Skano Group Quarterly report 17.05.2013
Financial result, 3 months 2013
Pärnu, 2013-05-17 16:01 CEST (GLOBE NEWSWIRE) -- MANAGEMENT REPORT
FIRST QUARTER IN SHORT
Consolidated net sales of the first quarter of 2013 was 4.4 mil. euros, representing a 4% decrease on the first quarter compared to the same period in 2012. At the same time, consolidated EBITDA amounted to minus 37 thousand euros (147 thousand euros in Q4 2011). The result of Q1 2013 included also one-off costs amounted to 92 thousand euros.
The sales in Skano Pärnu fibreboard factory (incl. Isotex) was 1,8 mil. Euros, increased as compared to the respective period last year by 3%, the operating loss of the first quarter was 135 thousand euros compared with the operating loss 26 thousand euros last year.
The turnover of Skano Püssi fibreboard factory was 591 thousand euros, representing 19% decrease in the first quarter compared to the same period in 2012. Operating loss amounted to 212 thousand euros compared with the operating loss 237 thousand euros last year. Due to weak demand Püssi factory was
operating at approximately of 50% of its capacity in the first quarter of 2013. Sales have dropped in all regions except for Russia due to weak economic situation in Europe and cold spring that has put off construction season. Profitability of Fibreboard division was affected by very fragmented production
portfolio where high number of small size orders caused low production efficiency and high COGS. The priority of the management of the company is continuously to ensure the sales of the production of Skano Püssi fibreboard factory in order to guarantee the maximum production capacity and efforts are
taken in this direction on an on-going basis.
The turnover of Skano furniture factory in Pärnu decreased in the first quarter by 5% and amounted to 1 676 thousand euros. The operating profit of the first quarter was 33 thousand euros as in 2012 the operating profit of the same period was 120 thousand euros. Sales in the first quarter of 2013 decreased in all regions (except for sales to the subsidiary) due to weak demand of foreign markets. The company is seeking new sale’s possibilities in the current markets but going into totally new markets is a substantial direction for us. For that reason a Western Europe sales manager was hired from outside Estonia.
The turnover of Skano furniture retail chain decreased by 1% as compared to the same period last year being 549 thousand euros and the operating profit was 59 thousand euros compared with the operating loss 5 thousand euros in the first quarter last year. Current year operating profit contains also profit from
currency exchange rate of hryvnia 45 thousand euros. Retail sale increased in Estonia but decreased in other regions. In order to better operate the Baltic retail sales changes in the structure were made at the end of the first quarter in 2013 where Estonia current retail sales manager started to run the whole
Baltic retail sales. The sales of Skano Group AS own furniture still forms a considerable part of the retail sale and it enables the furniture factory to operate much more profitably than it would be possible without its own retail chain.
INCOME STATEMENT
Consolidated net sales of the first quarter in 2013 was 4.4 mil. euros (4.6mil. euros in same period of 2012) representing a 4% decrease on the first quarter compared to Q1 2012. The Group’s gross margin in the first quarter of 2013 was 11.9% compared to 13.7% in the first quarter of 2012. Consolidated
operating loss amounted to 226 thousand euros (operating loss 99 thousand euros from main activities in same period 2012). The consolidated operating margin of net sales was -6% (-2% from main activities in Q1 2012).
Consolidated net loss amounted to 312 thousand euros (compared to net loss 164 thousand euros in Q1 2012), and the net margin was -7% (-4% in Q1 2012).
POSITION OF FINANCIAL STATEMENT
As of 31.03.2013 the total assets of Skano Group AS amounted to 15.5 mil. euros (31.03.2012: 16.3 mil. euros). The liabilities of the company accounted for 53.8% (31.03.2012: 53.9%) thereof, i.e. 8.3 mil. euros (31.03.2012: 8.8 mil. euros).
Receivables and prepayments have decreased by 0.2 mil. euros i.e. 9% increase with 12 months. The reason of decrease of receivables was smaller sale of the period and tighter debtor policy applied in the company.
Inventories remained at the same level compared to last year, amounting to 3.3 mil. euros on 31.13.2013. (31.03.2013: 3.3 mil. euros). Property, plant and intangibles decreased by 0.6 mil. euros mainly as a result of depreciation.
