Skano Group Quarterly report 23.08.2013
Financial result, 6 months 2013
Pärnu, 2013-08-23 15:15 CEST (GLOBE NEWSWIRE)
SECOND QUARTER IN SHORT
Consolidated net sales of the second quarter of 2013 was 4.7 mil. euros, representing a 3% decrease on the second quarter compared to the same period in 2012. At the same time, consolidated EBITDA amounted to 123 thousand euros (364 thousand euros in Q2 2012).
The sales in Skano Pärnu fibreboard factory (incl. Isotex) was 1.7 mil. euros, decreased as compared to the respective period last year by 5%, the operating loss of the second quarter was 76 thousand euros compared with the operating profit 36 thousand euros last year.
The turnover of Skano Püssi fibreboard factory was 889 thousand euros, representing 25% increase in the second quarter compared to the same period in 2012. Operating loss amounted to 158 thousand euros compared with the operating loss 203 thousand euros last year. Due to weak demand Püssi factory was operating at approximately of 70-80% of its capacity in the second quarter of 2013.
Although sales were on the same level compare to the second quarter of 2012 the down pressure to sales was felt due to weak economic situation in Europe. 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 both factories 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 second quarter by 12% and amounted to 1 831 thousand euros. The operating profit of the second quarter was 133 thousand euros as in 2012 the operating profit of the same period was 238 thousand euros. Sales in the second quarter of 2013
decreased in all regions (except for sales to the subsidiary) due to weak demand of foreign markets. Sales dropped the most in Finland, by 29% compared to the same period in 2012. The company is seeking new sale’s possibilities in the current markets but going into totally new markets is a substantial direction for us.
The turnover of Skano furniture retail chain increased 9% as compared to the same period last year being 619 thousand euros, operating loss was 3 thousand euros compared with the sales 569 thousand and operating profit 63 thousand euros in the second quarter of 2012. Current year operating loss contains also loss from currency exchange rate of hryvnia 14 thousand euros (profit from currency exchange rate 50 thousand euros in the same period of 2012). Retail sale increased in Estonia and Lithuania but decreased in Latvia and dropped in
large extent in Ukraine (-38%). 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 second quarter in 2013 was 4.7 mil. euros (4.9 mil. euros in same period of 2012) representing a 3% decrease on the second quarter compared to Q2 2012. The Group’s gross margin in the second quarter of 2013 was 15.6% compared to 17.9% in the second quarter of 2012. Consolidated
operating loss amounted to 104 thousand euros (operating profit 108 thousand euros from main activities in same period 2012). The consolidated operating margin of net sales was -2% (+2% from main activities in Q2 2012).
Consolidated net loss amounted to 164 thousand euros (compared to net profit 39 thousand euros in Q2 2012), and the net margin was -3% (+1% in Q2 2012).
POSITION OF FINANCIAL STATEMENT
As of 30.06.2013 the total assets of Skano Group AS amounted to 15.3 mil. euros (30.06.2012: 16.1 mil. euros). The liabilities of the company accounted for 54.1% (30.06.2012: 53.1%) thereof, i.e. 8.2 mil. euros (30.06.2012: 8.5 mil. euros).
Receivables and prepayments have decreased by 0.2 mil. euros i.e. 8% decrease with 12 months. The reason of decrease of receivables was implementation of factoring instrument.
Inventories remained at the same level compared to last year, amounting to 3.3 mil. euros on 30.06.2013. (30.06.2012: 3.3 mil. euros). Property, plant and intangibles decreased by 0.5 mil. euros mainly as a result of depreciation.
Short-term loans decreased by 0.03 mil. euros and amounted to 1.25 mil. euros in 30.06.2013 (30.06.2012: 1.28 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions
amounted to 2.4 mil. euros (30.06.2012: 2.5 mil. euros). Current and non-current liabilities decreased by 0.3 mil. euros to 8.2 mil. euros (30.06.2012: 8.5 mil. euros).
