Skano Group Quarterly report 29.08.2014
Financial results, 6 months 2014
Pärnu, 2014-08-29 15:28 CEST (GLOBE NEWSWIRE) --
THE SECOND QUARTER IN SHORT
Consolidated net sales of the second quarter of 2014 was 5.35 mil. euros, representing a 13% increase on the second quarter compared to the same period in 2013. At the same time, consolidated EBITDA amounted to 431 thousand euros
(EBITDA 123 thousand euros in Q2 2013).
The sales in Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 2.2 mil. euros, increased as compared to the respective period last year by 25%, the operating profit of the second quarter was 126 thousand euros compared with the operating loss of 76 thousand euros last year.
The turnover of Skano Fibreboard OÜ Püssi factory was 1.2 mil. euros, representing a 39% increase in the second quarter compared to the same period in 2013. The operating loss amounted to 25 thousand euros compared with the
operating loss 158 thousand euros last year.
The main sales growth came from Finland thanks to the new distribution partner and from Estonia. Despite of sales growth from Finland, which came at the expense of a bigger market share, our main foreign markets remained weak due to the general economic situation in Europe. We have continuously expanded the list of our target markets and made considerable efforts in product development to obtain certificates necessary for different markets. In the second quarter
we also conducted product testing and fine tuning of the production process in both factories in order to achieve a lower production cost.
The priority of the management of the company is to continuously 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 second quarter by 7,5% and amounted to 1,7 mil. euros. The operating profit in the second quarter was 141 thousand euros, in 2013 the operating profit of the
same period was 133 thousand euros. Sales in the second quarter of 2014 decreased mostly in Finland due to a weak demand by 23% compared to 2013, also sales to the Baltics (through the subsidiary) decreased by 16%. Sales to Russia
remained at the same level compared to 2013. In addition to seeking new sales possibilities in the current markets, the company has made considerable efforts to enter into new markets. The sales in new markets is not yet covering the gap
from our main markets.
The turnover of Skano Furniture OÜ retail chain was 543 thousand euros which is a 12% decrease compared to the same period last year and the operating loss was 49 thousand euros, compared with the sales of 619 thousand and operating loss of 3 thousand euros in the second quarter of 2013. The current year second quarter operating loss of 49 thousand euros also contains a loss from the drop in currency exchange rate of hryvnia 55 thousand euros, out of which 32 thousand euros was due to the revaluation of intragroup loans as a separate subsidiary but which will be eliminated out on the group level and will not affect Skano Group end result. The realized currency exchange rate loss amounted to 20 thousand euros (the realized loss from the currency exchange rate was 13 thousand euros in the same period of 2013). Retail sales increased surprisingly in Ukraine but decreased in the Baltics. 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
The consolidated net sales of the second quarter in 2014 was 5.35 mil. euros (4.74 mil. euros in the same period of 2013) representing a 13% increase compared to Q2 2013. The Group’s gross margin in the second quarter of 2014 was
21.8% compared to 15.6% in the second quarter of 2013. The consolidated operating profit amounted to 212 thousand euros (operating loss of 104 thousand euros from the main activities in the same period of 2013). The consolidated operating margin of net sales was 4.0% (-2.2% from main activities in Q2 2013).
The consolidated net profit amounted to 142 thousand euros (compared to a net loss of 164 thousand euros in Q2 2013), and the net margin was 2.7% (-3.5% in Q2 2013).
POSITION OF FINANCIAL STATEMENT
As of 30.06.2014 the total assets of Skano Group AS amounted to 15.1 mil. euros (30.06.2013: 15.3 mil. euros). The liabilities of the company accounted for 55.5% (30.06.2013: 54.1%) thereof, i.e. 8.4 mil. euros (30.06.2013: 8.2 mil. euros).
Receivables and prepayments have decreased by 0.3 mil. euros i.e. 18% decrease with 12 months. The reason of decrease of receivables was implementation of factoring instrument.
Inventories have increased with 12 months by 0,25 mil. euros compared to last year, amounting to 3.5 mil. euros on 30.06.2014. (30.06.2013: 3.3 mil. euros). Property, plant and intangibles decreased by 0.4 mil. euros mainly as a result
of depreciation.
Short-term loans have increased by 0.2 mil. euros and amounted to 1.4 mil. euros in 30.06.2014 which was a result of the usage of bank overdraft (30.06.2013: 1.2 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.6 mil. euros (30.06.2013: 2.4 mil. euros).
