6-K 1 sanitec_6k.txt SANITEC INTERNATIONAL SAL FORM 6-K securities and exchange commission Washington, D.C. 20549 Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 Commission file number 333-102846 For the month of December 2003 Sanitec International S.A. 19-21 boulevard Prince Henri L-1724 Luxembourg RC Luxembourg B 82 055 Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F Form 20-F /X/ Form 40-F / / Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes / / No /X/ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes / / No /X/ Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes / / No /X/ Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Sanitec International S.A. (Registrant) By: /s/ Timo Lehto ------------------------------------ Name: Timo Lehto Title: Principal Financial Officer and Director 01 December 2003 FORWARD-LOOKING STATEMENTS This report includes forward-looking statements. All statements other than statements of historical fact included in this report, including, without limitation, those regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, and future developments in the markets where we participate or are seeking to participate, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "anticipate", "believe", "continue", "could", "estimate", "expect", "forecast", "intend", "may", "plan", "potential", "predict", "project", "should", or "will" or the negative of such terms or other comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. These risks, uncertainties and other factors include, among other things, those listed under "Risk Factors" in our annual report on Form 20-F, filed with the SEC on June 24, 2003, as well as those included elsewhere in this report. Important factors that could cause our actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others: o our ability to service our existing indebtedness; o our ability to fund our future operations and capital needs through borrowing or otherwise; o our ability to implement successfully our business strategy, including our ability to integrate our recently acquired businesses, exploit cross-selling opportunities, pursue growth opportunities and restructure our production network, and our ability to realize financial benefits from cost-saving initiatives; o our expectations with respect to European economic and general industry conditions; o our ability to establish and maintain production and supply channels; o our ability to compete effectively in a highly competitive environment; and o our expectations about growth in demand for our products. We do not intend to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf, are expressly qualified in their entirety by cautionary statements contained throughout this report. As a result of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. INTERIM FINANCIAL REPORT JANUARY -- SEPTEMBER 2003 SANITEC (UNAUDITED) 25 November 2003 Page 2 of 26 TABLE OF CONTENTS Highlights.....................................................................3 Basis of Financial Presentation................................................4 Tables.........................................................................5 Consolidated Statements of Operations, January - September 2003.............5 Consolidated Balance Sheets, Assets.........................................6 Consolidated Balance Sheets, Shareholders' Equity and Total Liabilities.....7 Consolidated Statements of Cash Flows, January - September 2003.............8 Consolidated Statements of Cash Flows, July - September 2003...............11 Consolidated Statements of Operations, July - September 2003...............13 Consolidated Segment Information...........................................14 Operating and Financial Review................................................15 Quantitative and Qualitative Disclosures About Market Risk....................24 25 November 2003 Page 3 of 26 Highlights THIRD QUARTER 2003 o THIRD QUARTER 2003 NET SALES OF EUR 226.7 MILLION WERE DOWN AGAINST THE SAME QUARTER IN 2002 BY EUR 10.2 MILLION OR 4.3% IN TOTAL. EXCLUDING CURRENCY EXCHANGE RATE EFFECTS, 1.9% LESS SALES WERE RECOGNIZED. o EBITDA OF EUR 33.6 MILLION OR 14.8% OF NET SALES FOR THE THIRD QUARTER IS EUR 1.9 MILLION OR 5.3% LOWER THAN AT THE SAME TIME LAST YEAR. ADJUSTED FOR RESTRUCTURING AND INTEGRATION CONSULTING CHARGES, THE EBITDA MARGIN INCREASED TO 15.7% OF NET SALES COMPARED TO 14.8% LAST YEAR ON A COMPARABLE BASIS. o OPERATING PROFIT FOR THE THIRD QUARTER DECREASED TO EUR 12.2 MILLION OR 5.4% OF NET SALES COMPARED TO EUR 13.2 MILLION OR 5.6% DURING THE THIRD QUARTER OF 2002. EXCLUDING RESTRUCTURING AND INTEGRATION CONSULTING