Management report

Consolidated net sales for Q3 2020 were € 2.51 million from continuing operations (Q3 2019: € 3.34 million from continuing operations). The sales revenue of the Group`s main business segment, fibreboard, for Q3 2020 were € 2.48 million (Q3 2019: € 3.06 million). The main reason for this drop in sales was due to the closure of the Püssi factory in March 2020, which came about as a result of the loss of orders from customers within the display board industry caused by the COVID-19 pandemic. Furniture retail sales revenue for Q3 2020 were € 0 thousand, the decrease in sales (compared to Q3 2019: € 265 thousand) was due to the Group exiting the furniture retail segment earlier this year, with some remaining stock sales taking place during Q1 and Q2 2020. Rental and property development sales, includes the resale of utilities, in Q3 2020 were € 36 thousand (Q3 2019: € 32 thousand). Revenue from rental and property development increased due to more tenants being secured for the premises in Suur-Jõe 48, Pärnu.

Group EBITDA for Q3 2020 was positive € 366 thousand from continuing operations (Q3 2019: € 120 thousand from continuing operations), of which the fibreboard division EBITDA was positive € 370 thousand (Q3 2019: positive € 152 thousand). After depreciation and interest, group net profit for Q3 2020 was € 183 thousand from continuing operations (Q3 2019 net loss of € 671 thousand from continuing operations). The main reason for the loss in the Q3 2019 was the extraordinary loss of € 540 thousand received from the sale of the subsidiary Skano Furniture Factory OÜ.

The Group`s consolidated EBITDA has improved compared to the same period last year, the main reason being the much improved performance of the fibreboard division. The closure of the Püssi fibreboard factory enabled us to switch the Püssi factory construction sector orders to our Pärnu factory, and we started a 4^th shift in Pärnu in April 2020 as a result thereof. The Pärnu factory is now running all the time, except for a one-shift maintenance stop every month. This has led to increased machine utilisation, and gross margin for Nordic Fibreboard Ltd OÜ has therefore increased substantially, being 29% in Q3 2020 (from being 18% in Q3 2019).

Divisional review

Revenue by business segments

Profit by business segments

NORDIC FIBREBOARD Ltd: Fibreboard sales

Fibreboard sales in Q3 2020 were € 2.48 million, which are 19% lower than in the same period last year (2019: € 3.06 million). We sold our products to customers in 19 countries during Q3 2020. The main reason for the drop in sales was the loss of display board customers, boards for this sector was produced in the Püssi factory, which we closed in March 2020. However, sales to our customers within the construction sector in our main northern European markets have been stable. Finland, our largest market accounted for 27% of total fibreboard sales this year (up from being 26% of total sales in 9M in 2019).In the Q3 2020 compared to the Q3 2019, we recorded sales growth in the next large markets for us, these being Denmark and Estonia, while we recorded sales decline in markets further afield mainly due to the negative effect in many such markets caused by the corona virus.

By adding a 4^th shift in our Pärnu production, and thus achieving full machine utilisation, has led to a strong increase in Fibreboard’s gross margin from being 18% in Q3 2019 to now reaching 29% in Q3 2020. Overhead costs for Q3 2020 was down 16% compared to Q3 2019, and EBITDA for Q3 2020 was thus positive € 370 thousand (15% of sales in Q3 2020), compared to Q3 2019 EBITDA positive € 152 thousand.

FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS

SKANO FURNITURE: retail sales

There was no retail sales revenue of furniture in the Q3 2020 (2019 Q3 € 265 thousand). However, this business has been closed down, as earlier informed, and the sales recorded in 9 months 2020 was from some remaining stock.

RETAIL SALES BY COUNTRIES

* Latvian and Lithuanian stores were closed on 30.09.2019

PÄRNU RIVERSIDE DEVELOPMENT: real estate management

Rental income, including the resale of utilities, was € 36 thousand in Q3 2020 (2019 Q3 € 32 thousand). The company’s expenses consist of operating expenses and expenses related to the ongoing detail plan project, which resulted in positive EBITDA of € 1 thousand for Q3 2020 (2019 Q3 positive € 14 thousand). Real Estate Management net profit in Q3 2020 were € 1 thousand (2019 Q3: loss € 8 thousand).

The reason for the change in EBITDA and net profit/loss is the change in the accounting policies for investment properties adopted at the end of 2019, where instead of the measured cost, investment properties were recognized in the balance sheet at fair value.

OUTLOOK

Nordic Fibreboard Ltd

The order book from our traditional customers in our largest markets in northern Europe remains strong, although it is very difficult to predict what will happen in the future due to the continuing uncertainty surrounding the COVID-19 pandemic.

Nordic Fibreboard Ltd recorded net loss in October 2020 of € 27 thousand, such loss was mainly the result of the factory’s planned 2 week stoppages in early October. The production workers did not take their annual 2 week holiday during summer due to large order backlog we had at that time, instead it was moved to the early part of October. Thus, Pärnu factory’s output in October was reduced as a result thereof, which impacted sales negatively, and thus resulted in the aforementioned net loss of € 27 thousand. 

Next planned production holiday will take place in latter part of December which will also affect negatively compared to the results achieved during Q3 when there were no production holiday.

Pärnu Riverside Development

We will continue to manage and develop the property on Suur-Jõe Street 48, Pärnu.

PEOPLE

On the 30th of September 2020, the Group employed 99 people (compared to 128 people as of 30.09.2019 from continuing operations). The average number of personnel in Q3 2020 was 94 (Q3 2019: 123 from continuing operations). The reason for the decline in the number of employees compared to the same quarter last year is the closure of a factory in Püssi in March this year.

For nine months of 2020, wages and salaries with taxes amounted to € 1.6 million from continuing operations (nine months 2019: € 1.9 million from continuing operations). Payments made to management board members of all group companies including all subsidiaries with relevant taxes were € 158 thousand during 9M 2020 and € 148 thousand during 9M 2019.

FINANCIAL HIGHLIGHTS

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 = Last price / Earnings per share
Book value of a share = Equity / Total shares
Market to book ratio = Last price / Book value of a share
Market capitalization = Last price * Total shares
*http://www.nasdaqbaltic.com/

Consolidated statement of financial positions

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements

Consolidated statement of profit or loss and other comprehensive income

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements.

Consolidated statement of cash flows

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements.

TORFINN LOSVIK
Chairman of the board
Phone: +372 56 99 0988
This email address is being protected from spambots. You need JavaScript enabled to view it.

Attachments:

NORDIC FIBREBOARD AS Interim Report 2020 Q3.pdf