Skano Group Quarterly report 28.11.2014
Financial results, 9 months 2014
Pärnu, 2014-11-28 15:39 CET (GLOBE NEWSWIRE) --
THE THIRD QUARTER IN SHORT
Consolidated net sales of the third quarter of 2014 was 4.97 mil. euros, representing a 5% decrease on the third quarter compared to the same period in 2013. At the same time, consolidated EBITDA amounted to 165 thousand euros (EBITDA 354 thousand euros in Q3 2013).
The sales in Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 2.0 mil. euros, decreased as compared to the respective period last year by 17%, the operating profit of the third quarter was 48 thousand euros compared with the operating profit 134 thousand euros last year.
The turnover of Skano Fibreboard OÜ Püssi factory was 1.4 mil. euros, representing 27% increase in the third quarter compared to the same period in 2013. Operating loss amounted to 24 thousand euros compared with the operating loss 118 thousand euros last year.
Sales mainly decreased in Russia by 26% due to deteriorated economic and political situation. Our main foreign markets are still 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 third quarter we also conducted product testing and tuning of production process in both factories 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.
In July 2014 Skano Fibreboard OÜ acquired full control over Suomen Tuulileijona OY. Suomen Tuulieleijona OY is the wholesaler of Skano fibreboard products in Finland. The acquisition has no significant impact to our position in the Finnish wholesale market but was done to secure our ongoing sales in Finland.
The turnover of Skano Furniture Factory OÜ in Pärnu decreased in the third quarter by 21% and amounted to 1,1 mil. euros. The operating loss of the third quarter was 65 thousand euros as in 2013 the operating profit of the same period was 112 thousand euros. Profitability was impacted by low sales volumes. Sales in the third quarter of 2014 decreased mostly in Russia due to weak
demand by 34% as compared to 2013, also sales to Finland decreased 7%. Sales to the subsidiary (Baltics and Ukraine) increased by 14% as compared to the same period in 2013. In addition to seeking new sales possibilities in the current markets the company has made considerable effort to enter into totally new markets. Today sale in new markets is not covering the gap from our main markets.
The turnover of Skano Furniture OÜ retail chain increased 2% as compared to the same period last year being 556 thousand euros, operating loss was 14 thousand euros compared with the sales 547 thousand and operating loss 24 thousand euros in the third quarter of 2013. Current year third quarter operating loss contains also a loss from a drop of currency exchange rate of hryvnia 20
thousand euros (realized loss from currency exchange rate 32 thousand euros in the same period of 2013). Retail sale increased everywhere in Baltics but decreased in Ukraine due to escalated conflict. 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 2014 was 4.97 mil. euros (5.23 mil. euros in same period of 2013) representing a 5% decrease compared to Q3 2013. The Group’s gross margin in the third quarter of 2014 was 18.4% compared to 19.3% in the third quarter of 2013. Consolidated operating loss amounted to 58 thousand euros (operating profit 128 thousand euros from main activities in same period 2013). The consolidated operating margin of net sales was -1.2% (2.4% from main activities in Q3 2013).
Consolidated net loss amounted to 135 thousand euros (compared to net profit 71 thousand euros in Q3 2013), and the net margin was -2.7% (1.4% in Q3 2013).
POSITION OF FINANCIAL STATEMENT
As of 30.09.2014 the total assets of Skano Group AS amounted to 15.5 mil. euros (30.09.2013: 14.9 mil. euros). The liabilities of the company accounted for 57.5% (30.09.2013: 53.1%) thereof, i.e. 8.9 mil. euros (30.09.2013: 7.8 mil. euros).
Receivables and prepayments have increased by 0.1 mil. euros i.e. 6% increase with 12 months.
Inventories have increased with 12 months by 0,2 mil. euros compared to last year, amounting to 3.5 mil. euros on 30.09.2014. (30.09.2013: 3.3 mil. euros). Property, plant and intangibles decreased by 0.3 mil. euros mainly as a result of depreciation.
Short-term loans have increased by 0.95 mil. euros and amounted to 1.65 mil. euros in 30.09.2014 which was result of increase of factoring liabilities of Suomen Tuulileijona OY recently acquired and usage of bank overdraft (30.09.2013: 0.7 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.9 mil. euros (30.09.2013: 2.6 mil. euros).
