers, and with it Nordkalk’s know-how, will retire in the not-so-distant future. For this reason the 55+ programme was begun in spring 2002 and continues.

The goal of the 55+ programme is that - Nordkalk’s ageing workers will be able to continue working as well-motivated and fit individuals up to the age of retirement- the level of Nordkalk’s know-how will be maintained and used efficiently throughout the corporation- Nordkalk’s attraction as a good employer will improve further

The practical measures in the 55+ programme have included not only the courses for foremen but also in-depth discussions on development with employees over the age of 55 in Finland and Sweden and vol-untary health checks for employees in Finland. Two workplace health promotion days were held in 2004 in Finland as part of the 55+ programme. The purpose of these was to spend a day with different kinds of invig-orating activities and to provide workers with informa-tion about how to maintain their own level of fitness.

The 55+ programmeDeveloping the personnel The purpose of the courses given to personnel is to ensure Nordkalk’s high level of professional know-how and skill and to develop it further on a systematic and long-term basis. The professional competence and know-how of Nordkalk’s employees is being improved continuously as an integral part of the work both at the local sites and by Nordkalk’s in-house training programmes and courses given by external organisers. In addition to bettering special professional know-how the programmes are intended to raise levels of leader-ship and management as well as of information tech-nology expertise and knowledge of foreign languages.

The programme for foremen and supervisors that was begun in spring 2003 was brought to completion in 2004. In 2004 the programme continued with some 70 foremen and supervisors in Finland and Sweden attending. By the end of the year all those hold-ing the position of foreman or supervisor in Finland and Sweden had taken part in the programme. The programme was planned in accordance with develop-ment needs noted in an earlier personnel survey. These included the need to provide feedback, the ability to listen to the employees and to use what they heard in improving everyday operations. The programme pro-vided the participants with the skills needed to handle different kinds of interaction and especially develop-ment discussions.

In Poland the emphasis in personnel training has been on improving individual know-how. Earlier pro-grammes designed for groups have been followed by tailor-made courses to suit individual needs. Language courses in English and German have been organised as part of the programme. Administrative arrangements were harmonised in 2004, and practices consistent with those already in force elsewhere in Nordkalk were introduced. This change meant intensive accounting and computer training throughout the whole organisa-tion. In autumn a two-day training course was held during which the personnel of Nordkalk’s two Polish companies, now to be merged, honed their cooperation skills.

The Finnish Ministry of Education approved in February 2004 the further qualification in mining that Nordkalk and other companies in the field had helped to evolve. Two-year apprentice training leading to the new qualification was started at Tytyri, Lohja, in autumn 2004. These apprentice courses will give Nordkalk an opportunity to transfer the present per-sonnel’s know-how and skills to a younger generation and thus ensure that Nordkalk will also have a skilled workforce in the future.

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37

Measures designed to improve the health of the personnel, its capacity to work and its well-being are coordinated in Finland by the Industrial Health and Safety work group, the members of which represent Nordkalk’s personnel administration and industrial safety and occupational health bodies. The group’s aim is to further cooperation between the different bodies and to harmonise practices at Nordkalk’s different plants.

An industrial safety and work environment guide was published in the spring. During the year several directives pertaining to health and safety were issued, for example on how to prevent harassment, on the purchase of various kinds of safety equipment and a general directive on industrial health care. A joint health and safety day was held at the different Finnish plants for the first time. The day’s programme included a “zero tolerance for industrial accidents” project and studying the new directives.

The principal goal of the health and safety measures is to prevent industrial accidents and occupational dis-ease and illnesses. The aim for accidents and industrial diseases has been set at zero. In Lappeenranta this goal is being promoted by the “zero tolerance for industrial accidents” project, which will continue until the year 2006. Training and courses in attitude improvement have been organised for the entire personnel, and the importance of industrial safety has been emphasised on various occasions. During the first year of the project the number of accidents fell even though the goal of reducing them by half was not achieved. The number of sick-leave absences fell significantly. The number of reported near-accidents more than doubled, which was better than the target set.