CHARGES, OPERATING PROFIT INCREASED TO EUR 14.2 MILLION OR 6.3% OF NET SALES FOR THE QUARTER COMPARED TO 5.3% LAST YEAR. o TOTAL CAPITAL EXPENDITURE WAS EUR 10.4 MILLION OR 4.6% OF NET SALES FOR THE QUARTER. THIS REPRESENTS AN INCREASE OF EUR 0.6 MILLION COMPARED TO LAST YEAR. o EUR 16.6 MILLION IN CASH WAS GENERATED AND OUR NET DEBT WAS REDUCED BY EUR 20.0 MILLION IN THE THIRD QUARTER OF 2003. o OUR REVOLVING CREDIT FACILITY OF EUR 50 MILLION WAS UNDRAWN AND WE WERE IN FULL COMPLIANCE WITH OUR LOAN COVENANTS. YEAR TO DATE SEPTEMBER 2003 o SEPTEMBER YEAR TO DATE NET SALES WERE EUR 713.8 MILLION, WHICH IS EUR 31.7 MILLION OR 4.3% BELOW THE COMPARABLE NINE-MONTH PERIOD IN 2002 IN TOTAL. CURRENCY EXCHANGE RATE EFFECTS ACCOUNT FOR EUR 18.9 MILLION OR 59.6% OF THE TOTAL VARIANCE. o EBITDA FOR THE PERIOD WAS EUR 106.3 MILLION OR 14.9% OF NET SALES COMPARED TO EUR 109.0 MILLION OR 14.6% OF NET SALES IN THE SAME PERIOD OF 2002. ON A COMPARABLE BASIS EXCLUDING RESTRUCTURING AND INTEGRATION CONSULTING CHARGES, EBITDA INCREASED TO EUR 115.2 MILLION OR 16.1% OF NET SALES COMPARED TO EUR 110.5 MILLION OR 14.8% OF NET SALES IN THE FIRST NINE MONTHS OF 2002. o OPERATING PROFIT FOR THE NINE-MONTH PERIOD INCREASED TO EUR 40.9 MILLION OR 5.7% OF NET SALES COMPARED TO EUR 36.6 MILLION OR 4.9% OF NET SALES DURING THE SAME PERIOD IN 2002. ON A LIKE TO LIKE BASIS EXCLUDING RESTRUCTURING AND INTEGRATION CONSULTING CHARGES, OPERATING PROFIT INCREASED TO EUR 49.7 MILLION OR 7.0% OF NET SALES WHICH IS A 30.8% IMPROVEMENT OVER THE SAME TIME LAST YEAR. o TOTAL CAPITAL EXPENDITURE WAS EUR 22.8 MILLION OR 3.2% OF NET SALES FOR THE NINE-MONTH PERIOD OF 2003 WHICH IS A DECREASE OF EUR 26.8 MILLION OR 54.0% COMPARED TO LAST YEAR. o THE NET INDEBTEDNESS WAS EUR 687.5 MILLION EXCLUDING THE SHAREHOLDER AND PIK LOANS WHICH IS EUR 4.0 MILLION OR 0.6% LOWER THAN ON SEPTEMBER 30, 2002. 25 November 2003 Page 4 of 26 BASIS OF FINANCIAL PRESENTATION Sanitec International S.A. is a limited liability company established and registered with the Commercial Register in Luxembourg. Sanitec International S.A. was incorporated on May 8, 2001 and remained dormant until activated to issue the EUR 260 million High Yield Senior Notes in May 2002. Sanitec International S.A. became the parent company of Pool Acquisition Netherlands B.V. on April 3, 2002 when all the shares in Pool Acquisition Netherlands B.V. were transferred as contribution in kind to Sanitec International S.A. The ultimate parent company of Sanitec International S.A. is Pool Acquisition S.A., a limited liability company established and registered with the Commercial Register in Luxembourg. Pool Acquisition Netherlands B.V. was a limited liability company established and registered with the Commercial Register in the Netherlands. The company was incorporated on May 10, 2001 and became the parent company of Sanitec Oy, formerly Pool Acquisition Helsinki Oy on November 14, 2001. Pool Acquisition Netherlands B.V. was liquidated in November 2002. Sanitec Oy, formerly Pool Acquisition Helsinki Oy was established and registered as a limited liability company with the Commercial Register in Finland on April 6, 2001 in order to acquire Sanitec Oyj. This acquisition took place on June 7, 2001. On March 31, 2002, Sanitec Oyj was merged with its parent company Sanitec Oy, formerly Pool Acquisition Helsinki Oy, which changed its name to Sanitec Oy, in English Sanitec Corporation, as of the same date. The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in Finland ("Finnish GAAP"). Certain information and footnote disclosures normally included in financial statements presented in accordance with such generally accepted accounting principles have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of interim financial information have been included. All such adjustments are of a normal recurring nature. These unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2002. Accounting principles and valuation methods applied under Finnish GAAP when preparing the interim financial statements as of September 30, 2003 are materially the same as those applied for the year ended December 31, 2002. The preparation of financial statements in conformity with Finnish GAAP requires the management of the Group to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The consolidated financial statements, including the quarterly information disclosed, include the financial statements of the parent company and its wholly and over 50% owned subsidiaries at the end of the financial period concerned. The acquisition of Sanitec Oyj by Sanitec Oy, formerly Pool Acquisition Helsinki Oy on June 7, 2001 was accounted for as a purchase business combination. Restructuring provisions related to the Group management's plans for the Sanitec Oyj acquisition are included as a component of goodwill. Such goodwill is amortized according to plan over a period of 20 years, and the goodwill amortization is disclosed as a separate item in the consolidated statements of operations. 25 November 2003 Page 5 of 26 Tables