Long-term loans have decreased by 0.2 mil euros and amounted to 4.1 mil. euros in 30.09.2014 (30.09.2013: 4.3 mil. euros). The decrease was due to principal payments mounted to 0.2 mil. euros.
Current and non-current liabilities increased by 1.1 mil. euros to 8.9 mil. euros (30.09.2013: 7.8 mil. euros).
DIVISIONAL REVIEW
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q3 2014 | Q3 2013 | Q3 2014 | Q3 2013 | |
| Skano Fibreboard OÜ | 3,369 | 3,514 | 67.8 | 67.2% |
| Skano Furniture Factory OÜ | 1,119 | 1,419 | 22.5% | 27.1% |
| Skano Furniture OÜ retail | 556 | 547 | 11.2% | 10.5% |
| Suomen Tuulileijona OY | 1,376 | 0 | 27.7% | 0,0% |
| Elimination | (1,452) | (249) | (29.2%) | (4.8%) |
| TOTAL | 4,986 | 5,231 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q3 2014 | Q3 2013 | Q3 2014 | Q3 2013 | |
| Finland | 1,867 | 1,730 | 37.5% | 33.1% |
| Russia | 1,061 | 1,506 | 21.4% | 28.8% |
| Estonia | 806 | 841 | 16.2% | 16.1% |
| Great Britain | 286 | 219 | 5.8% | 4.2% |
| Latvia | 168 | 179 | 3.4% | 3.4% |
| Sweden | 158 | 110 | 3.2% | 2.1% |
| Lithuania | 143 | 96 | 2.9% | 1.8% |
| Ukraine | 92 | 201 | 1.9% | 3.8% |
| SAR | 62 | 0 | 1.2% | 0.0% |
| United Arab Emirates | 45 | 0 | 0.9% | 0.0% |
| Singapore | 42 | 0 | 0.8% | 0.0% |
| Saudi Arabia | 34 | 0 | 0.7% | 0.0% |
| Other countries | 204 | 349 | 4.1% | 6.7% |
| TOTAL | 4,968 | 5,231 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Finland, Great Britain, Sweden and Lithuania. The turnover has decreased in most in Russia and Ukraine.
PROFIT BY BUSINESS SEGMENTS
| th EU | Q3 2014 | Q3 2013 |
| Skano Furniture factory | (65) | 112 |
| Skano Furniture retail | (14) | (24) |
| Skano Fibreboard | 24 | 16 |
| Suomen Tuulileijona OY | (12) | 0 |
| Elimination | 9 | 24 |
| TOTAL | (58) | 128 |
| Net financial costs | (77) | (57) |
| Income tax | 0 | 0 |
| NET PROFIT | (135) | 71 |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the third quarter of 2014 amounted to 3.4 mil. euros and operating profit to 24 thousand euros. In the same period last year, the turnover of Skano Fibreboard totaled to 3.5 mil. euros and the operating profit from main activities 16 thousand euros. The aim of acquisition of Suomen Tuulileijona OY (distributer of our production in Finland) was to
secure our position in Finland, which is one of our core markets.
The biggest drop in sales in the third quarter compare to last year took place in Russia, 26% respectively due to general political situation and weakened purchase power in Russia for import goods.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sale | |||
| Q3 2014 | Q3 2013 | Q3 2014 | Q3 2013 | |
| Finland (incl. to Suomen Tuulileijona OY) |
1,298 | 1,339 | 38.5% | 38.2% |
| Russia | 623 | 841 | 18.5% | 23.9% |
| Estonia | 476 | 581 | 14,2% | 16.5% |
| Great Britain | 250 | 194 | 7.4% | 5.5% |
| Sweden | 158 | 110 | 4.7% | 3.1% |
| Latvia | 83 | 100 | 2.5% | 2.8% |
| SAR | 62 | 0 | 1.8% | 0.0% |
| Lithuania | 45 | 17 | 1.3% | 0.5% |
| United Arab Emirates | 45 | 0 | 1.3% | 0.0% |
| Ukraine | 42 | 46 | 1.2% | 1.3% |
| Singapore | 42 | 0 | 1.2% | 0,0% |
| Other countries | 245 | 286 | 7.4% | 8.2% |
| TOTAL | 3,369 | 3,514 | 100,0% | 100,0% |
| th EUR | Net sales | Operating Profit | ||
| Q3 2014 | Q3 2013 | Q3 2014 | Q3 20143 | |
| Pärnu Fibreborad factory | 1,421 | 1,685 | 36 | 63 |
| Püssi Fibreboard factory | 1,395 | 1,104 | (24) | (118) |
| Pärnu interior boards factory (Isotex) | 553 | 725 | 12 | 71 |
| Not allocated | 0 | 0 | 0 | 0 |
| TOTAL | 3,369 | 3,514 | 24 | 16 |
The net sales of the Pärnu fibreboard factory and interior board’s line decreased 17% in the third quarter of 2014 compared to the same quarter of 2013 and amounted to 2.0 mil. euros.