Short-term loans decreased by 0.1 mil. euros and amounted to 1.4 mil. euros in 31.03.2013 (31.03.2012: 1.5 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.3 mil. euros (31.03.2012: 2.5 mil. euros). Current and non-current liabilities decreased by 0.5 mil. euros to 8.3 mil. euros (31.03.2012: 8.8 mil. euros).DIVISIONAL REVIEW:
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | |
| Skano Fibreboard | 2,462 | 2,485 | 56.5% | 54.5% |
| Skano Furniture factory | 1,676 | 1,757 | 38.4% | 38.6% |
| Skano Furniture retail | 549 | 553 | 12.6% | 12.1% |
| Elimination | (326) | (236) | (7.5%) | (5.2%) |
| TOTAL | 4,361 | 4,559 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | |
| Finland | 1,242 | 1,342 | 28.5% | 29.4% |
| Russia | 1,230 | 1,267 | 28.2% | 27.8% |
| Estonia | 621 | 564 | 14.2% | 12.4% |
| Great Britain | 373 | 455 | 8.6% | 10.0% |
| Netherlands | 215 | 133 | 4.9% | 2.9% |
| Ukraine | 185 | 204 | 4.2% | 4.2% |
| Latvia | 120 | 141 | 2.8% | 3.1% |
| Sweden | 96 | 126 | 2.2% | 2.8% |
| Lithuania | 95 | 133 | 2.2% | 2.9% |
| Kazakhstan | 41 | 0 |
0.9% | 0.0% |
| Denmark | 38 | 48 | 0.9% | 1.1% |
| India | 28 | 18 | 0.6% | 0.4% |
| Csech republic | 18 | 1 |
0.4% | 0.0% |
| Other countries | 59 | 127 | 1.4% | 2.7% |
| TOTAL | 4,361 | 4,559 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Estonia and Netherlands. The percentage of turnover has decreased in most in Finland and Great Britain.
PROFIT BY BUSINESS SEGMENTS
| th EUR | Q1 2013 | Q1 2012 |
| Skano Furniture factory | 33 | 159 |
| Skano Furniture retail | 59 | (5) |
| Skano Fibreboard | (347) | (264) |
| Elimination | (11) | 11 |
| TOTAL | (266) | (99) |
| Net financial costs | (55) | (67) |
| Income tax | (1) | (7) |
| NET PROFIT | (322) | (173) |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the first quarter of 2013 amounted to 2.46 mil. euros and operating loss to 347 thousand euros. In the same period last year, the turnover of the division totaled to 2.49 mil. euros and the operating loss from main activities 264 thousand euros. Sales have dropped in all regions
except for Russia due to weak economic situation in Europe and cold spring that has put off construction season. The biggest drop in sales in the first quarter compare to last year took place in Great Britain and Finland, 18% and 7% respectively. Sales in Netherlands and Russia grew most, 62% and 11%
respectively. Profitability was affected by very fragmented production portfolio where high number of small size orders caused low production efficiency and high COGS.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | |
| Finland | 632 | 680 | 25.7% | 27.4% |
| Russia | 472 | 427 | 19.2% | 17.2% |
| Great Britain | 373 | 455 | 15.1% | 18.3% |
| Estonia | 354 | 362 | 14.4% | 14.6% |
| Netherlands | 215 | 133 | 8.7% | 5.4% |
| Sweden | 96 | 126 | 3.9% | 5.1% |
| Latvia | 64 | 68 | 2.6% | 2.7% |
| Denmark | 38 | 48 | 1.5% | 1.9% |
| India | 28 | 18 | 1.1% | 0.7% |
| Ukraine | 19 | 27 | 0.8% | 1.1% |
| Lithuania | 19 | 21 | 0.8% | 0.8% |
| Other countries | 77 | 120 | 3.1% | 4.8% |
| Intragroup | 75 | 0 | 3.1% | 0,0% |
| TOTAL | 2,462 | 2,485 | 100.0% | 100.0% |
The biggest growth has been in sales to Russia and Netherlands. The percentage of sales into Finland decreased.
| th EUR | Net sales | Profit | ||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | |
| Pärnu Fibreborad factory | 1,235 | 1,230 | (193) | (75) |
| Püssi Fibreboard factory | 591 | 733 | (212) | (237) |
| Pärnu interior boards factory (Isotex) | 561 | 521 | 58 | 49 |
| Not allocated | 75 | 1 |
0 |
(1) |
| TOTAL | 2,462 | 2,485 | (347) | (264) |
The net sales of the Pärnu Fibreboard factory and interior board’s line increased 3% in the first quarter of 2013 compared to the same quarter of 2012 and amounted to 1.8 mil. euros.
The turnover of Püssi fibreboard factory amounted to 591 thousand euros and operating loss amounted to 212thousand euros. The main question is still weak sales volumes of Püssi Fibreboard factory. In the first quarter Püssi factory was operated at 50% of its capacity.
It is also important to note that due to high fixed costs, the factory must be, for a profitable outcome, operated at as high capacity as possible, which shall ensure a lower average cost of the product. Presently, the cost price considerably higher than the optimum is greatly caused by technological
standstills and reconstruction of equipment in order to ensure better efficiency.