(1) Sanitec International S.A. was dormant with no operational activity until April 3, 2002. 25 November 2003 Page 6 of 26

(1) Sanitec International S.A. was dormant with no operational activity until April 3, 2002. 25 November 2003 Page 7 of 26

(1) Sanitec International S.A. was dormant with no operational activity until April 3, 2002. 25 November 2003 Page 8 of 26

25 November 2003 Page 9 of 26 1) EUR 23.8 million relates to refinancing costs of Junior loan into the High Yield Senior notes and other capitalized debt issuance costs. EUR 3.8 million refers to the buy-out of Sanitec's minority shareholders. 25 November 2003 Page 10 of 26 (Continues from previous page)

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25 November 2003 Page 12 of 26 (Continues from previous page)

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(Amounts in millions of euro) SANITEC INTERNATIONAL S.A. -------------------------------------------- (unaudited) (unaudited) (unaudited) Period from Period from Period from January 1 - April 1 - July 1 - March 31, June 30, September 30, 2003 2003 2003 ----------------------------------------------------------------------------- Net Sales Bathroom Ceramics 155.6 155.1 145.9 Bath and Shower Products 68.4 72.4 64.6 Vacuum Sewage Systems 17.9 17.7 16.2 ----------------------------------------------------------------------------- TOTAL NET SALES 241.9 245.2 226.7 EBITDA Bathroom Ceramics 25.7 24.2 23.7 Bath and Shower Products 10.3 9.1 8.5 Vacuum Sewage Systems 1.5 1.9 1.4 ----------------------------------------------------------------------------- TOTAL EBITDA 37.5 35.2 33.6 Net sales by region Central Europe (1) 43.6 39.0 43.1 South-West Europe 41.0 39.7 33.7 UK and Ireland 24.5 26.4 24.9 Benelux 21.7 20.4 17.7 Southern Europe 21.3 24.5 18.8 Central Eastern Europe (1) 14.6 16.5 19.4 North-East Europe 52.5 56.4 48.1 Export 4.8 4.6 4.8 Evac 17.9 17.7 16.2 ----------------------------------------------------------------------------- TOTAL 241.9 245.2 226.7 (1) Czech Republic and Slovakia have been reclassified from Central Europe to Central Eastern Europe. 25 November 2003 Page 15 of 26 Operating and Financial Review The discussion and analysis below provides information which we believe is relevant to an assessment and understanding of our consolidated financial position and results of operations. This discussion and analysis should be read in conjunction with the consolidated financial statements and related notes. The following discussion and analysis may contain management's evaluations and statements reflecting our views on future performance and may constitute forward-looking statements. These views may involve risks and uncertainties that are difficult to predict and may cause our actual results to differ materially from the results discussed in such forward-looking statements. Readers should consider that various factors, including changes in general economic conditions, the nature of competition, developments in distribution, industry trends, influence of currency fluctuations and inflation, and other factors which may or may not be discussed below could affect our performance. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The discussion below in this subsection includes a comparison of the consolidated historical interim financial statements of Sanitec International S.A. for the period from January 1, 2003 to September 30, 2003 and for the period from January 1, 2002 to September 30, 2002, both in accordance with Finnish GAAP. NOTE! FIGURES IN BRACKETS INDICATE AMOUNTS FOR THE CORRESPONDING PERIOD IN THE PREVIOUS YEAR. FOR FURTHER COMPARISONS, PLEASE REFER TO THE INCLUDED FINANCIAL STATEMENTS. NET SALES THIRD QUARTER 2003 CONSOLIDATED. Net sales for the third quarter 2003 were again strongly influenced by currency exchange effects and the sluggish economic situation in the Central European region, Germany in particular, and the Netherlands in the Benelux region. Net sales for the quarter were EUR 226.7 million (236.9 million), a decrease of 4.3% or EUR 10.2 million. Currency exchange rate effects, mostly from the Pound Sterling and Polish Zloty, contributed EUR 5.6 million or 54.9% of the total variance for the quarter. Excluding the currency exchange impact and a non-recurring