Local legislation determines health and safety meas-ures in all the countries where Nordkalk operates. In Sweden documents required by the Work Environment Authority (Systematiskt Arbetsmiljöarbet) regulations have been collated in a single database containing directives for the whole company and all the directives drawn up for each individual production plant. They cover various issues concerning the work environment from recreation to protective equipment. Courses in health and safety, e.g. fire and rescue exercises, are held in all the countries where Nordkalk operates. At Köping in Sweden last year the routines and risks involved in using coal in the production process were studied.

Industrial accidents and absencesThere were no accidents involving the death of a worker in any of the countries where Nordkalk oper-ates. Industrial accidents leading to three or more days off from work last year numbered 29 in Finland (20 in 2003). In Sweden the number of industrial accidents was 12 (12) and in Poland 4 (4). Unlike Finland the figures for the other two countries include accidents that did not lead to absences from work. Not a single accident was reported from Estonia last year. In spite of ageing among a relatively large proportion

of Nordkalk’s employees very few of them take early retirement, and the number of sick-leave absences is considerably lower than the average for Finnish indus-try. The percentage of absences among hourly paid workers at Nordkalk’s Finnish sites was 3.3 in 2004 (5.8 in 2003). The proportion of sick-leave absences was 3.0 (5.3) per cent and of those resulting from acci-dents 0.3 (0.5) per cent. The latest figures for Finnish industry as a whole indicate that the total number of absences in 2003 was 6.1 per cent, of which 5.7 per cent were due to sickness and 0.4 per cent to accidents. In Sweden the number of absences totalled 5.7 (5.1 in 2003) per cent. These figures include both workers and administrative personnel.

A lively year for industrial health careAll Nordkalk’s employees in Finland, Sweden and Estonia are covered by the company’s industrial health care. Only Pargas has its own health-care centre whereas elsewhere Nordkalk buys these services from outside. The Pargas health-care centre coordinates health care at all the Finnish locations and cooperates with personnel administration in matters concerning industrial safety. A general directive on industrial health care published in spring ensures that the same benefits are available at all the Nordkalk locations in Finland and that statistical reporting follows the same pattern. In Sweden the contents of agreements con-cerning health care differ slightly from place to place.

In addition to prophylactic health-care measures laid down by law Nordkalk also offers its employees in Finland general-practitioner services and basic labora-tory services. The treatment of illness is predominantly oriented towards health care; in other words, atten-tion is directed mainly towards illnesses that affect a worker’s ability to do his job. The general directive on industrial health care extended services somewhat to include certain specialist fields when it comes to an ill-ness that affects a person’s ability to perform his tasks.

The year 2004 was a busy one for Nordkalk’s indus-trial health care. Nordkalk’s health care participates actively in the 55+ programme and offers elderly employees voluntary medical check-ups. It was involved in organising recreation days for the 55+ pro-gramme, the main emphasis of which was on exercise and a proper diet. In addition to individual rehabilita-tion programmes preparations were put in motion for two rehabilitation groups. They will start their work at the beginning of 2005 with Nordkalk employees from different plants taking part.

In Sweden a survey was carried out the year before last among the personnel about industrial health care. It showed that the majority of the personnel were satis-fied with the services they received even though their expectations of corporate health care were high. On the one hand, the employees expected preventive measures such as support for leisure-time exercise and hobbies and, on the other, they wanted health-care activities to be extended to cover illnesses other than those related to work.

Health and safety

37

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38

Environmental Report 2004

38

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Nordkalk extracts and refines limestone. The impact on the environment of these activities is monitored and evaluated on a continuous basis in accordance with the Nordkalk Group’s environmental policy. This report provides an account of how Nordkalk’s operations affect the environment together with the measures that have been taken or are planned to reduce any adverse environmental effects.

