Consolidated net sales of 2011 was 17.3 mil. euros representing a 24% increase compared to 2010. Net sales of the comparable business units of the company (Pärnu softboard factory, furniture factory and retail chain Skano) was 16.2 mil. euros (representing a 16% increase compared to 2010). The rest of sales growth came from Püssi softboard factory, acquired in May 2011. Consolidated EBITDA of 2011 was 3.4 mil. euros (1.4 mil. euros in 2010), it includes the single revenue of 2.46 mil. euros from revaluation of assets. Consolidated net profit of 2011 was 2.6 mil. euros compared to 0.8 mil. euros in 2010, which was also influenced by the single revenue from revaluation in the amount of 2.46 mil. euros.

Consolidated net sales of fourth quarter of 2011 was 4.8 mil. euros representing a 19% increase in the fourth quarter compared to the fourth quarter of 2010. Net sales of the comparable business units of the company remain at the same level as in the previous year and the growth of sales came from acquired Püssi factory. Consolidated EBITDA decreased from 375 thousand euros in the fourth quarter 2010 to 99 thousand euros in the fourth quarter of 2011. Main reasons of decrease of operating profit are loss of launching period of Püssi factory in the amount of 260 thousand euros and 20-day work stoppage in December in Pärnu softboard factory for maintenance and vacations. The profit of furniture factory remain to the same level and amounted to 162 thousand euros, profit of Skano raised from 10 thousand euros in the fourth quarter 2010 to 59 thousand euros in the fourth quarter 2011.

Due to an uncertain situation of global economy, management decided to keep low stock reserve and use the period for vacations and maintenance. The plan is to keep the stock reserve and production capacity low throughout the first quarter 2012. According to the received orders, the management estimates that during the second quarter of 2012 Pärnu softboard factory will start operating in its full capacity and Püssi softboard factory reaches close to its full operating capacity. At the same time, the maximum capacity of Pärnu factory is raised 15% compared to the previous years.

By business units, Pärnu furniture factory exhibited 3% decrease of revenue in the fourth quarter and extended up to 2.0 mil. euros. Compared to the fourth quarter of the previous year, the profit remains the same – 162 thousand euros.

Turnover in Skano retail chain in the fourth quarter increased 3% compared to the previous year and made 631 thousand euros. As a result, the profit of Skano in the fourth quarter was 59 thousand euros compared to the 10 thousand euros in 2010. The results of Skano are also considerably influenced by currency movements, which brought exchange gains in the amount of 40 thousand euros in the fourth quarter of this year compared to the previous year in the amount of 12 thousand euros. Although as an independent unit Skano is still far from the objectives established by the management then from the standpoint of the enterprise it has yet brought positive receipts to the group throughout the crisis as the furniture factory sells its production to Skano upon market conditions and profitably. With the past 12 months of 2011 the sales of the furniture factory to Skano have made up the total of 917 thousand euros by bringing gross profit to the furniture factory and sales margin for covering the general expenses of the division to a considerably larger extent compared to the net loss of Skano division in the same period. The results of Skano retail chain have remained below the expectations in connection with the extremely low demand for durable goods caused by the economic environment in Ukraine and the Baltic countries.

The turnover of Pärnu softboard factory and interior finishing panels’ line decreased 2% compared to the fourth quarter of the previous year and made up 1.5 million euros. The unexpectedly drastic sales drop in Scandinavia, where the activity of construction works is remarkably lowered, caused decrease in turnover. This is the reason for the loss of the unit in fourth quarter. At the moment we see the signals of recovering of the demand. In connection with the start-up of Püssi factory, the management expects approximately 15% increase in the maximum production capacity of Pärnu factory. This can be achieved on the account of a shorter standstill that so far was spent on the adjustment of machinery for different products and the more favourable product portfolio for the factory (transfer of floor panels’ production to Püssi factory). The bigger production capacity shall use after recovery of demand or finding new markets.

Püssi softboard factory has started the first test production in the beginning of August. Generally the launching has proceeded according to the planned schedule but during the period of launching several standstills have occurred related to adjusting and repair of equipment, which could be considered natural. The company has considerably adjusted the parameters of the Püssi production line as compared to the production before the purchase in order to allow more efficient production process and lower risks. By October the factory achieved the capacity that enables us to produce ca 4,500 m³ a month and the total sales of which would be ca 500 thousand Euros. At the same time the launching of the factory on full capacity is continuing step by step and based on the purchase orders received. Currently ca 50% of the full capacity of the factory is used and the factory works in three shifts. Taking into consideration the general uncertainty of the economic environment the management prefers to keep the stock low and maintain the liquidity reserve in current situation. At the same time the company concentrates more than ever on dispersing sales volumes outside Europe (primarily in Asia), which in longer perspective would offer better protection against regional economic crises and guarantee higher margins. Presuming that the economic environment in target markets will not continue deterioration, the management shall expect the Püssi softboard factory to achieve its full capacity during the second quarter in 2012. With the support of additional investments it is also possible to increase the production capacity in future.