The turnover of Püssi fibreboard factory amounted to 1.4 mil. euros growing 27% compared to the same quarter in 2013 and operating loss amounted to 24 thousand euros (turnover 1.1 mil. euros and operating loss 118 thousand euros in Q3 2013). 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 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 third quarter in 2014.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | |||||
| Q3 2014 | Q3 2013 | Q3 2014 | Q3 2013 | 30.09.14 | 30.09.13 | ||
| Estonia | 323 | 234 | 58.1% | 42.8% | 4 | 4 | |
| Latvia | 85 | 79 | 15.3% | 14.4% | 1 | 1 | |
| Lithuania | 98 | 79 | 15.3% | 14.4% | 1 | 1 | |
| Ukraine | 50 | 155 | 9.0% | 28.4% | 4 | 4 | |
| TOTAL | 556 | 547 | 100.0% | 100.0% | 10 | 10 |
The furniture retail sale amounted to 556 thousand euros in the third quarter of 2014 and operating loss 14 thousand euros (sales 547 thousand euros and operating loss 24 thousand euros in Q3 2013). Current year third quarter operating loss 14 thousand euros contains also loss from drop of currency exchange rate of hryvnia 20 thousand euros (realized loss from currency exchange rate 32 thousand euros in the same period of 2013).
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the third quarter amounted to 1.1 mil. euros and operating loss to 65 thousand euros. In the same period last year, the turnover of the factory amounted to 1.4 mil. euros and the profit to 112 thousand euros. As compared to the previous year the turnover of the factory has decreased 21%. In the third quarter the sales decreased especially in Russia by 34% and in Finland by 7% due to colder economic and political environment and weaker demand for durable goods.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | ||||
| Q3 2014 | Q3 2013 | Q3 2014 | Q3 2013 | ||
| Russia | 438 | 335 | 39.1% | 46.9% | |
| Finland | 362 | 391 | 32,4% | 27.6% | |
| Other countries | 35 | 114 | 3.1% | 8.0% | |
| Subsidiaries | 284 | 249 | 25.4% | 17.5% | |
| TOTAL | 1,119 | 1,419 | 100,0% | 100,0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. Sales of Skano Fibreboard in Q4 2014 will slightly decrease compared to sales of the same period last year. The main reason behind decrease is a fire in Pärnu fibreboard factory on the 17th of November, which we can restart at the beginning of January 2015. Current production break will cause a partial deficit in sale of Pärnu factory’s production. Total direct fire damage to buildings and equipment is estimated to amount less than 100 thousand euros but exact damage report for insurance company is being prepared.
According to our insurance agreement our own responsibility is 10% but 10 thousand euros as minimum.
In addition to production portfolio the management’s priority is to improve energy efficiency in the production process, where 2014 last quarter investment and improvement program is aimed.
Further escalation of conflict in Ukraine impacts negatively to fibreboard sales in our main markets Finland and Russia. Despite of geopolitical developments we are taking actions to enter into new export markets.
SKANO FURNITURE RETAIL SALES. We expect total retail sale in Q4 2014 to decrease slightly compared to the sale of the same period last year as we expect bigger negative impact to sales from Ukraine due to political and economic instability.
SKANO FURNITURE FACTORY. In the fourth quarter of 2014 we expect significantly smaller sales of the furniture factory compared to the same period in 2013 because of the deteriorated economic situation in the near regions, in Finland due to general economic situation and in Russia due to conflict in Ukraine, which has material impact on local purchasing power and general trade with EU.
Sales to new markets in Q4 2014 are not covering the lag from our main markets. In 2015 our goal is to compensate with sales in new markets the gap from our main markets in Russia and Finland. In addition to seeking sales possibilities in new markets, we are refreshing our furniture series and developing alternative sales channels.
