Skano Group Quarterly report 29.11.2013
Financial results, 9 months 2013
Pärnu, 2013-11-29 15:35 CET (GLOBE NEWSWIRE)
THE THIRD QUARTER IN SHORT
Consolidated net sales of the third quarter of 2013 was 5.2 mil. euros, representing a 11% increase on the third quarter compared to the same period in 2012. At the same time, consolidated EBITDA amounted to 354 thousand euros (351
thousand euros in Q3 2012).
The sales in Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 2.4 mil. euros, increased as compared to the respective period last year by 13%, the operating profit of the third quarter was 16 thousand euros compared with the operating profit 25 thousand euros last year.
The turnover of Skano Fibreboard OÜ Püssi factory was 1.1 mil. euros, representing 38% increase in the third quarter compared to the same period in 2012. Operating loss amounted to 118 thousand euros compared with the operating
loss 230 thousand euros last year.
Sales growth came from Finland but despite of that other foreign markets remained weak due to general economic situation in Europe. We have continuously expanded list of our target markets and made considerable efforts in product
development to obtain certificates necessary for different markets. Profitability has suffered also due to higher sales costs in Finland. The same factors will probably impact also Q4 results, when we also conduct product testing and tuning of production process in order to achieve a lower production cost.
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 OÜ factory in Pärnu decreased in the third quarter by 1% and amounted to 1 419 thousand euros. The operating profit of the third quarter was 122 thousand euros as in 2012 the operating profit of
the same period was 58 thousand euros. Sales in the third quarter of 2013 decreased in Finland but sales to the Baltics (through the subsidiary) grew. 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 OÜ retail chain decreased 1% as compared to the same period last year being 547 thousand euros, operating loss was 24 thousand euros compared with the sales 555 thousand and operating profit 3 thousand
euros in the third quarter of 2012. Current year operating loss contains also loss from currency exchange rate of hryvnia 32 thousand euros in the third quarter (loss from currency exchange rate 25 thousand euros in the same period
of 2012). Retail sale increased in Estonia and Latvia but decreased in Lithuania and Ukraine. The sales of Skano Furniture Factory OÜ 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 third quarter in 2013 was 5.2 mil. euros (4.7 mil. euros in same period of 2012) representing a 11% increase on the third quarter compared to Q3 2012. The Group’s gross margin in the third quarter of 2013 was 19.3% compared to 15.9% in the third quarter of 2012. Consolidated operating profit amounted to 128 thousand euros (operating profit 109 thousand euros from main activities in same period 2012). The consolidated operating margin of net sales was 2.4% (2.3% from main activities in Q2 2012).
Consolidated net profit amounted to 71 thousand euros (compared to net profit 44 thousand euros in Q3 2012), and the net margin was 1.3% (0.9% in Q3 2012).
POSITION OF FINANCIAL STATEMENT
As of 30.09.2013 the total assets of Skano Group AS amounted to 14.9 mil. euros (30.09.2012: 16.2 mil. euros). The liabilities of the company accounted for52.5% (30.09.2012: 53.1%) thereof, i.e. 7.8 mil. euros (30.09.2012: 8.6 mil.
euros).
Receivables and prepayments have decreased by 0.5 mil. euros i.e. 25% decrease with 12 months. The reason of decrease of receivables was implementation of factoring instrument.
Inventories have decreased by 0.2 mil. euros compared to last year, amounting to 3.2 mil. euros on 30.09.2013. (30.09.2012: 3.4 mil. euros). Property, plant and intangibles decreased by 0.5 mil. euros mainly as a result of depreciation.
Short-term loans have decreased by 0.2 mil. euros and amounted to 0.7 mil. euros in 30.09.2013 (30.09.2012: 0.9 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.6 mil. euros (30.09.2012: 2.6 mil. euros).
Long-term loans have decreased by 0.6 mil euros and amounted to 4.3 mil. euros in 30.09.2013 (30.09.2012: 4.9 mil. euros).
Current and non-current liabilities decreased by 0.8 mil. euros to 7.8 mil. euros (30.09.2012: 8.6 mil. euros).
