The year 2004 was characterised by important structural changes for Viisnurk AS. By restructuring the company aimed at improving sustainable profitability and a reinforced financial position. Today it can be said that in general, restructuring of Viisnurk has been successfully carried out.  The Furniture and Building Materials Divisions of Viisnurk AS show stable profits and development; the divisions that used to make a loss have been closed and the financial position of the company has improved during the year. Viisnurk AS cash flows from operations were 31.2 million kroons (2 million euros) for 2004, which is 18.7 kroons (1.2 million euros) more than for 2003 and the company’s loan burden decreased by 33.8 million kroons (2.2 million euros) during the year.  Whereas in 2003 the loss of the company resulted mainly both from extraordinary costs of restructuring and normal operations, the results for 2004 were largely dependent on extraordinary costs related to closure and sale of divisions. Company’s current economic activities and cash flow are positive thereby creating preconditions for rapid improvement in operations for 2005.

 

 

Net Sales and Profit

 

Viisnurk AS ended the year 2004 with the sales revenue of 347.5 million kroons (22.2 million euros). The continuing activities generated growing sales revenue during the reporting year: the turnover of the Furniture Division was 156.5 million kroons/10 million euros (an increase by 2.1%) and that of the Buildings Materials Division was 96.1 million kroons/6.1 million euros (an increase by 4.1%). Closure of the Wood Division (mid-April) and the Sports Goods Division (end of October) reduced the total turnover of the company (11,4% compared to 2003) because the turnover of these divisions did not reach that of 2003.

 

Viisnurk AS ended the year with a loss of 16.5 million kroons (1 million euros). In 2003, the loss of the company amounted to 68.8 million kroons (4.4 million euros). Just like the economic result for 2003, the loss of Viisnurk for 2004 includes significant extraordinary costs, mainly due to closure and sale of unprofitable divisions. The largest amount of the annual loss is comprised of the calculated loss from the sale of the Wood Division amounting to 14 million kroons (0.9 million euros), which was charged off in 2004. The divisions that are continuing their activities made profit in 2004: the Building Material Division ended the year with a profit of 18.5 million kroons (1.2 million euros) and the Furniture Division with 2.9 million kroons (0.2 million euros).

 

Balance Sheet and Cash Flow Statement

 

The total assets of Viisnurk AS decreased by 25.7% in the accounting period, amounting to 208.5 million kroons (13.3 million euros) at 31.12.2004. As to the assets in the balance sheet, the current assets decreased by 36.2% and the fixed assets by 18.2% compared to 2003 due to closure of divisions. On the other hand, liabilities of the company plummeted – current liabilities decreased by 36 million kroons (2.3 million euros) and non-current liabilities by 20 million kroons (1.3 million euros) or 56 million kroons (3.6 million euros) in total, i.e. by 27% compared to 2003.

 

Viisnurk AS cash flows from operations were positive with 31.2 million kroons (2 million euros) for 2004. Operations yielded in 18.7 million kroons (1.2 million euros) more compared to 2003. Operations-related investments amounted to 3.7 million kroons (0.2 million euros); proceeds from the sale of fixed assets, securities and immovable not related to the main activities of the company amounted to 9 million kroons (0.6 million euros). The balance of Viisnurk AS loans decreased by 33.8 million kroons (2.2 million euros) in 2004.

 

 

 

The Furniture Division of Viisnurk AS ended the year with the sales revenue of 156.5 million kroons (10 million euros) and a profit of 2.9 million kroons (0.2 million euros). In 2003, the division gained a profit of 6.5 million kroons (0.4 million euros) at the net sales of 153.5 million kroons (9.8 million euros). Finland, Sweden, Russia and Germany have remained the most important target markets for the Furniture Division; retail sale of furniture in Estonia via Viisnurk’s subsidiary Skano OÜ has been launched successfully.

Optimisation of the product portfolio by abandoning several technically complicated and economically unprofitable product lines and reducing difference of levels of fixed costs were the most significant developments in 2004 for the Furniture Division. Acquisition of the sales activities of a former customer Skano AG, the Swiss company with its main activities in Germany and Austria at the beginning of October, can be considered a key event. This will enable the company to better reach the end users at one of its largest target markets and apart from gaining better sales margins it will also reduce dependence on single major customers. Thereby the Furniture Division aim at stable increase of production and sales volumes and significant growth of profitability during the following periods.

 

Results of the Buildings Materials Division were excellent for 2004: it made a profit of 18.5 million kroons (1.2 million euros) at the sales revenue of 96.1 million kroons (6.1 million euros). The division gained a profit of 19.5 million kroons (1.25 million euros) at the net sales of 92.2 million kroons (5.9 million euros) last year. A slight reduction of profit was due to some increase in the prices of production inputs (wood chips, power and heat). However, the division ended the year much better than forecasted. One of the reasons behind it was the increased sales of Isotex interior finishing boards with a higher added value. Isotex-line accounted for 33.7% of the sales portfolio in 2004 compared to 28% in 2003. Production processes functioned well during the accounting year: we succeeded in reducing the stoppage time of the main line with uninterrupted cycle by approx. 10%. Future strategies in the Building Material Division first and foremost involve constant increase of the share of products with higher value, both with regard to internal finishing boards and planned new products based on basic boards.

 

 

The Sports Goods Division that used to make a loss for Viisnurk AS was closed on 29 October 2004 according to the resolution of the Supervisory Board. All division’s contracts with customers had been duly carried out by the closing day. The economic results of the Sports Goods Division for 2004 expose a loss of 11.8 million kroons (0.75 million euros) at the turnover of 61 million kroons (3.9 million euros).

The potential buyer of the assets of the Sporting Goods has been elected and negotiations for entering into a purchase-sales contract of the assets are under way.

The Wood Division of Viisnurk AS was closed on 16 April 2004 pursuant to the restructuring plan of the company. The economic results of the Wood Division for 2004 expose a loss of 18 million kroons (1.15 million euros) at the sales revenue of 33.1 million kroons (2.1 million euros).

A contract with Desparo OPÜ was signed on 22 September 2004 on sale of the assets of the Wood Division. The possession of the Wood Division was transferred to the buyer by the contract concluded under the law of obligations. Possession of the assets shall be transferred to the buyer after concluding a real right contract, which will be signed after registration of the land under the division as a separate registered immovable. Total value of the transaction is 44 million kroons (2.8 million euros). Viisnurk AS will receive a calculated loss of 14 million kroons (0.9 million euros) from the transaction, which is reported fully in the annual report for 2004.

 

 

 

 

 

 

 

 

 

 

Andrus Aljas
CFO
+372 447 8355