Nordkalk aims at sustainable development, and the environmental implications of this are taken into account when the company sets up its strategic aims. Nordkalk endeavours to develop its products and processes in order to keep the environmental impact of its extraction and refining operations to a minimum. Diverse monitoring leads to an increased awareness of environmental risks; in order to achieve sustain-able development improvements are necessary all the time. All Nordkalk’s production plants in Finland and its entire operations in Sweden have been awarded ISO 14001 environmental certificates, which ensures continuous improvements in environmental work. Nordkalk’s environmental plans form part of the com-pany’s annual strategic planning, and environmental measures are followed up continuously by means of regular audits. Responsibility for production-related environmental matters lies with the division managers.

The Nordkalk intranet has set up an environmental website, and decisions, reports and plans are posted on the net in electronic form. In this way Nordkalk strives to increase the personnel’s awareness of and respon-sibility for the environment and involve as many as possible in its environmental efforts.

The site at Lappeenranta has updated its local envi-ronmental report. It covers the environmental state of the whole of the industrial site, where there are other companies operating as well as Nordkalk.

In addition to the measures taken to protect the envi-ronment during production, Nordkalk also offers envi-ronmental training to its customers. When drawing up contracts with entrepreneurs and sub-contractors Nordkalk now requires an assurance that its environ-mental demands will also be met. The sub-contractors are checked regularly in this connection by means of environmental audits.

Nordkalk operates at various locations around the Baltic Sea, and the company tries actively to reduce its emissions and effluents all the time. Nordkalk is involved in many research and development projects that aim to improve the state of the environment. The recycling of carbon dioxide and waste disposal are just two examples of how Nordkalk works with several Finnish research institutions in this respect. Another is the liming of the Alinen watercourse at Nokia to improve the quality of the water. Nordkalk also partici-pates in the Pro Saaristomeri (Pro Archipelago Sea) project, the aim of which is to improve the quality of the archipelago seawater. At Louhi, for example, Nordkalk cooperates with the South Savo environ-mental centre, the town of Savonlinna and nearby local authorities in a project designed to maintain the right oxygen balance in the upper course of Enovesi, which forms part of the Saimaa lake system. Since 1977 Sweden has carried out the world’s largest liming project. Nordkalk has been closely involved in devel-oping the project and also takes an active part in it.

Nordkalk participates in a number of projects associ-ated with water treatment and composting. Wastewater treatment in sparsely populated areas is under con-sideration in the Ravinnesampo project led by the Finland’s Environmental Administration. In the Tehokomp-project the effect of Nordkalk Velox in intensified composting is studied in cooperation with the universities of Jyväskylä and Helsinki and the State Technical Research Center. Green Know How is a project, where Nordkalk together with some other companies from south-western Finland is developing the environmental business activities in the area.

The main principles of Nordkalk’s environmental policy

Values and aims- sustainable development - compliance with environmental legislation and regulations - identification of environmental impact of operations - information about development, measures and results

Continuous improvement- environmental impact taken into account when developing products and processes- environmental plans form part of strategic planning and cover environmental aspects, aims and investment- investment plans include an evaluation of the environmental impact of the investment- environmental work is audited on a regular basis

39

Our aim is sustainable development

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Environmental impactSome of Nordkalk’s production plants are situated in towns and built-up areas, which means that the surroundings place great demands on operations. Nordkalk extracts and refines limestone at 28 locations in Finland, Sweden, Estonia and Poland.

The most significant aspects of Nordkalk’s operations are noise, vibration and dust. Other disadvantages in conjunction with extraction include surplus stone and various waste materials from the production processes.

Production processesLimestone is extracted from the bedrock in either quarries or underground mines. The stone is trans-ported for rough handling and sorting, after which it goes on to be processed further elsewhere. These operations cause vibration, noise and dust. Quarrying results in very obvious changes in the landscape. Nordkalk’s extraction processes result not only in the stone that is actually used by Nordkalk, but also in surplus stone which can be used as macadam. Ground water seeps by way of fissures in the bedrock into the mines, and surface water collects in the quarries. This may affect the level of the ground water in the area.

Carbonate products consist of crushed, ground or sifted limestone, i.e. calcium carbonate (CaCO

3). The

grinding of the limestone is a dry process so that dust formation poses a major environmental problem in plants where this is done. The dust emissions are kept to a minimum by passing them through filters.