Long-term loans have decreased by 0.2 mil euros and amounted to 4.1 mil. euros in 30.06.2014 (30.06.2013: 4.3 mil. euros). The decrease was due to principal payments amounted to 0.2 mil. euros.
Current and non-current liabilities increased by 0.2 mil. euros to 8.4 mil. euros (30.06.2013: 8.2 mil. euros).
DIVISIONAL REVIEW
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q2 2014 | Q2 2013 | Q2 2014 | Q2 2013 | |
| Skano Fibreboard OÜ | 3,397 | 2,631 | 63.5% | 55.5% |
| Skano Furniture Factory OÜ | 1,694 | 1,831 | 31.7% | 38.7% |
| Skano Furniture OÜ retail | 543 | 619 | 10.1% | 13.1% |
| Elimination | (284) | (344) | (5.3%) | (7.3%) |
| TOTAL | 5,350 | 4,737 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q2 2014 | Q2 2013 | Q2 2014 | Q2 2013 | |
| Finalnd | 2,113 | 1,404 | 39.5% | 29.6% |
| Russia | 1,358 | 1,636 | 25.4% | 34.5% |
| Estonia | 872 | 704 | 16.3% | 14.9% |
| Great Britain | 252 | 235 | 4.7% | 5.0% |
| Ukraine | 135 | 136 | 2.5% | 2.9% |
| Latvia | 117 | 112 | 2.2% | 2.4% |
| Lithuania | 108 | 165 | 2.0% | 3.5% |
| Sweden | 99 | 146 | 1.9% | 3.1% |
| United Arab Emirates | 56 | 0,1 | 1.0% | 0.0% |
| Germany | 45 | 18 | 0.8% | 0.8% |
| Kazakhstan | 43 | 39 | 0.8% | 0.8% |
| Japan | 20 | 0 | 0.4% | 0.0% |
| Other countries | 142 | 142 | 2.7% | 3.0% |
| TOTAL | 5,350 | 4,737 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Finland and Estonia. The percentage of turnover has decreased in most in Russia.
PROFIT BY BUSINESS SEGMENTS
| th EUR | Q2 2014 | Q2 2013 |
| Skano Furniture factory | 141 | 133 |
| Skano Furniture retail | (49) | (3) |
| Skano Fibreboard | 101 | (234) |
| Elimination | 19 | 0 |
| TOTAL | 212 | (104) |
| Net financial costs | (70) | (60) |
| Income tax | 0 | 0 |
| NET PROFIT | 142 | (164) |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the second quarter of 2014 amounted to 3.4 mil. euros and operating profit to 101 thousand euros. In the same period last year, the turnover of Skano Fibreboard totaled to 2.6 mil. euros and the operating loss from main activities 234 thousand euros. Due to a new distribution partner in Finland we have managed to increase sales considerably at the expense of a bigger market share. Sales to Finland grew by 105%. Considerable investments into production efficiency have paid off and improved production profitability in the second quarter.
The biggest drop in sales in the second quarter compared to last year took place in Russia, 37% respectively due to the general political situation and weakened purchase power in Russia for import goods.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | ||||
| Q2 2014 | Q2 2013 | Q2 2014 | Q2 2013 | ||
| Finland | 1,651 | 803 | 48.6% | 30.5% | |
| Estonia | 552 | 382 | 16.2% | 14.5% | |
| Russia | 509 | 806 | 15.0% | 30.6% | |
| Great Britain | 262 | 229 | 7.7% | 8.7% | |
| Sweden | 99 | 146 | 2.9% | 5.5% | |
| Latvia | 68 | 45 | 2.0% | 1.7% | |
| Germany | 45 | 18 | 1.3% | 0.7% | |
| Netherlands | 32 | 51 | 0.9% | 1.9% | |
| Ukraine | 28 | 35 | 0.8% | 1.3% | |
| Japan | 20 | 0 | 0.6% | 0.0% | |
| Other countries | 125 | 107 | 3.7% | 4.1% | |
| Intragroup | 6 | 9 | 0.2% | 0.3% | |
| TOTAL | 3,397 | 2,631 | 100.0% | 100.0% |
| th EUR | Net sales | Operating Profit | |||
| Q2 2014 | Q2 2013 | Q2 2014 | Q2 2013 | ||
| Pärnu Fibreborad factory | 1,564 | 1,091 | 111 | (125) | |
| Püssi Fibreboard factory | 1,233 | 889 | (25) | (158) | |
| Pärnu interior boards factory (Isotex) | 594 | 642 | 15 | 49 | |
| Not allocated | 6 | 9 | 0 | 0 | |
| TOTAL | 3,397 | 2,631 | 101 | (234) |
The net sales of the Pärnu fibreboard factory and interior board’s line increased 25% in the second quarter of 2014 compared to the same quarter of 2013 and amounted to 2.2 mil. euros. Production efficiency has improved thanks to our targeted production improvement and investment program.