FINANCIAL HIGHLIGHTS
| th EUR | 9 m 2014 | 9 m 2013 | 9 m 2012 |
| Income statement | |||
| Revenue | 15,669 | 14,329 | 14,148 |
| EBITDA | 696 | 440 | 862 |
| EBITDA margin | 4.4% | 3.1% | 6.1% |
| Operating profit | 29 | (242) | 119 |
| Operating margin | 0.2% | (1.7%) | 0.8% |
| Net profit | (179) | (415) | (90) |
| Net margin | (1.1%) | (2.9%) | (0.6%) |
| Balance sheet (30.09) | |||
| Total assets | 15,503 | 14,916 | 16,201 |
| Return on assets | (1.2%) | (2.8%) | (0.6%) |
| Equity | 6 586 | 7 090 | 7 602 |
| Return on equity | (2.7%) | (5.9%) | (1.2%) |
| Debt-to-equity ratio | 57.5% | 52.5% | 53.1% |
| Share (30.09) | |||
| Closing price | 0.93 | 1.30 | 1.37 |
| Earnings per share | (0.04) | (0.09) | (0.02) |
| Price-earnings ratio | (23.25) | (14.44) | (68.50) |
| Book value of a share | 1.46 | 1.58 | 1.69 |
| Market to book ratio | 0.64 | 0.82 | 0.81 |
| Market capitalization | 4 184 | 5 849 | 6 164 |
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 | 30.09.2014 | 31.12.2013 | 30.09.2013 |
| Cash and bank | 509 | 355 | 165 |
| Receivables and prepayments (Note 1) |
1,761 | 1,368 | 1,672 |
| Inventories (Note 2) | 3,487 | 2,974 | 3,249 |
| Total current assets | 5,757 | 4,697 | 5,086 |
| Investment property (Note 3) | 407 | 408 | 185 |
| Tangible fixed assets (Note 4) | 9,309 | 9,505 | 9,627 |
| Intangible fixed assets (Note 5) | 30 | 26 | 18 |
| Total fixed assets | 9,746 | 9,939 | 9,830 |
| TOTAL ASSETS | 15,503 | 14,636 | 14,916 |
| Debt obligations (Note 6) | 1,651 | 1,919 | 694 |
| Payables and prepayments (Note 7) | 2,897 | 2,255 | 2,557 |
| Short-term provisions (Note 8) | 3 | 14 | 3 |
| Total current liabilities | 4,551 | 4,188 | 3,254 |
| 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 |
| Total liabilities | 8,917 | 7,831 | 7,826 |
| 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 | (32) | 8 | 2 |
| Retained profits | 3,446 | 4,152 | 4,152 |
| Net profit (loss) for the year (Note 10) |
(179) | (706) | (415) |
| Total equity | 6,586 | 6,805 | 7,090 |
| TOTAL LIABILITIES AND EQUITY | 15,503 | 14,636 | 14,916 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 3rd Q 2014 | 3rd Q 2013 | 9 m 2014 | 9 m 2013 |
| RETURN ON SALES (Note 11) | 4,968 | 5,231 | 15,669 | 14,329 |
| Cost of production sold | (4,053) | (4,223) | (12,772) | (12,064) |
| Gross profit | 915 | 1,008 | 2,897 | 2,265 |
| Marketing expenses | (785) | (660) | (2,237) | (1,889) |
| General administrative expense | (141) | (169) | (472) | (556) |
| Other income | 21 | 37 | 44 | 98 |
| Other expenses | (68) | (88) | (203) | (160) |
| Operating profit (loss) (Note 11) | (58) | 128 | 29 | (242) |
| Financial income and financial expenses |
(77) | (57) | (208) | (172) |
| Profit (loss) before taxes | (135) | 71 | (179) | (414) |
| Prepaid income tax | 0 | 0 | 0 | (1) |
| NET PROFIT (LOSS) FOR THE PERIOD | (135) | 71 | (179) | (415) |
| Basic earnings per share (Note 10) | (0.03) | 0.02 | (0.04) | (0.09) |
| Diluted earnings per share (Note 10) | (0.03) | 0.02 | (0.04) | (0.09) |
| Other comprehensive income: | ||||
| Currency translation differences | (16) | 10 | (40) | 23 |
| TOTAL COMPREHENSIVE INCOME | (151) | 81 | (219) | (392) |
The planned time of publishing of interim report of the fourth quarter of 2014 is week 9 (23-27 February 2015)
Martin Kalle
CEO
+372 4478 331
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