DIVISIONAL REVIEW
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q3 2013 | Q3 2012 | Q3 2013 | Q3 2012 | |
| Skano Fibreboard OÜ | 3,514 | 2,964 | 67.2% | 63.0% |
| Skano Furniture Factory OÜ | 1,419 | 1,399 | 27.1% | 29.7% |
| kano Furniture OÜ retail | 549 | 553 | 10.5% | 11.8% |
| Elimination | (326) | (236) | (4.8%) | (4.5%) |
| TOTAL | 5,231 | 4,708 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q3 2013 | Q3 2012 | Q3 2013 | Q3 2012 | |
| Finalnd | 1,730 | 1,046 | 33.1% | 22.2% |
| Russia | 1,506 | 1,487 | 28.8% | 31.6% |
| Estonia | 841 | 754 | 16.1% | 16.0% |
| Great Britain | 219 | 334 | 4.2% | 7.1% |
| Ukraine | 201 | 229 | 3.8% | 4.9% |
| Latvia | 179 | 207 | 3.4% | 4.4% |
| Sweden | 110 | 143 | 2.1% | 3.0% |
| Germany | 106 | 34 | 2.0% | 0.7% |
| Lithuania | 96 | 146 | 1.8% | 3.1% |
| Kazakhstan | 47 | 36 | 0.9% | 0.8% |
| Netherlands | 39 | 165 | 0.7% | 3.5% |
| Japan | 32 | 0 | 0.6% | 0.0% |
| Greece | 15 | 14 | 0.3% | 0.3% |
| Other countries | 110 | 113 | 2.2% | 2.4% |
| TOTAL | 5,231 | 4,708 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Finland, Russia and Estonia. The percentage of turnover has decreased in most in the Great Britain and the Netherlands.
PROFIT BY BUSINESS SEGMENTS
| th EUR | Q3 2013 | Q3 2012 |
| Skano Furniture factory | 112 | 58 |
| Skano Furniture retail | (24) | 3 |
| Skano Fibreboard | 16 | 25 |
| Elimination | 24 | 23 |
| TOTAL | 128 | 109 |
| Net financial costs | (57) | (62) |
| Income tax | 0 | (3) |
| NET PROFIT | 71 | 44 |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the third quarter of 2013 amounted to 3.51 mil. euros and operating profit to 16 thousand euros. In the same period last year, the turnover of Skano Fibreboard totaled to 2.96 mil. euros and the operating profit from main activities 25 thousand euros. Sales are weak in all regions due to weak economic situation in Europe except for Finland, where due to a new distribution partner we have managed to increase sales considerably. Sales to Finland grew by 122%. Implementing the new sales structure in Finland has and will cause higher sales costs that is optimal during 6-9 months period.
Due to that increased sales to Finland have brought along bigger costs and profitability hasn’t improved yet.
The biggest drop in sales in the third quarter compare to last year took place in the Great Britain and the Netherlands, 42% and 78% respectively. The latter was due to review of our client portfolio, where we want to replace clients with low profitability and to improve our efficiency.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q3 2013 | Q3 2012 | Q3 2013 | Q3 2012 | |
| Finland | 1,339 | 602 | 38.1% | 20.3% |
| Russia | 841 | 804 | 24.0% | 27.1% |
| Estonia | 581 | 544 | 16.5% | 18.4% |
| Great Britain | 194 | 334 | 5.5% | 11.3% |
| Sweden | 110 | 143 | 3.1% | 4.8% |
| Germany | 106 | 34 | 3.0% | 1.1% |
| Latvia | 100 | 144 | 2.8% | 4.9% |
| Ukraine | 46 | 34 | 1.3% | 1.1% |
| Netherlands | 39 | 176 | 1.1% | 5.9% |
| Japan | 32 | 0 | 0.9% | 0.0% |
| Lithuania | 17 | 50 | 0.5% | 1.7% |
| Other countries | 109 | 99 | 3.1% | 3.4% |
| Intragroup | 0 | 0 | 0.0% | 0.0% |
| TOTAL | 3,514 | 2,964 | 100.0% | 100.0% |
The net sales of the Pärnu fibreboard factory and interior board’s line increased 13% in the third quarter of 2013 compared to the same quarter of 2012 and amounted to 2.4 mil. euros. Due to higher sales cost in Finland, production testing and too fragmented production portfolio the production efficiency was low in the third quarter.
