The nine-month net sales of Viisnurk AS in 2006 were 160.6 million kroons/10.3 mil. euros (165.9 mil. kroons/10.6 mil. euros during the same period in 2005) and the net profit amounted to 8.4 mil. kroons/536 thou. euros (7.2 mil. kroons/460 thou. euros in 2005). The total assets of Viisnurk amounted to 151.3 mil. kroons (9.7 mil euros) at the end of September 2006. The liabilities of the company accounted for 54% thereof, i.e. 81.3 mil. kroons (5.2 mil. euros).

 

3rd quarter of 2006

The net sales of the 3rd quarter of the accounting year amounted to 51.4 mil. kroons/3.3 mil. euros (47.3 mil. kroons/3.0 mil. euros in 2005) and the net profit amounted to 3.5 mil. kroons/225 thousand euros (0.5 mil. kroons/33 thousand euros in 2005).

The results of the third quarter of the company compared to the third quarter of 2005 have improved both in the Furniture Division and the Building Materials Division.

The profit of the Divisions does not reflect the general administrative costs of the corporation in the amount of 1.3 mil. kroons/84 thou. euros and the financial expenses of 565 thou. kroons/35 thou. euros that have been recorded in the report of business segments as unallocated expenses.

The turnover of the Furniture Division in the third quarter of 2006 amounted to 27.0 mil. kroons/1.7 mil. euros (25.0 mil. kroons/1.6 mil. euros during the same period in 2005) and the profit amounted to 1.8 mil. kroons/113 thou. euros (1.3 mil. kroons/84 thou. euros in 2005).

The turnover of the Building Materials Division in the third quarter of 2006 amounted to 24.4 mil. kroons/1.6 mil. euros (22.4 mil. kroons/1.4 mil. euros during the same period in 2005) and the profit amounted to 3.6 mil. kroons/231 thou. euros (1.4 mil. kroons/92 thou. euros in 2005).

 

Forecast and development

Based on the demand on the furniture and building materials market as well as the results of the activities planned in divisions, the management of the company foresees the continuation of positive trends and approves the calculated profit to be 12-14 mil. kroons (0.77-0.89 mil. euros).

In 2005, the profit of the company amounted to 9.8 million kroons (625 million euros).At the end of the third quarter the expansion plans of business units were approved by the Supervisory Board and implementing the activities of business plans began.

According to the strategy of developing the retail sale of the Furniture Division an international retail chain of furniture stores in our neighbouring markets operating under the trademark Skano shall be created. Upon creating the retail unit Viisnurk AS entered the business area of the retail of furniture and furnishing materials that is operated by a private limited company Skano, registered on 1 September 2003. Viisnurk AS holds 100% of the shares of Skano OÜ.

The production unit of the Furniture Division has concentrated on producing wooden home furniture. The trademark of the Division’s own products is Skano.

The Building Materials Division increased the production capacity of Isotex interior finishing boards as products of higher level of refinement and higher margin by installing a new production line to satisfy the increased demand in existing markets and to enter new markets. Increasing the production capacity of Isotex products helps the company to improve sales margins and give the existing production a higher value.

The Building Materials Division produces two categories of products: softboard-based building boards for insulation and soundproofing, and interior finishing boards for walls and ceilings. The trademarks of the Division’s products are Isoplaat (building board) and Isotex (interior finishing boards).

 

Divisional review:

 

(Thousand kroons)	Net sales		Profit
	2006 9m	2005 6m	2006 9m	2005 6m
Furniture Division	92,249	89,574	6,282	4,475
Building Materials Division	68,387	76,132	8,579	11,097
Terminated business activities	0	162	0	(1,230)
TOTAL	160,636	165,868	14,861	14,342
Unallocated expenses			(4,332)	(4,586)
OPERATING PROFIT			10,529	9,756
Net financial expenses			(1,705)	(2,563)
PROFIT BEFORE TAXES			8,824	7,193
Tax			(438)	0
NET PROFIT			8,386	7,193

(Thousand euros)	Net sales		Profit
	2006 9m	2005 6m	2006 9m	2005 6m
Furniture Division	5,896	5,725	401	286
Building Materials Division	4,371	4,866	548	709
Terminated business activities	0	10	0	(78)
TOTAL	10,267	10,601	949	917
Unallocated expenses			(277)	(293)
OPERATING PROFIT			672	624
Net financial expenses			(109)	(164)
PROFIT BEFORE TAXES			564	460
Tax			(28)	0
NET PROFIT			536	460

 

 

Furniture Division

The nine-month net sales of Viisnurk AS Furniture Division were 92.2 mil. kroons (5.9 mil. euros) and the economic result 6.3 mil. kroons (401 thousand euros) as a profit. As compared to the previous year the turnover of the division has increased by 2.7 mil. kroons (171 thou. euros) and the profit by 1.8 mil. kroons (115 thou. euros).

The Furniture Division’s nine-month sales in the company’s basic target markets in Finland and Russia have proceeded according to the plans and as compared to 2005 the sales have increased considerably. The Division has increased the sales of higher margin furniture that is based on the birch timber up to 89% (72% in 2005) in the accounting period. Thus, the share of pine furniture was 11% and the market demand in the respective sector is decreasing.  The company intends to further increase the share of birch furniture.

The share of furniture marketed under the Division’s own trademark Skano has also increased during the reporting period forming 22% of the division’s net sales (20% in 2005). It allows for better margins and increases sustainability in long-term perspective.