The turnover of Püssi fibreboard factory amounted to 1.2 mil. euros growing 39% compared to the same quarter in 2013 and operating loss amounted to 25 thousand euros (turnover 0.9 mil. euros and operating loss 158 thousand euros in Q2 2013). 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 and optimizing production portfolio and 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 10 stores in Tallinn (2), Tartu, Pärnu, Riga, Vilnius, Kiev (2), Kharkiv and Dnipropetrovs’k at the end of the second quarter in 2014.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||||
| Q2 2014 | Q2 2013 | Q2 2014 | Q2 2013 | 30.06.14 | 30.06.13 | |||
| Estonia | 294 | 308 | 54.2% | 49.8% | 4 | 3 | ||
| Latvia | 49 | 67 | 9.0% | 10.8% | 1 | 1 | ||
| Lithuania | 93 | 143 | 17.1% | 23.1% | 4 | 4 | ||
| Ukraine | 107 | 101 | 19.7% | 16.3% | 4 | 4 | ||
| TOTAL | 543 | 619 | 100.0% | 100.0% | 10 | 9 |
The furniture retail sales amounted to 543 thousand euros in the second quarter of 2014 and operating loss 49 thousand euros (sales 619 thousand euros and operating loss 3 thousand euros in Q2 2013). The current year second quarter operating loss 49 thousand euros contains also a loss from a drop in the currency exchange rate of hryvnia 55 thousand euros, out of which 32 thousand euros was due to revaluation of intragroup loans as a separate subsidiary but which will be eliminated out on group level and will not affect Skano Group end result and the realized currency exchange rate loss amounted to 20 thousand euros (realized loss from currency exchange rate 13 thousand euros in the same period of 2013).
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the second quarter amounted to 1.7 mil. euros and operating profit to 141 thousand euros. In the same period last year, the turnover of the factory amounted to 1.8 mil. euros and the profit to 133 thousand euros. As compared to the previous year the turnover of the factory has decreased 7.5% and the operating profit has increased by 8 thousand euros. In the second quarter the sales decreased especially in Finland by 23% due to a colder economic environment and weaker demand for durable goods.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | ||||
| Q2 2014 | Q2 2013 | Q2 2014 | Q2 2013 | ||
| Russia | 849 | 830 | 50.1% | 45.3% | |
| Finland | 462 | 601 | 27.3% | 32.8% | |
| Kazakhstan | 43 | 39 | 2.5% | 2.1% | |
| Estonia | 26 | 14 | 1.5% | 0.8% | |
| Other countries | 36 | 12 | 2.1% | 0.7% | |
| Subsidiaries | 278 | 335 | 16.5% | 18.3% | |
| TOTAL | 1,694 | 1,831 | 100.0% | 100.0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. Sales of Skano Fibreboard in Q3 2014 will remain at the same level compared to sales of the same period last year. In Q3 collective vacations in both factories are planned which will influence profitability. In addition to optimizing the production portfolio the management’s priority is to also improve energy efficiency in the production process, with the aim to achieve our 2014 investment and improvement program target.
We are moderately optimistic about 2014 2H, but further escalation of the conflict in Ukraine would impact negatively to fibreboard sales in our main markets of Finland and Russia. Despite of geopolitical developments we are taking actions to enter into new export markets.
SKANO FURNITURE RETAIL SALES. We expect retail sales in the third quarter of 2014 to decrease compared to the sale of the same period last year. We expect a bigger negative impact to sales from Ukraine due to political and economic instability.
SKANO FURNITURE FACTORY. In the third quarter of 2014 we expect smaller sales of the furniture factory compared to the same period in 2013 because of the deteriorated economic situation in the neighbouring region, in Finland due to general economic situation and in Russia due to conflict in Ukraine, which has impact on local purchasing power and general trade with EU.
