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Financial results 12 months 2015 THE FOURTH QUARTER IN SHORT Consolidated net sales of the fourth quarter of 2015 were 4.2 mil. euros, representing a 9% decrease on the fourth quarter compared to the same period in 2014. At the same time, consolidated EBITDA amounted to -72 thousand euros (EBITDA -1 099 thousand euros in Q4 2014, which included also one-off non-monetary write-down of Püssi fibreboard factory assets amount to 925 thousand euros, without the write-down EBITDA would have been -83 thousand euros). Net sales during 12 month in 2015 amounted to 18.8 mil. euros, representing 8% decrease (2014 12 months net sales: 20.3 mil. euros). 12 months EBITDA in 2015 was 739 thousand euros exceeding last year level (2014 12 months EBITDA: -312 thousand euros, which included also one-off non-monetary write-down of Püssi fibreboard factory assets amount to 925 thousand euros, without the write-down EBITDA would have been 613 thousand euros). Although consolidated net sales have decreased mainly due to weak demand in Finland and Russia, the company has managed to improve EBITDA margin and achieved a better result compared to last year. The main reasons behind it are improvements of fibreboard production process allowing to reduce production cost and keep profitability at much lower production volumes. The sale in Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 1.4 mil. euros, decreasing 11% as compared to the respective period last year, the operating loss of the fourth quarter was 74 thousand euros compared with the operating loss 145 thousand euros last year. The turnover of Skano Fibreboard OÜ Püssi factory was 1.3 mil. euros, representing 3% increase in the fourth quarter compared to the same period in 2014. Operating loss amounted to 28 thousand euros compared with the operating loss 1 051 thousand euros last year, without the write-down of Püssi fibreboard factory assets by 925 thousand euros operating loss would have been 126 thousand euros. Sales mainly decreased in our core markets. As our main foreign markets Russia and Finland are still very weak due to the general economic situation we have been continuously expanding the list of our target markets and made significant efforts in product development. In the fourth quarter we also conducted product testing and tuning of production process in both factories in order to achieve a lower production cost and break-even point. 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. Sales of Suomen Tuulielijona OY in Q4 2015 decreased 21% compared to last year, which amounted to 0.7 mil. euros (0,8 mil euros in Q4 2014). Suomen Tuulileijona OY is the wholesaler of Skano fibreboard products in Finland. The turnover of Skano Furniture Factory OÜ in Pärnu decreased in the fourth quarter by 20% and amounted to 1.2 mil. euros. The operating loss of the fourth quarter was 399 thousand euros as in 2014 the operating loss of the same period was 61 thousand euros. 2015 fourth quarter operating loss 399 thousand euros contains also a loss from write-down of receivables against Skano other subsidiaries 265 thousand euros, which is non-monetary and will be eliminated from the consolidated results as they are intragroup transactions against another group company. Without write-down 2015 Q4 operating loss would have been 134 thousand euros. In addition to write-down the profitability was impacted by low sales volumes. In the fourth quarter of 2015 sales to Russia decreased due to very weak demand by 39% as compared to 2014. Sales to Finland decreased slightly 3 % and sales in the Baltics remained at the same level. In addition to seeking new sales possibilities in the current markets the company has made considerable effort to enter into new markets like UK, France and USA. The turnover of Skano Furniture OÜ retail chain decreased 2% as compared to the same period last year being 648 thousand euros, operating loss was 196 thousand euros compared with the sales 662 thousand and operating loss 304 thousand euros in the fourth quarter of 2014. 2015 fourth quarter operating loss 196 thousand euros (in Q4 2014: operating loss 304 thousand euros) contains also a loss from a drop of currency exchange rate of hryvnia 77 thousand euros (in Q4 2014: exchange rate loss 137 thousand euros) and cost of write-down of receivables against Skano Ukrainian subsidiary 125 thousand euros (in Q4 2014: write-down 216 thousand euros). In Q4 2015 Skano Furniture OÜ exchange rate loss and write-down cost amounting to 181 thousand euros (in Q4 2015: 304 thousand euros) is non-monetary and will be eliminated from the consolidated results as they are intragroup transactions against another group company. Retail sale increased in Estonia and Lithuania but decreased in Latvia and Ukraine. Retail sale is still very weak in Ukraine due to the conflict and difficult economic situation. 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 fourth quarter in 2015 was 4.2 mil. euros (4.7 mil. euros in same period of 2014) representing a 9% decrease compared to Q4 2014. The Group’s gross margin in the fourth quarter of 2015 was 16% compared to 15% in the fourth quarter of 2014. Consolidated operating loss amounted to 281 thousand euros (operating loss 1 228 thousand euros from main activities in same period 2014 which included also one-off non-monetary write-down of Püssi fibreboard factory assets amount to 925 thousand euros. Without write-down 2015 Q4 operating loss would have been 304 thousand euros). The consolidated operating margin of net sales was -6.7% (-26.3% from main activities in Q4 2014). Consolidated net loss amounted to 361 thousand euros (compared to net loss 1 302 thousand euros in Q4 2014), and the net margin was -8.5% (-27.97% in Q4 2014). POSITION OF FINANCIAL STATEMENT As of 31.12.2015 the total assets of Skano Group AS amounted to 13.3 mil. euros (31.12.2014: 13.3 mil. euros). The liabilities of the company accounted for 63% (31.12.2014: 60%) thereof, i.e. 8.3 mil. euros (31.12.2014: 8.0 mil. euros). Receivables and prepayments have decreased by 0.2 mil. euros i.e. 19% decrease within 12 months. Inventories have increased 0.5 mil euros with 12 months, amounting to 3.4 mil. euros on 31.12.2015. (31.12.2014: 3.0 mil. euros). Property, plant and intangibles amounted to 8,1 mil euros decreased by 0.2 mil. euros mainly as a result of depreciation. Short-term loans have decreased by 0.7 mil. euros and amounted to 1.3 mil. euros in 31.12.2015 which was a result of usage of bank overdraft and restructuring of the loan between short- and long-term payment schedule (31.12.2014: 2.0 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.7 mil. euros (31.12.2014: 2.2 mil. euros). Long-term loans have increased by 0.6 mil euros and amounted to 4.2 mil. euros in 31.12.2015 (31.12.2014: 3.6 mil. euros). The increase was caused by restructuring of the loan between short- and long-term payment schedule. Current and non-current liabilities have increased by 0.3 mil. euros to 8.3 mil. euros (31.12.2014: 8.0 mil. euros). DIVISIONAL REVIEW NET SALES BY BUSINESS SEGMENTS
NET SALES BY GEOGRAPHICAL SEGMENTS
Regarding the markets, turnover has increased in Estonia and in new market Portugal. The turnover has decreased most in Russia and Finland.