item of EUR 0.9 million in the prior year in the Central European region net sales decreased EUR 3.7 million or 1.6%. Stronger sales in the U.K., particularly in the DIY (Do-It-Yourself) market, and a positive product mix in the Southern European region were not enough to offset the continuing slump in the building and renovation sectors, specifically in Germany and the Netherlands. YEAR TO DATE SEPTEMBER 2003 CONSOLIDATED. Year to date September net sales reflect the continuing economic stagnation in the Central European region, Germany in particular, the Netherlands in the Benelux region, and a slowdown in export sales most notably to Russia. Net sales were EUR 713.8 million (745.5 million), a decrease of 4.3% or EUR 31.7 million. Currency exchange rate effects, mostly from the Pound Sterling and Polish Zloty, contributed EUR 18.9 million or 59.6% of the total variance for the first nine-month period of the year. Excluding the currency exchange impact and a non-recurring item of EUR 3.1 million in the prior year in the Central European region, net sales decreased EUR 9.7 million or 1.3% against the first nine-month period of 2002. Brand repositioning in the Southern European region, solid performance of the DIY market in the U.K., and the introduction of new products in the South Western European region have helped ease the effects of the economic situation in Germany and the Netherlands as well as the sales shortfall to the Russian market. BATHROOM CERAMICS THIRD QUARTER 2003 Bathroom ceramics net sales for the third quarter 2003 were EUR 145.9 million (149.5 million), a decrease of EUR 3.6 million or 2.4% over the third quarter of 2002. With exclusion of currency exchange rate effects and a non-recurring item in the Central European region in the prior year, Bathroom Ceramic net sales increased by EUR 0.8 million or 0.5% over the same quarter last year. 25 November 2003 Page 16 of 26 YEAR TO DATE SEPTEMBER 2003 Bathroom ceramics net sales for the nine-month period of 2003 were EUR 456.6 million (469.7 million), a decrease of EUR 13.1 million or 2.8% over the first nine months of 2002. With exclusion of currency exchange rate effects and a non-recurring item in the Central European region in the prior year, Bathroom Ceramic net sales grew by EUR 1.5 million or 0.3% over the same period last year. Increased sales volumes in the U.K., the South West, and the Southern European regions as well as higher ASPs than in the previous year helped offset the poor results in the Central European and Benelux regions. BATH AND SHOWER PRODUCTS THIRD QUARTER 2003 Bath and shower products net sales for the third quarter of 2003 were EUR 64.6 million (69.5 million), a decrease of EUR 4.9 million or 7.1% compared to the third quarter of 2002. Excluding currency exchange rate effects, Bath and shower product sales finished at EUR 3.5 million or 5.0% behind the same quarter last year. This is due mostly to weak demand in the Central European region, specifically Germany, as well as slow sales to the Russian market. YEAR TO DATE SEPTEMBER 2003 Bath and shower products net sales for the first nine-month period of 2003 were EUR 205.4 million (222.5 million), a decrease of EUR 17.1 million or 7.7% compared to the same period in 2002. Excluding currency exchange rate effects, Bath and shower product net sales finished EUR 13.0 million or 5.8% below the first nine months of 2002. Contributing to this variance are the tough market conditions in the Central European region, Germany, driven by the economic situation, as well as poor sales performance in Russia. VACUUM SEWAGE SYSTEMS THIRD QUARTER 2003 Vacuum sewage systems net sales for the third quarter of 2003 finished at EUR 16.2 million (17.9 million), a decrease of EUR 1.7 million or 9.5% compared to the respective quarter in 2002. Excluding currency exchange rate effects of EUR 0.8 million, Vacuum sewage systems net sales were lower by EUR 0.9 million or 5.0% below the same period last year. Somewhat stronger sales in the train sector were not enough to offset the negative development in marine and aviation sectors. YEAR TO DATE SEPTEMBER 2003 Net sales until September finished at EUR 51.8 million (53.3 million), a decrease of 1.5 million or 2.8% compared to the same period of 2002. Excluding currency exchange rate effects of EUR 3.3 million, the first nine-month period of 2003 outperformed the first nine months of 2002 by EUR 1.8 million or 3.4%. Slight improvements in the train business were again not enough to offset the flat marine and aircraft markets. OPERATING EXPENSES THIRD QUARTER 2003 Operating expenses, excluding depreciation and amortization, finished