FINANCIAL HIGHLIGHTS
| th EUR | 6 m 2014 | 6 m 2013 | 6 m 2012 |
| Income statement | |||
| Revenue | 10,701 | 9,098 | 9,440 |
| EBITA | 531 | 86 | 512 |
| EBITDA margin | 5.0% | 0.9% | 5.4% |
| Operating profit | 87 | (370) | 10 |
| Net profit | (44) | (486) | (134) |
| Net margin | (0.4%) | (5.3%) | (1.4%) |
| Balance sheet (30.06) | |||
| Total assets | 15,133 | 15,256 | 16,050 |
| Return on assets | (0.3%) | (3.2%) | (0.8%) |
| Equity | 6 737 | 7 009 | 7,532 |
| Return on equity | (0.7%) | (6.9%) | (1.8%) |
| Debt-to-equity ratio | 55.5% | 54.1% | 53.1% |
| Share (30.06) | |||
| Closing price | 1,00 | 1,06 | 1,31 |
| Earnings per share | (0.01) | (0.11) | (0.03) |
| Price-earnings ratio | (100.00) | (9.64) | (43.67) |
| Book value of a share | 1,50 | 1,56 | 1,67 |
| Market to book ratio | 0,67 | 0,68 | 0,78 |
| Market capitalization | 4,499 | 4,769 | 5,894 |
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 | 30.06.2014 | 31.12.2013 | 30.06.2013 |
| Cash and bank | 264 | 355 | 111 |
| Receivables and prepayments (Note 1) | 1,601 | 1,368 | 1,942 |
| Inventories (Note 2) | 3,512 | 2,974 | 3,257 |
| Total current assets | 5,377 | 4,697 | 5,310 |
| nvestment property (Note 3) | 408 | 408 | 185 |
| Tangible fixed assets (Note 4) | 9,322 | 9,505 | 9,741 |
| Intangible fixed assets (Note 5) | 26 | 26 | 20 |
| Total fixed assets | 9,756 | 9,939 | 9,946 |
| TOTAL ASSETS | 15,133 | 14,636 | 15,256 |
| Debt obligations (Note 6) | 1,406 | 1,919 | 1,249 |
| Payables and prepayments (Note 7) | 2,617 | 2,255 | 2,419 |
| Short-term provisions (Note 8) | 7 | 14 | 7 |
| Total current liabilities | 4,030 | 4,188 | 3,675 |
| Non-current debt obligations (Note 6) | 4,127 | 3,413 | 4,328 |
| Non-current provisions (Note 8) | 239 | 230 | 244 |
| Total non-current liabilities | 4,366 | 3,643 | 4,572 |
| 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 | (16) | 8 | (8) |
| Retained profits | 3,446 | 4,152 | 4,152 |
| Net profit (loss) for the year (Note 10) | (44) | (706) | (486) |
| Total equity | 6,737 | 6,805 | 7,009 |
| TOTAL LIABILITIES AND EQUITY | 15,133 | 14,636 | 15,256 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 2nd Q 2014 | 2nd Q 2013 | 6 m 2014 | 6 m 2013 |
| RETURN ON SALES (Note 11) | 5,350 | 4,736 | 10,701 | 9,098 |
| Cost of production sold | (4,181) | (3,999) | (8,719) | (7,841) |
| Gross profit | 1,169 | 737 | 1,982 | 1,257 |
| Marketing expenses | (729) | (649) | (1,451) | (1,229) |
| General administrative expenses | (159) | (180) | (332) | (387) |
| Other income | 6 | 19 | 23 | 61 |
| Other expenses | (75) | (31) | (135) | (72) |
| Operating profit (loss) (Note 11) | 212 | (104) | 87 | (370) |
| Financial income and financial expenses | (70) | (60) | (131) | (115) |
| Profit (loss) before taxes | 142 | (164) | (44) | (485) |
| Prepaid income tax | 0 | 0 | 0 | (1) |
| NET PROFIT (LOSS) FOR THE PERIO | 142 | (164) | (44) | (486) |
| Basic earnings per share (Note 10) | 0,03 | (0.04) | (0.01) | (0.11) |
| Diluted earnings per share (Note 10) | 0.03 | (0.04) | (0.01) | (0.11) |
| Other comprehensive income: | ||||
| Currency translation differences | 21 | 3 | (24) | 13 |
| TOTAL COMPREHENSIVE INCOME | 163 | (161) | (68) | (473) |
The planned time of publishing of interim report of the third quarter of 2014 is week 48 (24-28 November 2014)
Martin Kalle
CEO
+372 4478 331
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Skano 2014 2Q interim report ENG.pdf