PROFIT BY BUSINESS SEGMENTS
SKANO FIBREBOARD The net sales of Skano Fibreboard in the fourth quarter of 2015 amounted to 2.6 mil. euros and operating loss to 102 thousand euros.In the same period last year, the turnover of Skano Fibreboard totaled to 2.8 mil. euros and the operating loss from main activities 1 199 thousand euros, which included also one-off non-monetary write-down of Püssi fibreboard factory assets by 925 thousand euros. The decrease in sales in the third quarter compare to last year took place in Finland. Sales increased most in Estonia and Portugal. NET SALES BY GEOGRAPHICAL SEGMENTS
The net sales of the Pärnu fibreboard factory and interior board’s line decreased 11 % in the fourth quarter of 2015 compared to the same quarter of 2014 and amounted to 1.4 mil. euros. The turnover of Püssi fibreboard factory amounted to 1.3 mil. euros increasing 3% compared to the same quarter in 2014 (turnover 1.2 mil. euros in Q4 2014). 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 (3), Tartu, Pärnu, Riga, Vilnius, Kiev (2) and Kharkiv at the end of the fourth quarter in 2015. A shop in Dnipropetrovsk was handed over to a local dealer based on franchise agreement. RETAIL SALES BY COUNTRIES
Retail sale amounted to 648 thousand euros in the fourth quarter of 2015 and operating loss 196 thousand euros (sales 662 thousand euros and operating loss 304 thousand euros in Q4 2014). Current year fourth quarter operating loss 196 thousand euros (in Q4 2014: operating loss 304 thousand euros) contains also a loss from a drop of currency exchange rate of hryvnia 77 thousand euros (in Q4 2014: exchange rate loss 137 thousand euros) and cost of write-down of receivables against Skano Ukrainian subsidiary 125 thousand euros (in Q4 2014: write-down 216 thousand euros). Skano Furniture OÜ exchange rate loss and write-down cost amounting to 181 thousand euros (in Q4 2015: 304 thousand euros) is non-monetary and will be eliminated from the consolidated results as they are intragroup transactions against another group company. FURNITURE PRODUCTION The net sales of the Skano Furniture Factory in the fourth quarter amounted to 1.2 mil. euros and operating loss to 399 thousand euros. In the same period last year, the turnover of the factory amounted also to 1.5 mil. euros and the operating loss to 61 thousand euros. Fourth quarter operating loss 399 thousand euros contains also a loss from write-down of receivables against Skano other subsidiaries 265 thousand euros, which is non-monetary and will be eliminated from the consolidated results as they are intragroup transactions against another group company. As compared to the previous year the turnover of the factory has decreased 20%. In the fourth quarter the sales decreased in Russia by 39% due to colder economic environment and weaker purchasing power for imported durable goods. Sales in Finland decreased slightly and in the Baltics remained almost at the same level. FURNITURE FACTORY SALES BY COUNTRIES
FORECAST AND DEVELOPMENT SKANO FIBREBOARD. We expect sales of Skano Fibreboard in Q1 2016 to be similar compared to sales of the same period last year. Sales in our core markets are lower due to weak demand which we expect to compensate with sales in new markets. On the other hand we see already better results in efficiency even with lower production volumes compared to last year as a result of the recent production improvement plan. The management’s priority is to secure the factories with sufficient sales volumes and to improve energy efficiency in the production process, where 2016 investment and improvement program is aimed. Further progress in production efficiency is achieved primarily due to lower energy consumption and technological improvements as a result of which amount of poor quality products and production outage would decrease. SKANO FURNITURE RETAIL SALES. We expect total retail sale in Q1 2016 to be lower compared to sales of the same period last year. We expect steady sales in the Baltics but decrease in Ukraine due to political and economic instability. SKANO FURNITURE FACTORY. In Q1 2016 we expect smaller sales of the furniture factory compared to the same period in 2015 because of the deteriorated economic situation in the near regions, especially in Russia. In Russia sales are down due to weak currency, broad-based economic downturn and low consumer confidence. Sales to new markets in 2016 are not covering the lag from our main markets but our goal is to compensate with sales in new markets partly the gap from our main markets in Russia and Finland. In addition to seeking sales possibilities in new markets, we are refreshing our existing furniture series, developing new furniture series and alternative sales channels. In January 2016 we participated the furniture fair in Cologne with three new series, which should supports sales in 2H 2016. FINANCIAL HIGHLIGHTS
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
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
The planned time of publishing of interim report of the first quarter of 2016 is week 21 (23-27th of May 2016) Martin Kalle |
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