the quarter EUR 8.0 million or 4.0% lower than in the third quarter of 2002 at EUR 194.4 million (202.4 million). Solid gains from savings programs and restructuring efforts implemented in 2002 and continuing in 2003 materialized notably in the third quarter of 2003. Cost of products sold - materials and consumables was EUR 74.7 million (78.3 million), which is 4.6% or EUR 3.6 million below the third quarter of 2002. Improvements made by the strategic purchasing initiative started in 2002 were partially offset by a product mix shift and higher than usual energy costs. Personnel costs improved against the third quarter of 2002 ending at EUR 65.9 million (68.3 million) which is EUR 2.4 million or 3.5% lower than the prior year. Excluding restructuring charges, personnel expenses were reduced in the quarter by EUR 4.8 million or 7.0% against the third quarter of 2002. Bathroom ceramics production network restructuring and continuing execution of Sales, 25 November 2003 Page 17 of 26 General, and Administration function cost reduction plans are the primary contributors to this improvement. Cost of outside services ended the quarter at EUR 19.8 million (22.5 million) which is a solid EUR 2.7 million or 12.0% lower than in the third quarter of 2002. This decrease is mostly attributable to reductions in subcontracting services used. Other operating expenses increased slightly by 2.1% or EUR 0.7 million to EUR 34.0 million (33.3 million) compared to the third quarter of 2002. YEAR TO DATE SEPTEMBER 2003 Operating expenses, excluding depreciation and amortization, until September 2003 finished EUR 29.4 million or 4.6% lower than in the first nine months of 2002 at EUR 611.6 million (641.0 million). This reduction was due to restructuring and integration efforts started in 2002. Excluding restructuring and integration related charges, operating expenses were EUR 36.8 million or 5.8% below the first nine months of 2002. Cost of products sold - materials and consumables finished the first nine months of 2003 at EUR 225.6 million (235.4 million), which is 4.2% or EUR 9.8 million below the first nine months in 2002. The strategic purchasing savings initiative started in 2002 continued to gain momentum but was partially negated by higher energy costs and a product mix change. Personnel costs showed improvement compared to the first nine months of 2002 finishing the same period in 2003 at EUR 216.3 million (226.0 million) which is EUR 9.7 million or 4.3% lower than in the prior year. Excluding restructuring charges, personnel expenses were reduced by EUR 15.5 million or 6.9% against the first half of 2003 on a like to like basis. Factory closures resulting from the Bathroom Ceramic production network restructuring efforts and efficiency from the execution of Sales, General, and Administration functions cost reduction plans generated solid savings in the first nine-month period of the year. Costs of outside services were EUR 62.4 million (71.6 million), which is EUR 9.2 million or 12.8% lower than in first nine months of 2002. This improvement is attributable mostly to reductions in subcontracting activities group wide. Other operating expenses decreased by 0.6% or EUR 0.7 million to EUR 107.3 million (108.0 million) compared to the first nine months of 2002. Excluding integration consulting related charges, other operating expenses were reduced by EUR 2.3 million or 2.2% against the first half of 2003 on a like to like basis. Successful implementation and control of the cost reduction initiatives in the Sales, General, and Administration functions are the primary drivers behind this improvement. DEPRECIATION AND AMORTIZATION THIRD QUARTER 2003 Depreciation and amortization for the third quarter of 2003 was EUR 21.4 million, which is EUR 0.9 million or 4.0% lower than the third quarter of 2002. The expense is lower due mostly to the disposition of closed production facilities and lower capital expenditure. YEAR TO DATE SEPTEMBER 2003 Depreciation and amortization for the first nine months of 2003 totaled EUR 65.4 million (72.4 million), which is EUR 7.0 million or 9.7% lower than in the prior year. Most of the variance is due to an exceptional amortization expense of EUR 5.9 million in the second quarter of the prior year. The remainder is lower due mostly to the disposition of closed production facilities and lower capital expenditure. OPERATING PROFIT THIRD QUARTER 2003 Operating profit for the third quarter of 2003 was EUR 12.2 million (13.2 million), which is a decrease of EUR 1.0 million or 7.6% over the third quarter of 2002. In the third quarter of 2003 the operating profit margin was 5.4 % of net sales compared to 5.6% in the third quarter of the previous year. Excluding restructuring charges and integration consulting expenses, operating profit increased to 6.3% of net sales, which is EUR 1.5 million higher than in the third quarter of the prior year. 25 November 2003 Page 18 of 26 Restructuring efforts in Bathroom ceramic production and cost savings programs in the Sales, General, and Administration functions contribute to this increase. 