The turnover of Püssi fibreboard factory amounted to 1.1 mil. euros growing 38% compared to the same quarter in 2012 and operating loss amounted to 118 thousand euros (turnover 799 thousand euros and operating loss 230 thousand
euros in Q3 2012). Output of Püssi Fibreboard factory grew in the third quarter but the main challenge is still to secure Püssi Fibreboard factory with sufficient sales volumes.
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. Too fragmented production portfolio could increase the production cost by 10-20%.
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 third quarter in 2013.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales |
Number of stores |
||||
| Q3 2013 | Q3 2012 | Q3 2013 | Q3 2012 | 30.09.13 | 30.09.12 | |
| Estonia | 234 | 201 | 42.8% | 36.2% | 3 | 3 |
| Latvia | 79 | 63 | 14.4% | 11.4% | 1 | 1 |
| Lithuania | 79 | 96 | 14.4% | 17.3% | 1 | 1 |
| Ukraine | 155 | 195 | 28.4% | 35.1% | 4 | 4 |
| TOTAL | 547 | 555 | 100.0% | 100.0% | 9 | 9 |
The furniture retail sale amounted to 547 thousand euros in the third quarter of 2013 and operating loss 24 thousand euros (sales 555 thousand euros and operating profit 3 thousand euros in Q3 2012). The 3rd quarter operating loss contains also loss from currency exchange rate of hryvnia 32 thousand euros (loss from currency exchange rate 25 thousand euros in the same period last year. Retail sale increased in Estonia and Latvia but decreased in Lithuania and Ukraine.
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the third quarter amounted to 1.4 mil. euros and operating profit to 112 thousand euros. In the same period last year, the turnover of the factory amounted to 1.4 mil. euros and the
profit to 58 thousand euros. As compared to the previous year the turnover of the factory has increased 1% and the operating profit has increased by 54 thousand euros. Sales in the third quarter of 2013 increased to the Great Britain and our subsidiary. In the third quarter the sales decreased in Finland and Russia due to weak demand of foreign markets.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales |
|||
| Q3 2013 | Q3 2012 | Q3 2013 | Q3 2012 | |
| Russia | 665 | 683 | 46.9% | 48.8% |
| Finland | 391 | 444 | 27.6% | 31.7% |
| Kazakhstan | 47 | 36 | 3.3% | 2.6% |
| Estonia | 26 | 9 | 1.8% | 0.6% |
| Other countries | 47 | 17 | 2.9% | 1.2% |
| Subsidiaries | 249 | 210 | 17.5% | 15.0% |
| TOTAL | 1,419 | 1,399 | 100.0% | 100.0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. Sales of Skano Fibreboard will remain at the same level compare to the same period last year. In Q4 we will carry out production testing, development and tuning of production process in order to achieve a lower production cost. In December we have 2-weeks collective vacation and planned small maintenance repair. Those factors will impact negatively
Fibreboard Q4 results, but are important in order to achieve lower production cost and efficient production portfolio.
In spite of weak demand of foreign markets and economic situation in Europe we are moderately optimistic about sales growth in 2014, mostly from Finland. We predict that the strategic agreement with a new distribution partner in Finland allows us to increase our production capacity in 2014.
SKANO FURNITURE RETAIL SALES. We expect retail sale in the fourth quarter of 2013 to decrease compare to the sale of the same period in last year.
SKANO FURNITURE FACTORY. In the fourth quarter of 2013 we expect smaller 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. Sales to new markets (incl. the Great Britain) are not yet exceeding the lag from our main markets.