The different uses for carbonate products include soil improvement, cleaning flue gases at power plants and raising the alkaline level in water. It is also commonly used in animal feeds and as a filler in asphalt, paper and plastics.

Nordkalk refines calcite and wollastonite from the raw stone extracted from the mine at Lappeenranta. The processed calcite is then further refined in Nordkalk’s subsidiary Suomen Karbonaatti Oy to make paper pigments. In the refining process the water used is in a mainly closed system. If necessary, water can be siphoned from the basins under controlled con-ditions into a nearby stream, where the water from the local water treatment plant also flows.

Quicklime is produced by heating crushed and sorted limestone to a temperature of some 1000ºC in either a rotary or shaft kiln. The limestone (CaCO

3) breaks

down into calcium oxide, or quicklime (CaO), and car-bon dioxide (CO

2). Coal, oil or gas may be used to fuel

the process. Quicklime is grainy or floury in appear-ance. It is sifted into different fractions or ground to a fine flour. Flue gases from the process contain oxides of nitrogen (NOx), carbon dioxide (CO

2) and varying

amounts of sulphur dioxide (SO2). The manufacturing

process also releases dust into the air and to reduce this the emissions are passed through an electric or textile filter. The filter has to be extremely sensitive.

The products are used in the manufacture of iron and steel, for processing sulphite ores, for pulp and paper pigment, for soil stabilisation and water cleaning, etc. Quicklime is also used in coal-fired power plants to clean flue gases.

Slaked limeSlaked, or hydrated, lime is made by adding water to quicklime. The calcium dioxide reacts with the water to produce calcium hydroxide (Ca (OH)

2),

slaked lime, which is a dry, powder-like flour, light in colour. The process of slaking lime releases heat and steam. Efficient dust removal, however, means that the quantity of particles discharged into the atmosphere is negligible.

Slaked lime is used in local authority and industrial water purification plants, for cleaning flue gases and as a building material.

Energy consumptionThe process of crushing, grinding and sifting carbon-ate products consumes electricity. Moreover, liquid gas or fuel oil is used for drying carbonate products. The specific consumption of energy in 2004 was 0.27 GJ per tonne of produced carbonate product. Energy analyses have identified potential ways of saving energy in the manufacture of carbonate products. These include, for example, changing the air intakes for the drums used to dry the products and reducing the temperature at certain stages of the process. Daily maintenance routines and careful regulation can also affect the consumption of energy, of course.

The process of burning lime requires high tempera-tures. Calcination of the limestone takes place in lime kilns at a temperature of about 1000ºC. The heat comes from coal, fuel oil, coke gas or natural gas. Coke gas is a by-product from the steel-making industry and can be used as a fuel in the lime kilns if they are situated in the immediate vicinity of a steel mill. Using other fuels to replace coal and oil in the lime industry is difficult. The impurities in the fuels permeate the lime products, the purity demands for which are extremely strict. Moreover, the thermal val-ues for most renewable fuels are in general low so that the quantities of fuel required increase and necessitate major changes in the processes. The specific energy used in the production of quicklime has dropped since the end of the 1990’s, and in 2004 it was 5.6 GJ per tonne of lime.

Nordkalk’s emissions of carbon dioxide emanate from its consumption of energy but carbon dioxide is also released into the atmosphere during the actual process

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41

of making quicklime. Carbon dioxide is released from calcium carbonate under the influence of heat and the final product is calcium oxide, quicklime. Theoretical calculations indicate that about 33 per cent of the carbon dioxide produced by Nordkalk comes from the fuel used and about 66 per cent from the calcination process. Quicklime is an irreplaceable raw material for both environmental and industrial purposes. In some of the processes employed by Nordkalk’s customers, such as the manufacture of PCC used for paper pigments, for example, the carbon dioxide released when the lime is burnt is reintroduced into the product when recarboni-sation occurs.