The range of products of furniture lines with higher profitability was expanded within the product portfolio of the Furniture Division in the third quarter. At the same time, developing new product lines continued both among the division’s own brands and for new subcontractors. The new furniture lines shall be introduced in various markets starting from the fourth quarter in 2006 and in the beginning of 2007. Additional opportunities for increasing sales in the existing markets are created through the above activities as well as the preconditions for entering new markets. Among potential markets the division sees an opportunity to increase sales in Great Britain and Eastern and Central Europe.

The retail sale of the Furniture Division shows a rising tendency. Within nine months this year the retail sale has increased by 51% as compared to the same period last year; the increase in the third quarter was 39% as compared to the respective period in 2005.

In the retail business of the division activities were initiated in the third quarter to expand the retail business to our neighbouring markets according to the strategy. The expansion of retail business includes opening new stores offering home furniture and furnishing materials in various Eastern European markets.

 

 

Building Materials Division

The nine-month net sales of the Building Materials Division amounted to 68.4 mil. kroons (4.4 mil. euros) and profit to 8.6 mil. kroons (548 thou. euros). In the same period of the last year, the turnover of the division totalled 76.2 mil. kroons (4.9 mil. euros) and the net profit 11.1 mil. kroons (709 thou. euros). The results of the nine months were influenced by extreme weather conditions in the beginning of the year and the fire in May. These negative facts had a one-time affect on the results of the division.

Since the beginning of the third quarter production volumes, sales and profitability of the division have improved rapidly and the factory is working on full capacity in order to satisfy the increased demand. In addition, active selling has been initiated in the eastern market – Russia and the Ukraine as well as Latvia and Lithuania.

 

Building Boards

Among Isoplaat building boards the demand of wind protection board in the internal market has leaped ahead. The commencement of direct marketing in Finland (as one of the principal markets), which was planned for the first quarter of this year, achieved success in the third quarter by selling under our trademark in all of the most significant retail chains. The sales of flooring boards have also increased in the third quarter, especially in our neighbouring markets. Wind protection boards were the product group with the largest share in the sales of building boards.

Within the nine months of 2006 the division has increased the share of products sold under its own trademark Isoplaat up to 90% (64% in 2005) of the total sales of building boards; in addition, it has increased the share of direct marketing as compared to sales through intermediaries. It allows for better margins and increases sustainability in the long-term perspective.

This year the division took its building boards to new eastern markets with large potential – Russia and the Ukraine.

 

Interior Finishing Boards

Sales volumes and results of Isotex internal finishing boards were on planned levels both on the internal and external markets. At the end of the third quarter an updated and larger choice of wall panels was introduced to the market helping further strengthen its leading position in the markets and creating better opportunities for entering new markets. At the same time development activities for introducing new ceiling panels to the market in the fourth quarter of 2006 continued. Ceiling panels comprised 73% and wall panels 27% of the sales of interior finishing boards.

Within nine months this year the division has increased the share of Isotex interior finishing boards as products of higher level of refinement and higher margin up to 39% of the sales of the division (35% in 2005). Interior finishing boards are being produced since 1996 and they are sold 100% under the company’s own trademark Isotex.

Together with building boards interior finishing boards have also been taken to eastern markets where both product groups have a good perspective. Offering larger volume more actively is limited by the present production capacity.

In order to satisfy the increased demand in the existing markets and to enter the markets of Russia and the Ukraine, the Supervisory Board of Viisnurk AS has approved the decision to increase the production capacity of interior finishing boards via opening the second production line. The estimated total cost of the investment shall be 10 mil. kroons/639 thou. euros and the planned deadline for implementing the line is the beginning of the third quarter in 2007. The new production line enables to increase the volume of products from 39% to 55% of the net sales of the Building Materials Division. Increasing the production capacity of Isotex products helps the company to improve sales margins and give the existing production a higher value.

 

 

 

 

 

BALANCE SHEET
consolidated	Thou. Kr.	Thou. Kr.	Thou. eur	Thou. eur
	30.9.2006	31.12.2005	30.9.2006	31.12.2005
Cash and bank	5,755	5,552	368	355
Short-term fin. invest.	0	6,785	0	434
Receivables and prepayments	27,572	25,749	1,762	1,645
Inventories	48,033	42,161	3,070	2,695
Total current assets	81,360	80,247	5,200	5,129
Long-term financial investments	1	1	0	0
Investment property	15,521	15,521	992	992
Tangible fixed assets	53,272	58,235	3,405	3,722
Intangible fixed assets	1,098	1,818	70	116
Total fixed assets	69,892	75,575	4,467	4,830
TOTAL ASSETS	151,252	155,822	9,667	9,959
Debt obligations	2,325	8,909	149	569
Payables and prepayments	30,478	32,353	1,948	2,069
Short-term provisions	124	430	8	27
Total current liabilities	32,927	41,692	2,105	2,665
Non-current debt obligations	47,920	47,920	3,063	3,063
Long-term provisions	430	430	27	27
Total non-current liabilities	48,350	48,350	3,090	3,090
Total liabilities	81,277	90,042	5,195	5,755
Share capital (nominal value)	44,991	44,991	2,875	2,875
Issue premium	11,332	11,332	724	724
Mandatory capital reserve	4,499	4,499	288	288
Retained profits	767	(4 817)	49	(308)
Net profit for the year	8,386	9,775	536	625
Total equity	69,975	65,780	4,472	4,204
TOTAL LIABILITIES AND EQUITY	151,252	155,822	9,667	9,959

 

Einar Pähkel

Business- and Administration Manager

+372 447 8331