DIVISIONAL REVIEW
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q2 201 | Q2 2012 | Q2 2013 | Q2 2012 | |
| Skano Fibreboard | 2,631 | 2,621 | 55.5% | 53.7% |
| Skano Furniture factory | 1,831 | 2,070 | 38.7% | 42.4% |
| Skano Furniture retail | 619 | 569 | 13.1% | 11.7% |
| Elimination | (344) | (379) | (7.3%) | (7.8%) |
| TOTAL | 4,737 | 4,881 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q2 2013 | Q2 2012 | Q2 2013 | Q2 2012 | |
| Russia | 1,636 | 1,480 | 34.5% | 30.3% |
| Finland | 1,404 | 1,569 | 29.6% | 32.1% |
| Estonia | 704 | 676 | 14.9% | 13.8% |
| Great Britain | 235 | 312 | 5.0% | 6.4% |
| Lithuania | 165 | 86 | 3.5% | 1.8% |
| Sweden | 146 | 128 | 3.1% | 2.6% |
| Ukraine | 136 | 188 | 2.9% | 3.9% |
| Latvia | 112 | 154 | 2.4% | 3.2% |
| Netherlands | 51 | 124 | 1.1% | 2.5% |
| Kazakhstan | 39 | 40 | 0.8% | 0.8% |
| Csech republic | 20 | 0 | 0,4% | 0.0% |
| Germany | 18 | 23 | 0.4% | 0.5% |
| India | 14 | 15 | 0.3% | 0.3% |
| Other countries | 57 | 86 | 1.2% | 1.8% |
| TOTAL | 4,737 | 4,881 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Russia, Estonia and Lithuania. The percentage of turnover has decreased in most in Finland, Great Britain and Netherlands.
PROFIT BY BUSINESS SEGMENTS
| th EUR | Q2 2013 | Q2 2012 |
| Skano Furniture factory | 133 | 238 |
| Skano Furniture retail | (3) | 63 |
| Skano Fibreboard | (234) | (167) |
| Elimination | 0 | (26) |
| TOTAL | (104) | 108 |
| Net financial costs | (60) | (67) |
| Income tax | 0 | (2) |
| NET PROFIT | (164) | 39 |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the second quarter of 2013 amounted to 2.63 mil. euros and operating loss to 234 thousand euros. In the same period last year, the turnover of the division totaled to 2.62 mil. euros and the
operating loss from main activities 167 thousand euros. Sales have dropped in all regions except for Russia, Sweden and Finland due to weak economic situation in Europe. In spite of deteriorated economic situation company
managed to increase sales in Finland due to a new distribution partner and a strategic cooperation agreement. The biggest drop in sales in the second quarter compare to last year took place in Great Britain and Netherlands, 27%
and 59% respectively. Sales in Russia grew most, 35% respectively. Profitability was affected by a 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 | |||
| Q2 2013 | Q2 2012 | Q2 2013 | Q2 2012 | |
| Russia | 806 | 598 | 30.6% | 22.8% |
| Finland | 803 | 734 | 30.5% | 28.0% |
| Estonia | 382 | 405 | 14.5% | 15.5% |
| Great Britain | 229 | 312 | 8.7% | 11.9% |
| Sweden | 146 | 128 | 5.5% | 4.9% |
| Netherlands | 51 | 124 | 1.9% | 4.7% |
| Latvia | 45 | 72 | 1.7% | 2.7% |
| Ukraine | 35 | 26 | 1.3% | 1.0% |
| Lithuania | 22 | 22 | 0.8% | 0.8% |
| Germany | 18 | 23 | 0.7% | 0.9% |
| India | 14 | 15 | 0.5% | 0.6% |
| Other countries | 71 | 72 | 2.7% | 2.7% |
| Intragroup | 9 | 90 | 0.3% | 3.4% |
| TOTAL | 2,631 | 2,621 | 100.0% | 100.0% |
| th EUR | Net sales | Profit | ||
| Q2 2013 | Q2 2012 | Q2 2013 | Q2 2013 | |
| Pärnu Fibreborad factory | 1,091 | 1,266 | (125) | (24) |
| Püssi Fibreboard factory | 889 | 709 | (158) | (203) |
| Pärnu interior boards factory (Isotex) | 642 | 556 | 49 | 60 |
| Not allocated | 9 | 90 | 0 | 0 |
| TOTAL | 2,631 | 2,631 | (234) | (167) |
The net sales of the Pärnu Fibreboard factory and interior board’s line decreased 5% in the second quarter of 2013 compared to the same quarter of 2012 and amounted to 1.7 mil. euros. Due to fragmented production portfolio the
production efficiency was low in the second quarter.
The turnover of Püssi fibreboard factory amounted to 889 thousand euros growing 25% compared to the same quarter in 2012 and operating loss amounted to 158 thousand euros (turnover 709 thousand euros and operating loss 203 thousand euros in Q2 2012). Output of Püssi Fibreboard factory grew in the second quarter but the main challenge is still to secure Püssi Fibreboard factory with sufficient sales volumes. In the second quarter Püssi factory was operated at 70-80% 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.