Energy-saving agreementNordkalk’s three largest plants in Finland - at Lappeenranta, Pargas and Tytyri, Lohja - joined the Ministry of Trade and Industry’s voluntary agreement on energy saving in the year 2000. At those locations where the energy-saving agreement is not in force efforts are nonetheless made to follow the same norms and reduce consumption of energy. At each of these three locations authorised energy inspection consult-ants have carried out analyses to see how energy might be saved in both production processes and construction technology. As a result of the analyses each location has drawn up a plan for more efficient energy-saving meas-ures in which attention focuses on operating methods that affect energy consumption. An example of the most important measures that have been put into practice to save energy is the way in which waste heat from the lime kilns is recovered. This heat is then fed into the local district heating system or used in Nordkalk’s own production.

Emissions tradingDuring the year under review national legislation was passed in accordance with the EU directive on emis-sions trading. Trading started in the EU region on 1.1.2005 and the first stage, covering the years 2005-2007, applies only to carbon dioxide emissions. From early 2005 planning starts on the extent and conditions of emissions trading in the EU member countries for the years 2008-2012. Then, other greenhouse gases than just CO

2 may be included in the system. Nordkalk’s

representatives take part in different interest groups whose opinions will be passed on to the authorities.

Nordkalk’s lime plants in Finland, Sweden and Estonia applied for and were granted emissions rights for the period 2005-2007. During the year routines for moni-toring and reporting emissions were drawn up, and from the beginning of 2005 they will be followed in accordance with legislation.

41

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Specifi c Emissions in Air

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42

Environmental products Nordkalk also develops and markets products for envi-ronmental care. Different kinds of limestone-based applications can be used to prevent and remedy envi-ronmental problems. Sales of environmental products account for 13 per cent of Nordkalk’s total turnover. A considerable proportion of this is used for cleaning drinking water and wastewater.

Nordkalk Velox has been evolved with the specific purpose of finding more efficient ways of composting and combating the unpleasant odours often associated with treating refuse and sewage. Nordkalk Velox is particularly well suited for use at composting plants and in open-pit composts that handle bio-waste and different wastewater and industrial sludges.

Nordkalk Filtra is a range of products that make it possible to clean water in situations where traditional methods are unsuitable. The products are best suited for use in small units that are not served by the com-munal wastewater system. The Nordkalk Filtra range of products is extremely timely, especially in Finland, since a new law places a duty on private households in sparsely populated areas to clean their wastewater.

The acidification of watercourses results primarily from air pollution in the form of acid rain. Liming helps to return the quality of the water to what it was before acidification. Nordkalk’s long-term work stretching over several decades has won the company worldwide renown as an expert on liming lakes and watercourses. Sweden has the world’s largest state-funded liming programme in the world. Nordkalk participates actively in this programme in its capacity as an expert on the liming of watercourses and forests.

Using fossil fuels to generate energy leads to air pol-lution through acid emissions of sulphur dioxide, for example, which reacts with moisture in the air to form sulphuric acid. When this falls in the form of acid rain, the soil becomes acidic, which endangers nature. Acid soil hinders plants from taking up nutrients from the soil, and fish cannot survive in acid lakes.

Flue gases from power plants can be neutralised effectively before they are led into the chimneys. The flue gases are cleaned with the aid of limestone-based products or absorbents. The most common absorbents used are quicklime (Nordkalk’s QL products) and slaked lime (Nordkalk SL products).

The sulphur dioxide (SO2) in flue gases from coal-fired power plants can be reduced by means of ground lime in scrubbers or by semi-wet technology with slaked lime. Both methods can reduce the amount of sulphur dioxide by more than 90 per cent.

When waste is incinerated, emissions of chlorine and fluorine (HCl, HF) exceed those of sulphur dioxide. Limestone-based products can be used to reduce these, too. In some plants the flue gases are scrubbed with water and the resulting acid water neutralised by means of ground lime and/or slaked lime. Slaked lime can also be injected into the flue-gas duct of the plant before particle separation. The incineration of waste is very common in Sweden and Central Europe, for example.