25 November 2003 Page 19 of 26 YEAR TO DATE SEPTEMBER 2003 Operating profit for the first nine months of 2003 was EUR 40.9 million (36.6 million), which is an increase of EUR 4.3 million or 11.7% over the first nine months of 2002. In January - September 2003 the operating profit margin increased to 5.7% of net sales compared to 4.9% in January - September 2002. Excluding restructuring and integration related charges, operating profit increased to 7.0% of net sales, which is EUR 11.7 million higher than in the first nine months of the prior year. Permanent efficiency improvements from restructuring efforts in Bathroom ceramic production and cost savings program in the Sales, General, and Administration functions drive this increase in profitability. EBITDA THIRD QUARTER 2003 The EBITDA for the third quarter of 2003 was EUR 33.6 million (35.5 million) or EUR 1.9 million i.e. 5.4 % lower than in the third quarter of the prior year. Excluding restructuring and integration consulting related charges, adjusted EBITDA was EUR 0.7 million higher than at the same time last year and the margin increased from 14.8% in the third quarter of 2002 to 15.7% in the third quarter of 2003. BATHROOM CERAMICS. Bathroom ceramics EBITDA for the third quarter of 2003 was EUR 23.7 million (25.2 million), a decrease of EUR 1.5 million or 6.0%. Various improvements in the Sales, General, and Administration expenses and production efficiency gains were offset by restructuring related charges. BATH AND SHOWER PRODUCTS. Bath and shower products EBITDA for the third quarter of 2003 was EUR 8.5 million (9.0 million), down EUR 0.5 million or 5.6% from the third quarter of 2002. The strategic purchasing initiatives enacted to reduce the cost of component material were not enough to offset restructuring related charges and the decreased sales volumes especially in Germany and Russia. VACUUM SEWAGE SYSTEMS. Vacuum sewage systems EBITDA for the third quarter of 2003 was EUR 1.4 million (1.3 million) an increase of 7.7% to the third quarter of 2002. Cost control programs coupled with a slight volume increase in the train business contributed to this improved performance. YEAR TO DATE SEPTEMBER 2003 January - September EBITDA was EUR 106.3 million (109.0 million), 2.5% lower than in the prior year. Excluding restructuring and integration consulting related charges, adjusted EBITDA was EUR 4.7 million higher than at the same time last year and the margin increased from 14.8% in the first nine months of 2002 to 16.1% in the first nine months of 2003. This improvement was driven by the strategic purchasing initiatives to lower the cost of material and components, the restructuring of the Bathroom Ceramic production network to lower production costs, as well as the programs executed to lower Sales, General, and Administration expenses. BATHROOM CERAMICS. Bathroom ceramics EBITDA in January - September 2003 was EUR 73.6 million (74.3 million), decrease of EUR 0.7 million or 0.9%. Various improvements in the Sales, General, and Administration expenses and the gains made through the restructuring of the Bathroom ceramics production network compensated for the restructuring related charges in these segments in the first nine months of 2003. BATH AND SHOWER PRODUCTS. Bath and shower products EBITDA in January - September 2003 was EUR 27.9 million (31.1 million), decrease of EUR 3.2 million or 10.3% from prior year. The strategic purchasing initiatives enacted to reduce the cost of component material and various Sales, General, and Administration function cost savings were offset by the sales volume decrease as well as restructuring charges in the first nine months of the year. VACUUM SEWAGE SYSTEMS. Vacuum sewage systems EBITDA in January - September 2003 was EUR 4.8 million (3.7 million) an increase of EUR 1.1 million or 29.7% from prior year. Improvements in the train and marine sectors as well as cost control programs drive this improvement. OTHER INCOME & EXPENSES, NET 25 November 2003 Page 20 of 26 Other income and expenses, net, consists of the net of interest income and other financial income, exchange gains and losses, writedowns of financial assets, and interest expenses and other financial