SKANO FURNITURE
FURNITURE RETAIL SALES
Skano Group AS retail business is operated by a private limited company Skano Furniture OÜ and its subsidiaries in Latvia, Lithuania and Ukraine. Skano has totally 9 stores in Tallinn (2), Pärnu, Riga, Vilnius, Kiev, Donetsk, Kharkiv and Dnipropetrovs’k at the end of the first quarter in 2013.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | 31.03.13 | 13 31.03.12 | |
| Estonia | 251 | 191 | 45.7% | 34.5% | 3 | 3 |
| Latvia | 56 | 73 | 10.2% | 13.2% | 1 | 1 |
| Lithuania | 76 | 112 | 13.8% | 20.3% | 1 | 1 |
| Ukraine | 166 | 177 | 30.3% | 32.0% | 4 | 5 |
| TOTAL | 549 | 553 | 100.0% | 100.0% | 9 | 10 |
The furniture retail sale has reached to the profitable sales level, and it results with profit 59 thousand euros in the first quarter 2013. Profit from currency exchange rate of hryvnia was 45 thousand euros. Retail sale increased in Estonia but decreased in other regions. In order to better operate the
Baltic retail sales changes in the structure were made at the end of the first quarter in 2013 where Estonia current retail sales manager started to run the whole Baltic retail sales.
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the first quarter amounted to 1.7 mil. euros and operating profit to 33 thousand euros. In the same period last year, the turnover of the factory amounted to 1.8 mil. euros and the profit to 159 thousand euros. As compared to the previous year the turnover of
the factory has decreased 81 thousand euros and the operating profit has decreased 126 thousand euros. Sales in the first quarter of 2013 decreased in all regions (except for sales to the subsidiary) due to weak demand of foreign markets. The company is seeking new sale’s possibilities in the current markets but going into totally new markets is a substantial direction for us. For that reason a Western Europe sales manager was hired from outside Estonia.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | |
| Russia | 758 | 840 | 45.2% | 47.8% |
| Finland | 610 | 662 | 36.4% | 37.7% |
| Kazakhstan | 41 | 0 | 2.4% | 0.0% |
| Estonia | 16 | 11 | 1.0% | 0.6% |
| Other countries | 0 | 8 | 0.0% | 0.5% |
| Subsidiaries | 251 | 236 | 15.0% | 13.4% |
| TOTAL | 1,676 | 1,757 | 100.0% | 100.0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. The main production line of Pärnu Fibreboard factory is operating at a normal capacity in the second quarter of 2013 but the period also includes yearly 3 weeks planned maintenance repair cycle which can be executed only during warm months. Production lines of Isotex interior finishing
boards are also operated at a normal capacity. Due to low demand Püssi factory is operating at approximately of 70% of its capacity at the beginning of the second quarter but by the end of the second quarter we expect to run the factory already at 80-90% of its capacity. The sales of Skano Fibreboard in the second quarter will probably exceed the sales of last year.
In spite of weak demand of foreign markets and economic situation in Europe we still are moderately optimistic about sales growth for H2 2013, mostly from Russia and Finland. Russia’s sales volumes have been growing steadily over the past years and we expect this to continue in 2013. Decrease of our sales in Finland and in other regions in the first quarter was caused by deteriorated
economic situation in Europe, which we don’t expect to improve during 2013. We have changed our distribution partner at the end of 2012 and plan to significantly add to our marketing efforts in Finland in 2013 which should increase sales from account of new clients. We have also signed a strategic
cooperation agreement in Finland, which if implemented successfully, will allow us to increase the output of Püssi factory significantly in second half of 2013. We also expect this to help our Pärnu factory to reach higher capacity utilization and as a result of this, expect the whole production process to
become more efficient, lead to lower average production price and higher sales volumes in H2 2013
SKANO FURNITURE RETAIL SALES. We expect retail sale in the second quarter of 2013 to exceed slightly the sale of last year.
SKANO FURNITURE FACTORY.In the second quarter of 2013 we expect small decrease in sales of the furniture factory compared to the same period in 2012 because of the deteriorated economic situation in the near region. For the second half of 2013 we already expect small support from sales to new markets and namely to Great Britain as after successful feedback from the local furniture spring fair
we have agreed with our new English partner the further action plan and representation of our furniture in Great Britain. In addition to Great Britain we also seek for possibilities to enter into other markets of Western Europe in larger volumes.
SKANO GROUP AS.
At the beginning of May EAS Enterprise Estonia approved Skano Group AS application for export development support for 2013 and 2014 amounting to 100 thousand euros.