42

Nordkalk Velox is used for odour control and for enhancing the composting process in windrow com-posting of sewage sludge.

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All Nordkalk’s production plants have development projects in progress, and routines for monitoring and supervising these are being improved all the time. The most important aims of Nordkalk’s environmental measures are to reduce dust emissions and noise and to make more efficient use of limited resources, such as stone and fuels. Our environmental management system has led to many improvements. Safer handling of waste oil and more efficient sorting of general waste may be mentioned as examples. Ways of using surplus stone form part of the environmental programmes for the mines and quarries.

In 2004 the total amount of environmental investments in Nordkalk was EUR 1,5 million.

DustReducing dust emissions is one of the most important environmental measures in Nordkalk’s operations, and efforts to cut the amounts of dust released are being continuously improved. By scattered dust emissions is meant that extremely fine particles are released into the environment with the wind, principally from loading bays and the wheels of vehicles. By improving traffic arrangements at Nordkalk’s different industrial sites the amount of dust released can be reduced and traffic safety improved. Many of Nordkalk’s plants have purchased sweeping machines, covered their yards with asphalt, increased wetting, built sound bar-riers and planted trees. As far as possible water from the company’s own mines or quarries is used for wet-ting dusty areas and roads. The effects of the measures taken are monitored, and the majority of the plants measure the dust fall-out at their location regularly. The measurements taken at Sipoo, for example, show that the amount of dust in the air at the plant has been reduced to a quarter of what it was in the early 1980’s.

Nordkalk’s lime kilns, crushing and grinding plants and loading bays have been equipped in recent years with new electric and textile filters. In Köping, Sweden, a new filter was installed in 2003 and the amount of dust in the air has been reduced to a sixth compared to the previous years. These have efficiently cut the amounts of particles released. In 2004 new filters were installed at Lappeenranta, Sipoo, Tytyri and Vimpeli, Finland, for example.

The use of compressed air at Tytyri and Vimpeli have reduced emissions of dust and CO

2 and also cut fuel

costs. The loading bays at the Sipoo and Vimpeli plants have been equipped with dust filters.

The project designed to reduce the problems associ-ated with electric filters on rotary kilns has brought results. The number of operational interruptions and their length have decreased, and at the Lappeenranta lime works, for example, dust emissions caused by such interruptions have been reduced by as much as 60 per cent. In addition to more advanced use of existing filter technology, inspection of the quality of the coal used has also been stepped up.

Transport by trucks at Uddagården, Sweden has been replaced by a conveyor system. At Rakke, Estonia, an open elevator has been replaced by a covered trans-porter, which has reduced dust emissions both indoors and outdoors.

Ditching and surfacing of the loading area have reduced dust emissions at the Rakke plant. Yards and roads have likewise been surfaced at Köping.

The international R&D project financed by the EU to reduce the amount of fine particles at Storugns on Gotland was brought to completion. As a result the amount of explosives used has fallen, which has also led to a reduction in emissions, albeit not of fine par-ticles. The technology acquired for the project and the links with experts help in the continuing work.

NoiseNordkalk’s plants make continuous improvements in efforts to cut the noise from machines and other equip-ment. Another important consideration is to up-date work routines so that exposure of both workers and the environment to noise can be reduced. Measurements of noise levels in recent years have shown that they have decreased markedly.

At Storugns a harbour basin closer inshore has been dredged. This means that loading can now be done closer to the production process, thus reducing noise levels in the vicinity.

At Köping it has been possible to reduce the noise from unloading stone and at the same time dust emissions by introducing rubber covering. A sound barrier has also been built around the plant area.

Insulating the crushing equipment at Storugns has reduced the amount of noise and dust. Other measures to reduce noise levels include sound insulation of the screening equipment and silo and installing silencers to three filters.

At Lappeenranta the conveyor at the lime factory was exchanged for a quieter model.

WaterThe state of both ground and surface water is subject to continuous monitoring. Analyses carried out at Lappeenranta, for example, indicate that the water released into watercourses from the industrial site consists mainly of rainwater and is of good quality. Nordkalk also monitors the state of ground water; there are some twenty measuring points within the Lappeenranta industrial site. The measurements show that the water is of good quality. The level of the ground water has not dropped even though mining continues at increasingly lower levels.