expenses; in other words it represents our result of net financial position. THIRD QUARTER 2003 Other income and expenses, net, increased by EUR 1.0 million or 4.4% to EUR 23.5 million (22.5 million) for the third quarter of 2003 compared to the third quarter of 2002. YEAR TO DATE SEPTEMBER 2003 Other income and expenses, net, decreased by EUR 7.4 million or 9.6% to EUR 69.6 million (77.0 million) for January - September 2003 compared to January - September 2002. The variance is driven mostly by the redemption premium for the junior loan facility in the second quarter in the prior year. INCOME TAXES THIRD QUARTER 2003 Income taxes during the third quarter of 2003 were EUR 6.3 million (4.9 million), which represents a EUR 1.4 million or 28.6% increase against the same period in 2003. Cash payments of tax in the last quarter were EUR 4.5 million (2.4 million). YEAR TO DATE SEPTEMBER 2003 Income taxes in January - September 2003 remained at the same level of the previous year and totaled EUR 18.7 million (EUR 18.5 million in January - September 2002). Cash payments of tax in the first nine months were EUR 13.9 million (EUR 11.1 million). CAPITAL EXPENDITURE THIRD QUARTER 2003 Total capital expenditure in the third quarter of 2003 was EUR 10.4 million (9.8 million), which is EUR 0.6 million or 6.1% higher than in the same quarter in the prior year. YEAR TO DATE SEPTEMBER 2003 Total capital expenditure in January - September 2003 was EUR 22.8 million (49.6 million), which is EUR 26.8 million or 54.0 % lower than in the first nine months of 2002. The majority of this decrease, EUR 22.4 million, is related to one time refinancing costs of a junior credit facility into senior notes in the second quarter of the prior year. The remaining reduction of EUR 4.4 million or 16.4% reflects the focusing of our capital spending, other than normal maintenance investments, on selected strategically vital targets only. PERSONNEL THIRD QUARTER 2003 At the end of the third quarter of 2003, Sanitec had 7,932 employees, which is 451 employees less than at the same time in 2002 and 367 people less than employed on December 31, 2002. This represents also a reduction of 98 persons compared to the second quarter of 2003. The headcount reductions resulted from plant closings in Germany and the UK and personnel reductions in the sales, general and administration areas. These reductions were partially offset by an addition of personnel in our plants in low cost regions. SUBSEQUENT EVENTS Dr. Ulrich Wohr has been appointed member of the Supervisory Board of Sanitec Oy, replacing Dr. Hanns Ostmeier. 25 November 2003 Page 21 of 26

(Amounts in millions of euro) SANITEC INTERNATIONAL S.A. ------------------------------------------ At At At March 31, June 30, September 30, 2003 2003 2003 -------------------------------------------------------------------------------- Total debt 1,154.0 1,148.0 1,144.0 (including shareholder loan and PIK loan) Cash and bank balances (-) 14.1 15.3 31.3 Shareholder loan (-) 334.3 334.3 334.3 PIK loan (-) 70.7 75.7 75.7 -------------------------------------------------------------------------------- TOTAL NET DEBT (1) 734.9 722.7 702.7 Interest bearing receivables / short-term (-) 5.5 4.9 5.5 Interest bearing receivables / long-term (-) 9.0 9.4 9.7 -------------------------------------------------------------------------------- NET INDEBTEDNESS (EXCLUDING SHAREHOLDER LOAN AND PIK LOAN) 720.4 708.4 687.5 -------------------------------------------------------------------------------- Shareholder loan (+) 334.3 334.3 334.3 PIK loan (+) 70.7 75.7 75.7 NET INDEBTEDNESS (INCLUDING SHAREHOLDER LOAN AND PIK LOAN) 1,125.4 1,118.4 1,097.5 ================================================================================ (1) We define total net debt as the total of Long term debt including current installments and current debt, less cash and cash equivalents. Subordinated indebtedness (PIK-loan and Shareholder loan) is excluded. 25 November 2003 Page 22 of 26

LIQUIDITY AND CAPITAL RESOURCES Under our senior credit facility, we are required to make the following repayments of principal through 2007 and thereafter: (Amounts in millions of euro) YEAR ------------------------------------------------ 2003 (October- December) 11.4 2004 39.2 2005 48.2 2006 58.2 2007 67.2 Thereafter 246.9 ------------------------------------------------ TOTAL SENIOR CREDIT 471.1 ================================================ 25 November 2003 Page 23 of 26 As of September 30, 2003, our total long-term debt including the PIK loan and the shareholder loan amounted to EUR 1,141.1 million, and our total short-term debt amounted to EUR 2.9 million.