Divisional review

Net sales by business segments

After the acquisition of Püssi softboard factory the main activity will change to manufacturing of building materials.

Net sales by geographical segments

Regarding the markets, turnover has increased into Russia and Great Britain. The percentage of turnover has decreased most in Estonia, Latvia and Kazakhstan.

Profit by business segments

Building Materials Division

The net sales of the Building Materials Division in fourth quarter amounted to 2.4 mil. euros and loss to 347 thousand euros. In the same period of the last year, the turnover of the division totaled to 1.6 mil. euros and the profit 53 thousand euros. As compared to the previous year the turnover of the division has increased by 817 thousand euros (51%).    
 

Net sales by geographical segments

Regarding the markets, turnover has increased most into Great Britain, Russia, Nederland and Bulgaria and decreased into Estonia and Latvia.

Püssi softboard factory started the first test production in the beginning of August. Generally the launching has proceeded according to the planned schedule but during the period of launching several standstills have occurred related to adjusting and repair of equipment. By now the problems have mostly been solved. In the last week of October the factory achieved a level where it is possible to produce around 4,500 m³ and the potential total sales of which would be about 500 thousand euros per month.

The net sales of the Püssi factory in fourth quarter amounted to 814 thousand euros and loss to 260 thousand euros. The sales of Püssi factory was much smaller than expected. Many clients bought remarkably smaller amounts than prognosis a few months before. In future it is planned to improve the production line and increase the speed of the line and achieve a monthly production capacity of 5,500-6,000 m3. The project related to the increase of production capacity can be processed, if the existing capacity is in use and we see increasing demand. Therefore we have decided that during the first quarter of 2012 the Püssi factory is going to work in three shifts and use around 50% of its capacity. The above production capacity is currently covered with orders and there is no intention to create large stocks. At the same time we see the recovering of demand in March and April.

Furniture Division

Furniture Retail – Skano

AS Viisnurk retail business is operated by a private limited company OÜ Skano and its subsidiaries in Latvia, Lithuania and Ukraine. Skano has totally 11 stores – two in Tallinn, Pärnu, Riga, Vilnius, two in Kiev, Donetsk, Kharkiv and two in Dnipropetrovs’k at the end of year. At first quarter 2012 one store at Dnipropetrovs’k will close.

Retail sales by countries

Furniture Production

The Furniture Factory’s sales in the fourth quarter in the company’s basic target markets in Russia and Finland have decreased slightly. Our clients do not estimate increase of demand in near future. Rather, a decrease in the consumers’ certainty can be expected in the conditions of the European debt crisis and therefore also a decrease in the sales turnover as a result.

The net sales of the Furniture Factory in fourth quarter amounted to 2.0 mil. euros and profit to 162 thousand euros. In the same period of the last year, the turnover of the division totalled 2.1 mil. euros and the profit 162 thousand euros. As compared to the previous year the turnover of the factory has increased by 69 thousand euros (3%) and the profit has remained the same.

Furniture factory sales by countries

Financial highlights

EBITDA = Earnings before interest, taxes, deprecation and amortisation

EBITDA margin = EBITDA / Revenue

Operating margin = Operating profit / Revenue

Net margin = Net profit / Revenue

Return on assets = Net profit / Total assets

Return on equity = Net profit / Equity

Debt-to-equity ratio = Liabilities / Total assets

Earnings per share = Net profit / Total shares

Price-earnings ratio = Closing price / Earnings per share

Book value of a share = Equity / Total shares

Market to book ratio = Closing price / Book value of a share

Market capitalization = Closing price * Total shares

Forecast and development

As the outlook of Europe’s economy is unpredictable, our view of the future is cautious. We believe that in connection with cooling of economics, demand may decrease in the nearest future; we contribute to maintaining liquidity and not creating an excess stock reserve. We will continue production only proceeding from orders and according to the forecasts of our reliable partners.

Building Materials Division. On the main production line in the production is performed in three shifts in Pärnu softboard factory and it continues according to preliminary estimations until the end of first quarter 2012. According to orders list, factory fill produce in full capacity again in second quarter. Isotex lines are used one or two shifts accordingly the demand of clients.

Due to the low demand Püssi softboard factory shall operate about 50% of capacity in the first quarter 2012.

In connection with the decreasing sales volumes in Scandinavia we have continued the search of customers from other areas, especially the Asian countries as well as Russia.

Skano. We do not expect significant growth of retail sale in the first quarter of 2012. Therefore we shall continue to save the costs and do not plan any extension of the retail chain.

Furniture Factory. In the first quarter of 2012 we expect similar turnover as in the preceding quarters in the furniture factory, but the volume will still remain lower than the production capabilities would allow. Therefore the workload is continuously low in the furniture factory. Agreements have been concluded with the employees for application of undertime until 31.03.2012.

Consolidated statement of financial position

Consolidated statement of comprehensive income

*The other income includes the gain from a bargain purchase 2,455 th. EUR

The planned time of publishing of interim report of first quarter 2012 is week 20 (14. - 18. May 2012).

 Einar Pähkel
 CFO
 +372 447 8331
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