FINANCIAL HIGHLIGHTS
| th EUR | 9 m 2013 | 9 m 2012 | 9 m 2011 |
| Income statement | |||
| Revenue | 14,329 | 14,148 | 12,513 |
| EBITDA | 440 | 862 | 3,353 |
| EBITDA margin | 3.1% | 6.1% | 26.8% |
| Operating profit | (242) | 119 | 2,893 |
| Operating margin | (1.7%) | 0.8% | 23.1% |
| Net profit | (415) | (90) | 2,775 |
| Net margin | (2.9%) | (0.6%) | 22.2% |
| Balance sheet (30.09) | |||
| Total assets | 14,916 | 16,201 | 16,538 |
| Return on assets | (2.8%) | (0.6%) | 16.8% |
| Equity | 7,090 | 7,602 | 7,693 |
| Return on equity | (5.9%) | (1.2%) | 36.1% |
| Debt-to-equity ratio | 52.5% | 53.1% | 53.5% |
| Share (30.09) | |||
| Closing price | 1.30 | 1.37 | 1.50 |
| Earnings per share | (0.09) | (0.02) | 0.62 |
| Price-earnings ratio | (14.4) | (68.5) | 2.42 |
| Book value of a share | 1.58 | 1.69 | 1.76 |
| Market to book ratio | 0.82 | 0.81 | 0.85 |
| Market capitalization | 5,849 | 6,164 | 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 | 30.09.2013 | 31.12.2012 | 30.09.2012 |
| Cash and bank | 165 | 158 | 179 |
| Receivables and prepayments (Note 1) | 1,672 | 1,792 | 2,219 |
| Inventories (Note 2) | 3,249 | 3,303 | 3,448 |
| Total current assets | 5,086 | 5,253 | 5,846 |
| Investment property (Note 3) | 185 | 185 | 185 |
| Tangible fixed assets (Note 4) | 9,627 | 10,010 | 10,158 |
| Intangible fixed assets (Note 5) | 18 | 23 | 12 |
| Total fixed assets | 9,830 | 10,218 | 10,355 |
| TOTAL ASSETS | 14,916 | 15,471 | 16,201 |
| Debt obligations (Note 6) | 694 | 1,845 | 880 |
| Payables and prepayments (Note 7) | 2,557 | 1,923 | 2,579 |
| Short-term provisions (Note 8) | 3 | 12 | 3 |
| Total current liabilities | 3,254 | 3,780 | 3,462 |
| Non-current debt obligations (Note 6) | 4,328 | 3,973 | 4,898 |
| Non-current provisions (Note 8) | 244 | 236 | 239 |
| Total non-current liabilities | 4,572 | 4,209 | 5,137 |
| Total liabilities | 7,826 | 7,989 | 8,599 |
| 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 | 2 | (21) | (11) |
| Retained profits | 4,152 | 4,353 | 4,353 |
| Net profit (loss) for the year (Note 10) | (415) | (201) | (91) |
| Total equity | 7,090 | 7,482 | 7,602 |
| TOTAL LIABILITIES AND EQUITY | 14,916 | 15,471 | 16,201 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 3rd Q 2013 | 3rd Q 2012 | 9 m 2013 | 9 m 2012 |
| RETURN ON SALES (Note 11) | 5,231 | 4,708 | 14,329 | 14,148 |
| Cost of production sold | (4,223) | (3,961) | (12,064) | (11,901) |
| Gross profit | 1,008 | 747 | 2,265 | 2,247 |
| Marketing expenses | (660) | (559) | (1,889) | (1,752) |
| General administrative expenses | (169) | (76) | (556) | (385) |
| Other income | 37 | 40 | 98 | 131 |
| Other expenses | (88) | (43) | (160) | (122) |
| Operating profit (loss) (Note 11) | 128 | 109 | (242) | 119 |
| Financial income and financial expenses | (57) | (62) | (172) | (197) |
| Profit (loss) before taxes | 71 | 47 | (414) | (78) |
| Prepaid income tax | 0 | (3) | (1) | (13) |
| NET PROFIT (LOSS) FOR THE PERIOD | 71 | 44 | (415) | (91) |
| Basic earnings per share (Note 10) | 0.02 | 0.01 | (0.09) | (0.02) |
| Diluted earnings per share (Note 10) | 0.02 | 0.01 | (0.09) | (0.02) |
| Other comprehensive income: | ||||
| Currency translation differences | 10 | 27 | 23 | 0 |
The planned time of publishing of interim report of the fourth quarter 2014 is week 9 (25-28 February 2014)
Martin Kalle
CFO
+372 4478 331
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www.skano.com