Our long-term debt as of September 30, 2003 matures as follows: (Amounts in millions of euro) YEAR -------------------------------------------------- 2003 (October - December) 11.4 2004 39.2 2005 48.2 2006 58.2 2007 67.2 Thereafter 916.9 -------------------------------------------------- TOTAL LONG-TERM DEBT 1,141.1 ================================================== We expect to be able to finance these obligations and our working capital requirement through a combination of operating cash flows and borrowings under our EUR 50 million revolving credit facility under the senior credit facility which is subject to restrictive covenants. Currently, no credit is drawn from this revolving credit facility. In addition in September 30, 2003, certain of our operating subsidiaries had an aggregate of EUR 7.6 million of borrowing capacity under credit facilities of EUR 10.5 million. In view of the current, uncertain economic environment, in July 2002 we renegotiated with the syndicate of banks and financial institutions that participate in our senior multi-currency term loan and revolving credit facility the "total net debt leverage ratio covenant" of that facility. For the purpose of calculating the "total net debt leverage ratio covenant", we are allowed to adjust EBITDA by any items treated as exceptional or extraordinary and any operational expenses directly related to the acquisition of Sanitec Oyj by Sanitec International S.A. The revised covenant levels, until September 30, 2005, are set forth in the following table. 25 November 2003 Page 24 of 26 X EBITDA ------------------------------------------------------------ July 1, 2003 - September 30, 2003 4.90 October 1, 2003 - March 31, 2004 4.55 April 1, 2004 - June 30, 2004 4.25 July 1, 2004 - September 30, 2004 4.00 October 1, 2004 - September 30, 2005 3.50 We are in compliance with all our loan covenants as well as the provisions of the indenture. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risks, including adverse changes in interest rates, currency exchange rates and, to a lesser extent, commodity pricing. INTEREST RATE RISK MANAGEMENT We are exposed to interest rate risk through our debt instruments. These instruments are currently comprised primarily of the senior credit facility and certain other operating credit facilities. See section "Description of Other Indebtedness and Certain Related Agreements". We manage interest rate risk on a group-wide basis with a combination of fixed and floating interest rate financial instruments designed to balance the fixed and floating interest rates. We have entered into interest rate swaps and options to adjust interest rate risk exposure when appropriate. The table below provides, as at September 30, 2003, information about our financial instruments that are sensitive to changes in interest rates, including debt obligations, interest rate swaps and interest rate options. For debt obligations, the table presents principal cash flows by expected maturity dates and related weighted average interest rates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected (contractual) maturity dates. For interest rate options, the table shows contract amounts and respective average strike rates. 25 November 2003 Page 25 of 26

This table presents the carrying amounts (accrued interests) and estimated fair values of interest rate swaps and options. The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties.

25 November 2003 Page 26 of 26 FOREIGN CURRENCY FORWARD CONTRACTS The table below provides information, as at September 30, 2003, about our significant derivative financial instruments that are sensitive to changes in foreign currency exchange rates and their respective fair values, including carrying amounts. In the table below, the pro forma information reflects the absolute change in the estimated fair value of our foreign exchange forwards assuming the foreign exchange rates change by 10%. Our foreign exchange forward contracts generally do not exceed one year. (Amounts in millions of euro) Currency Notional Amount Fair Value Amount Proforma Change in Values -------------------------------------------------------------------------------- DKK 19.6 19.6 1.8 GBP 16.1 16.1 1.5 NOK 12.1 12.2 1.1 SEK 46.0 47.1 3.8 USD 13.9 14.3 1.0 Others 43.2 43.9 3.9 -------------------------------------------------------------------------------- TOTAL 150.9 153.2 13.1 ================================================================================ COMMODITY RISK MANAGEMENT We currently do not engage in any hedging related to risks in commodity or raw material prices. In the future, we may hedge risks related to the price of energy.

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