FINANCIAL HIGHLIGHTS
| th EUR | 3 m 2013 | 3 m 2012 | 3 m 2011 |
| Income statement | |||
| Revenue | 4,361 | 4,559 | 4,024 |
| EBITDA | -37 | 147 | 280 |
| EBITDA margin | (0.8%) | 3.2% | 7.0% |
| Operating profit | (266) | (99) | 129 |
| Operating margin | (6.1%) | (2.2%) | 3.2% |
| Net profit | (322) | (173) | 102 |
| Net margin | (7.4%) | (3.8%) | 2.5% |
| Balance sheet (31.03) | |||
| Total assets | 15,511 | 16,337 | 9,568 |
| Return on assets | (2.1%) | (1.1%) | 1.1 |
| Equity | 7,170 | 7,529 | 5,448 |
| Return on equity | (4.5%) | (2.3%) | 1.9% |
| Debt-to-equity ratio | 53.8% | 53.9% | 43.1% |
| Share (31.03) | |||
| Closing price | 1.19 | 1.57 | 1.50 |
| Earnings per share | (0.07) | (0.04) | 0.02 |
| Price-earnings ratio | (17.00) | (39.25) | 75.00 |
| Book value of a share | 1.59 | 1.67 | 1.21 |
| Market to book ratio | 0.75 | 0.94 | 1.24 |
| Market capitalization | 5,354 | 7,064 | 6,749 |
EBITDA = Earnings before interest, taxes, depreciation and amortization
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
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| th EUR | 31.03.2013 | 31.12.2012 | 31.03.2012 |
| Cash and bank | 137 | 158 | 204 |
| Receivables and prepayments (Note 1) | 1,925 | 1,792 | 2,126 |
| Inventories (Note 2) | 3,347 | 158 | 204 |
| Receivables and prepayments (Note 1) | 1,925 | 1,792 | 2,126 |
| Inventories (Note 2) | 3,347 | 3,303 | 3,336 |
| Total current assets | 5,409 | 5,253 | 5,666 |
| Investment property (Note 3) | 185 | 185 | 185 |
| Tangible fixed assets (Note 4) | 9,896 | 10,010 | 10,471 |
| Intangible fixed assets (Note 5) | 21 | 23 | 15 |
| Total fixed assets | 10,102 | 10,218 | 10,671 |
| TOTAL ASSETS | 15,511 | 15,471 | 16,337 |
| Debt obligations (Note 6) | 1,444 | 1,845 | 1,519 |
| Payables and prepayments (Note 7) | 2,324 | 1,923 | 2,552 |
| Short-term provisions (Note 8) | 9 | 12 | 8 |
| Total current liabilities | 3,777 | 3,780 | 4,079 |
| Non-current debt obligations (Note 6) | 4,328 | 3,973 | 4,490 |
| Non-current provisions (Note 8) | 236 | 236 | 239 |
| Total non-current liabilities | 4,564 | 4,209 | 4,729 |
| Total liabilities | 8,341 | 7,98 | 8,808 |
| Share capital at nominal value (Note 9) | 2,699 | 2,699 | 2,699 |
| Issue premium | 364 | 364 | 364 |
| Statutory capital | 288 | 288 | 288 |
| Currency translation | (11) | (21) | (2) |
| Retained profits | 4,152 | 4,353 | 4,353 |
| Net profit (loss) for the year (Note 10) | (322) | (201) | (173) |
| Total equity | 7,170 | 7,482 | 7,529 |
| TOTAL LIABILITIES AND EQUITY | 15,511 | 15,471 | 16,337 |
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 1st Q 2013 | 1st Q 2012 |
| RETURN ON SALES (Note 11) | 4,361 | 4,559 |
| Cost of production sold | (3,841) | (3,934) |
| Gross profit | 520 | 625 |
| Marketing expenses | (580) | (600) |
| General administrative expenses | (207) | (110) |
| Other income | 42 | 36 |
| Other expenses | (41) | (50) |
| Operating profit (loss) (Note 11) | (266) | (99) |
| Financial income and financial expenses | (55) | (67) |
| Profit (loss) before taxes | (321) | (166) |
| Prepaid income tax | (1) | (7) |
| NET PROFIT (LOSS) FOR THE PERIOD | (322) | (173) |
| Basic earnings per share (Note 10) | (0.07) | (0.04) |
| Diluted earnings per share (Note 10) | (0.07) | (0.04) |
| Other comprehensive income: | ||
| Currency translation differences | 10 | 9 |
| TOTAL COMPREHENSIVE INCOME | (312) | (164) |
The planned time of publishing of interim report of the second quarter 2013 is
week 34 (19-23 Augugst 2013)
Martin Kalle
CFO
+372 447 8331
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www.skano.com