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 (2), Kharkiv and
Dnipropetrovs’k at the end of the second quarter in 2013.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| Q2 2013 | Q2 2012 | Q2 2013 | Q2 2012 | 30.06.13 | 30.06.12 | |
| Estonia | 308 | 261 | 49.8% | 45.9% | 3 | 3 |
| Latvia | 67 | 82 | 10.8% | 14.4% | 1 | 1 |
| Lithuania | 143 | 64 | 23.1% | 11.2% | 1 | 1 |
| Ukraine | 101 | 162 | 16.3% | 28.5% | 4 | 4 |
| TOTAL | 619 | 569 | 100.0% | 100.0% | 9 | 9 |
The furniture retail sale amounted to 619 thousand euros in the second quarter of 2013 and operating loss 3 thousand euros (sales 569 thousand euros and operating profit 63 thousand euros in Q2 2012). Retail sale increased in Estonia and Lithuania but decreased in Latvia and Ukraine (-38% in Ukraine compared to the same period in 2012). In Ukraine the store in Donetsk was closed due to poor performance and a new store in Kiev was opened instead.
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the second quarter amounted to 1.8 mil. euros and operating profit to 133 thousand euros. In the same period last year, the turnover of the factory amounted to 2.1 mil. euros and the
profit to 238 thousand euros. As compared to the previous year the turnover of the factory has decreased 234 thousand euros and the operating profit has decreased 105 thousand euros. Sales in the second quarter of 2013 decreased in all regions (except for sales to the subsidiary) due to weak demand of foreign markets. In the second quarter the sales in Finland decreased the most (-28%) due to significantly deteriorated economic situation.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| Q2 2013 | Q2 2012 | Q2 2013 | Q2 2012 | |
| Russia | 830 | 882 | 45.3% | 42.6% |
| Finland | 601 | 835 | 32.8% | 40.3% |
| Kazakhstan | 38 | 40 | 2.1% | 1.9% |
| Estonia | 14 | 10 |
0.8% | 0.5% |
| Other countries | 12 |
14 |
0.7% | 0.7% |
| Subsidiaries | 335 | 289 | 18.3% | 14.0% |
| TOTAL | 1,831 | 2,070 | 100.0% | 100.0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. The main production line of Pärnu Fibreboard factory was operating at full capacity in July 2013 and is expected to be fully utilized in the third quarter of 2013 according to the management forecast. Production
lines of Isotex interior finishing boards are operated at a normal capacity. Püssi Fibreboard factory was also operating at full capacity in July 2013 and according to the management forecast will continue operating at full power throughout the third quarter except for 3-weeks collective vacation and yearly planned maintenance repair in the second half of August. According to the forecast the sales of Skano Fibreboard in the third quarter will exceed the
sales of last year.
In spite of weak demand of foreign markets and economic situation in Europe we are 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 H2 2013. Decrease of our sales in Finland and in other regions in the first half was mostly caused by deteriorated economic, which we don’t expect to improve during 2013. Despite of stagnation in Finland we hope due to a new distribution partner and a strategic cooperation agreement to increase sales in Finland. We also expect this to help our Pärnu and Püssy factories 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 third quarter of 2013 to exceed slightly the sale of last year primarily due to steady growth in the Baltics.
SKANO FURNITURE FACTORY. In the third 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 and especially in Finland. For the second half of 2013 we expect small support from sales to new markets and namely to Great Britain. Additional sales still won’t compensate the sales shortage from Finland. In addition to Great Britain we also seek for possibilities to enter into other markets of Western Europe.
SKANO GROUP AS. On the 13th of August at the Extraordinary General Meeting, according to the restructuring plan, increase of share capital of newly established subsidiaries Skano Furniture Factory OÜ and Skano Fibreboard OÜ by
non-monetary contribution was approved. The object of the non-monetary contribution is the set of assets of the fibreboard and furniture production units. Skano Group AS will transfer the production unites of fibreboard and
furniture into separate subsidiaries. The non-monetary contribution shall be finalised 01.09.2013 by the latest. Starting from September the main activities, production of fibreboard and furniture, are operated under separate
subsidiaries, in Skano Fibreboard OÜ and Skano Furniture Factoru OÜ respectively. Skano Group AS will remain as a holding company.