At Lappeenranta, most of the process water from Suomen Karbonaatti Oy - normally about 80% - is led into the sedimentation basins. The rest of the water

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Environmental improvement 2004

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flows through SKOY’s own sedimentation and oxida-tion basins into the nearby watercourses. Because the amount of process water has decreased clearly, the percentage of solids is also noticeably smaller. In Poland Miedzanka supplies water to nearby domes-tic households, and the Tytyri plant in Finland provides the local water mains with ground water.

District heating and energyEfforts to recover waste heat from the lime kilns continued in 2004. The Pargas and Tytyri plants now save 30 per cent more waste heat compared with the period before the installation of technical innova-tions. The heat recovered is used in the towns’ district heating networks, and the amount supplied has increased in step with the amounts of heat recovered. Corresponding amounts of heat at both Pargas and Lohja were previously produced by means of fuel oil. This added to the greenhouse effect because of the car-bon dioxide released into the atmosphere. This invest-ment was made mainly in 2002 but the increase in the amount of heat supplied to the district heating system is already reflected in production figures for 2003 and 2004. Waste heat from the Lappeenranta lime kiln is also distributed in the form of district heating and exploited in the plant’s own production processes.

More efficient production methods in the Lappeenranta mine have in two years reduced fuel consumption by 13 per cent per tonne of stone extracted. Also at Kurevere in Estonia it has been possible to markedly reduce fuel consumption even though production has increased.

The Siikainen plant has adopted a new computer programme designed to save energy and increase efficiency. This will lead to further improvements. The gains made by the programme will also be exploited as far as possible at other Nordkalk plants.

New projects are in progress at the different locations to reduce fuel consumption. Storugns, for example, in renewing its machine park, has gone in for trucks and wheel loaders that meet stringent requirements on emissions and fuel consumption.

Other measuresThe annual quantity of surplus stone produced at Nordkalk’s different extraction sites depends on geo-logical factors and the extraction plans. Nordkalk aims to reduce the stone that has to be stored and to find ways of exploiting it usefully. In Finland more than 60 per cent of surplus stone is now sold for use in other purposes.

Sales of dust recovered from the electric filters installed in the lime kilns at Pargas, Lappeenranta, Tytyri and Louhi continue, and the plant at Köping in Sweden succeeded once again in making use of the entire amount of filter dust recovered.

Nordkalk has put great effort into ways of storing surplus products in mining space that is no longer in use. This cuts dust considerably and means that the storage areas above ground do not have to be extended. Underground mining space no longer required at Louhi and Tytyri constitutes an important final dump for waste, e.g. fly and gypsum ash from power sta-tions, according to the local environmental centre. At many sites the areas close to the quarries where sur-plus stone is stored have been landscaped by planting trees. Landscaping at Storugns on Gotland is regarded as a part of the production process and is carried out as quarrying advances. The Sipoo plant has continued its programme of landscaping the shore area, and at Vampula, Finland, a decision has been reached on planting trees on the surplus stone area near the main road. It is estimated the area will be covered by trees within 10 years.

Landscaping work on the old feldspar quarry at Alavus has been in progress in the years 2003-2004. The steep walls have been blasted and surplus stone used to build gentle slopes. Turf has been laid to speed up the root-ing of vegetation.

Waste handling and measures to improve cleanliness at the different plant locations have been intensified. The amount of hazardous and unsorted waste at the Pargas quarry fell by 15 per cent last year, for example.

Unexpected incidents affecting the environmentAn oil leak originating from the time before Nordkalk acquired the site was noted at Storugns in conjunction with construction work. The leak was reported to the authorities and the polluted area cleaned up in accord-ance with current regulations. The area where the leak occurred was surrounded by a cellar vault, which prevented the oil from spreading.

Environmental achievement of the year 2004Nordkalk’s internal award of merit for environmental achievement for 2004 went this time to a project team for its work on improving logistics at the Luleå plant in Sweden. Transport trips at Luleå have fallen by about 20% since 2001. Less handling of the material means reduced emission of dust, less noise and reduced fuel consumption. It also has a positive impact on the quality of the material.

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A considerable part of waste heat from the lime kilns is recovered. About 90% of this energy is supplied to district heating networks and the rest is used in the own production.

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Emissions and By-ProductsFINLAND 2002 2003 2004

Emission in air CO2 (t) 696 725 677 084 715 166 particles (t) 207 200 211 SO2 (t) 75 101 107 NOx (t) 502 381 406Emission in water solid material (t) 5 19 20 1)

BOD7 ATU (t) 1 1 1By-product filter dust (t) 52 530 53 409 54 352 * utilized (t) 37 624 29 551 26 194 slaking residue (t) 16 028 14 081 17 033 * utilized (t) 9 372 10 968 8 411 surplus stone (t) 1 782 470 2 253 181 1 448 785 *utilized (t) 1 304 445 1 533 212 1 128 657 refining waste (t) 183 264 199 975 272 621 * utilized (t) 39 446 31 500 60 859 kiln waste (t) 11 526 11 496 14 067 * utilized (t) 538 987 5 587 * mine filling (t) 470 9 107 2 056Environmentally hazardous waste oils+greases (t) 58 42 63

SWEDEN 2002 2003 2004

Emission in air CO2 (t) 415 109 459 763 448 118 particles (t) 116 113 35 2)

SO2 (t) 50 47 111 3)

NOx (t) 306 290 288By-product filter dust (t) 37 607 27 727 16 421 * utilized (t) 36 012 25 917 15 026 slaking residue (t) 1 716 1 319 1 332 * utilized (t) 1 716 1 319 1 332 surplus stone (t) 669 407 1 036 638 980 801 * utilized (t) 329 936 377 453 470 700 washing sludge (t) 26 000 26 000 28 000 kiln waste (t) 1 994 1 526 1 591Environmentally hazardous waste oils+greases (m3) 444 506 378 4)

ESTONIA 2002 2003 2004

Emission in air CO2 (t) 34 583 38 123 41 210 particles (t) 182 321 299 SO2 (t) 2 2 2 NOx (t) 17 29 30By-product filter dust (t) 2 999 2 100 1 600 * utilized (t) 2 999 2 100 1 600 kiln waste (t) 557 850 2 364 surplus stone (t) 61 597 0 0Environmentally hazardous waste oils+greases (m3) 4 6 3

POLAND 2002 2003 2004

Emission in air CO2 (t) 7993 9082 10252 particles (t) 12 22 30 SO2 (t) 6 8 6 NOx (t) 20 23 28By-product surplus stone (t) 333623 0 98928 *utilized (t) 333623 225147 200000Environmentally hazardous waste oils+greases (m3) 19 23 19

The tables are a summary of measured and calculated figures.1) Lappeenranta, Ihalainen industrial area2) The new electric filter at the Köping lime kiln has reduced particle emissions.3) Depends on variations in the sulphur content of the limestone and increased production.4) The figure includes waste oil from ships visiting the Storugns harbour.

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FinlandNordkalk CorporationSkräbbölevägenFI-21600 PargasTel. +358 (0)204 55 6999Fax +358 (0)204 55 6038

SwedenNordkalk ABKungsgatan 74, Box 544SE-101 30 StockholmTel. +46 (0)8 677 5300Fax +46 (0)8 10 0145

EstoniaNordkalk ASVasalemmaEE-76101 HarjumaaTel. +372 6713 266Fax +372 6713 148

PolandNordkalk Sp. z o.o.ul. Starowislna 13,15PL-31-038 KrakowTel. +48 (0)12 428 65 80Fax +48 (0)12 429 50 05

GermanyNordkalk GmbHAn der Untertrave 81 - 83DE-23552 LübeckTel. +49 (0) 451 397 09 73Fax +49 (0) 451 397 09 84

www.nordkalk.com