FINANCIAL HIGHLIGHTS
| th EUR | 6 m 2013 | 6 m 2012 | 6 m 2011 |
| Income statement | |||
| Revenue | 9,098 | 9,440 | 8,336 |
| EBITDA | 86 | 511 | 719 |
| EBITDA margin | 0.9% | 5.4% | 8.6% |
| Operating profit | (370) | 10 | 427 |
| Operating margin | (4.1%) | 0.1% | 5.1% |
| Net profit | (486) | (134) | 373 |
| Net margin | (5.3%) | (1.4%) | 4.5% |
| Balance sheet (30.06) | |||
| Total assets | 15,256 | 16,050 | 13,467 |
| Return on assets | (3.2%) | (0.8%) | 2.8% |
| Equity | 7,009 | 7,532 | 5,716 |
| Return on equity | (6.9%) | (1.8%) | 6.5% |
| Debt-to-equity ratio | 54.1% | 53.1% | 57.6% |
| Share (30.06) | |||
| Closing price | 1.06 | 1.31 | 1.74 |
| Earnings per share | (0.11) | (0.03) | 0.08 |
| Price-earnings ratio | (9.64) | (43.67) | 21.75 |
| Book value of a share | 1.56 | 1.67 | 1.27 |
| Market to book ratio | 0.68 | 0.78 | 1.37 |
| Market capitalization | 4,769 | 5,894 | 7,828 |
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 | 30.06.2013 | 31.12.2012 | 30.06.2012 |
| Cash and bank | 111 | 158 | 174 |
| Receivables and prepayments (Note 1) | 1,942 | 1,792 | 2,116 |
| Inventories (Note 2) | 3,257 | 3,303 | 3,268 |
| Total current assets | 5,310 | 5,253 | 5,558 |
| Investment property (Note 3) | 185 | 185 | 185 |
| Tangible fixed assets (Note 4) | 9,741 | 10,010 | 10,294 |
| Intangible fixed assets (Note 5) | 20 | 23 | 13 |
| Total fixed assets | 9,946 | 10,218 | 10,492 |
| TOTAL ASSETS | 15,256 | 15,471 | 16,050 |
| Debt obligations (Note 6) | 1,249 | 1,845 | 1,277 |
| Payables and prepayments (Note 7) | 2,419 | 1,923 | 2,507 |
| Short-term provisions (Note 8) | 7 |
12 |
5 |
| Total current liabilities | 3,675 | 3,780 | 3,789 |
| Non-current debt obligations (Note 6) | 4,328 | 3,973 | 4,490 |
| Non-current provisions (Note 8) | 244 | 236 | 239 |
| Total non-current liabilities | 4,572 | 4,209 | 4,729 |
| Total liabilities | 8,247 | 7,989 | 8,518 |
| Share capital at nominal value (Note 9) | 2,699 | 2,699 | 2,699 |
| Issue premium | 364 | 364 | 364 |
| Statutory capital reserve | 288 | 288 | 288 |
| Currency translation | (8) | (21) | (38) |
| Retained profits | 4,152 | 4,353 | 4,353 |
| Net profit (loss) for the year (Note 10) | (486) | (201) | (134) |
| Total equity | 7,009 | 7,482 | 7,532 |
| TOTAL LIABILITIES AND EQUITY | 15,256 | 15,471 | 16,050 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 2nd Q 2013 | 2nd Q 2012 | 6 m 2013 | 6 m 2012 |
| RETURN ON SALES (Note 11) | 4,736 | 4,881 | 9,098 | 9,440 |
| Cost of production sold | (3,999) | (4,007) | (7,841) | (7,941) |
| Gross profit | 737 | 874 | 1,257 | 1,499 |
| Marketing expenses | (649) | (592) | (1,229) | (1,192) |
| General administrative expenses | (180) | (199) | (387) | (309) |
| Other income | 19 | 54 | 61 | 91 |
| Other expenses | (31) | (29) | (72) | (79) |
| Operating profit (loss) (Note 11) | (104) | 108 | (370) | 10 |
| Financial income and financial expenses |
(60) | (67) | (115) | (134) |
| Profit (loss) before taxes | (164) | 41 | (485) | (124) |
| Prepaid income tax | 0 |
(2) | (1) | (10) |
| NET PROFIT (LOSS) FOR THE PERIOD | (164) | 39 | (486) | (134) |
| Basic earnings per share (Note 10) | (0.04) | 0.01 | (0.11) | (0.03) |
| Diluted earnings per share (Note 10) | (0.04) | 0.01 | (0.11) | (0.03) |
| Other comprehensive income: | ||||
| Currency translation differences | 3 | (36) | 13 | (27) |
| TOTAL COMPREHENSIVE INCOME | (161) | 3 | (473) | (161) |
The planned time of publishing of interim report of the third quarter 2013 is week 48 (25-29 November 2013)
Martin Kalle
CF0
+372 4478 331
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www.skano.com