The net sales of Viisnurk AS for the third quarter of 2002 were 82.4 mil. kroons (5.3 mil. euros) and the economic activities resulted in the loss of 3.2 mil. Kroons (0.2 mil. euros). As compared to the third quarter of the previous year, the net sales of the company were 14% lower. Last year, the company earned 5.2 million kroons (0.3 mil. euros) of profit by the end of the quarter. By the end of nine months of the accounting year, Viisnurk AS exposed the profit of 0.6 mil. kroons (37 thousand euros) at the net sales of 258.2 mil. kroons (16.5 mil. euros), whereas the same period of 2001 resulted in the profit of 23.7 mil. kroons (1.5 mil. euros) at the net sales of 239.4 mil. kroons (15.3 mil. euros).
The decline in the economic results of Viisnurk and the inability to keep to the estimates made at the beginning of the year (retaining net profit on the level of 2000) mainly result from the following circumstances:
- The Wood Panel Factory was planned to pass the break-even point and start making profit at the beginning of the second quarter of the current year. However, the combination of unfavourable market conditions resulting in instable customer orders and ongoing launching difficulties (such as the problems of production management and personnel training) generated a loss in the amount of 3.8 mil. kroons (0.24 mil. euros) by the end of the third quarter.
- According to the estimations, the profit of the Sports Goods Division should have exceeded that of the past year (5.6 mil. kroons/0.4 mil. euros). However, the negotiations with the major customers for cross-country skis (Atomic, Rossignol) at the beginning of the year resulted in contractual prices, which were over 10% lower than the year before due to the declining market volume and pressure of competition. The sales on the US market, which has exposed higher than average profit margins, have been adversely affected by the poor snow conditions of the past season in North America and dollar depreciation. Therefore, the economic result of the Sports Goods Division for the past nine months exposes a loss (-2 mil. kroons/-0,13 mil. euros). The profit of 100 thousand kroons (6 thousand euros) was earned in the third quarter.
- A slowdown in major target markets has also affected the economic results of the other business units - the Furniture Factory and the Softboard Factory. As compared to the Softboard Factory, which was mainly affected by slow export markets in the first quarter, the sales of the Furniture Factory declined in the conditions of the generally passive market in the third quarter (after the summer holidays, the sales of furniture have not recovered in the previous scope). It takes three to six months to replace the decreased number of orders from the existing customers with new stable orders.
Viisnurk has initiated the restructuring process to improve the situation and profitability of the company, according to which:
- The sawmill, Wood Panel Factory and Furniture Factory will be integrated into a single Furniture Division with the aim of creating synergy in the said value-adding chain. The synergy to be created will be based on the rapid application of the production management and supervision systems, which have been developed in the Furniture Factory and proved to be successful, throughout the new division, optimisation of the production process and maximal use of timber. The revised marketing strategy shall make use of the advantages of the vertical integration, quality management programmes and motivated skilled workers of the value-adding chain of the Furniture Division.
- A significant change in the strategy will be made in the Sports Goods Division, which means cutting back the existing production capacity of cross-country skis and focussing on the products bearing the company’s trade marks and orders of higher profitability. The released production resources will be employed for extending the production of hockey sticks in the Sports Goods Division and furniture blanks in the Furniture Division.
- The Softboard Factory will pay more attention to promoting its environmentally friendly Isotex interior finishing boards among consumers, aiming at increasing the sales of products of higher value to resist the increase in the prices of heat energy and other production inputs.
The restructuring process of the company will most probably add some extraordinary costs in the fourth quarter. The costs will be specified in the course of the process and additional information will be provided for the investors in the fourth quarter. Nevertheless, according to the budget of company, the net cash flow from operations for whole year will be positive. Net cash flow from operating activities for 9 months was 12.8 mil. kroons (0.8 mil. euros). The management of the company expects the positive changes resulting from the activities to be launched as well as from the prospective recovery of export markets to be exposed from the second half of 2003 on.
INCOME STATEMENT
In th. kroons In th kroons In th euros In th euros
III quarter III quarter III quarter III quarter
2002 2001 2002 2001
NET SALES 82 434 95 779 5 269 6 121
Cost of goods sold (77 784) (81 520) (4 972) (5 210)
Gross profit 4 650 14 259 297 911
Marketing expenses (3 763) (3 813) (240) (243)
General admin. expenses (2 004) (2 443) (128) (156)
Other income 938 251 60 16
Other expenses (621) (276) (40) (18)
Profit from operations (800) 7 978 (51) 510
Financial income 299 20 19 1
Financial expenses (2 658) (2 835) (170) (181)
NET PROFIT (3 159) 5 163 (202) 330
Basic earnings per share (0,70) 1,15 (0,04) 0,07
Diluted earnings per (0,70) 1,15 (0,04) 0,07
share
In th kroons In th kroons In th euros In th euros
9 months 9 months 9 months 9 months
2002 2001 2002 2001
NET SALES 258 222 239 426 16 503 15 302
Cost of goods sold (229 658) (189 949) (14 677) (12 140)
Gross profit 28 564 49 477 1 826 3 162
Marketing expenses (13 397) (12 574) (857) (804)
General admin. expenses (6 997) (7 368) (447) (471)
Other income 1 451 1 419 93 91
Other expenses (1 609) (1 301) (103) (83)
Profit from operations 8 012 29 653 512 1 895
Financial income 333 336 21 21
Financial expenses (7 760) (6 314) (496) (403)
NET PROFIT 585 23 675 37 1 513
Basic earnings per share 0,13 5,26 0,01 0,34
Diluted earnings per 0,13 5,26 0,01 0,34
share
BALANCE SHEET
In th kroons In th kroons In th euros In th euros
30.9.2002 31.12.2001 30.9.2002 31.12.2001
Cash and bank 476 5 036 30 322
Customer receivables 51 539 52 496 3 294 3 355
Other receivables 1 968 2 215 126 142
Prepaid expenses 5 405 5 449 345 348
Inventories 83 915 74 576 5 363 4 765
Total current assets 143 303 139 772 9 158 8 932
Long-term fin. 1 436 1 436 92 92
investments
Tangible assets 220 066 216 043 14 065 13 808
Intangible assets 800 269 51 17
Total non-current assets 222 302 217 748 14 208 13 917
TOTAL ASSETS 365 605 357 520 23 366 22 849
Debt obligations 41 206 47 368 2 634 3 027
Customer prepayments 651 1 216 42 78
Supplier payables 33 894 36 793 2 165 2 351
Taxes payable 5 713 5 639 365 360
Accrued expenses 12 760 8 348 816 534
Total current 94 224 99 364 6 022 6 350
liabilities
Long-term liabilities 108 119 95 479 6 910 6 102
Total non-current 108 119 95 479 6 910 6 102
liabil.
Share capital at par 44 991 44 991 2 875 2 875
value
Share premium 11 332 11 332 724 724
Mandatory capital 4 499 4 499 288 288
reserve
Retained earnings 101 855 82 472 6 510 5 271
Net profit for the year 585 19 383 37 1 239
Total equity 163 262 162 677 10 434 10 397
TOTAL LIABILITIES 365 605 357 520 23 366 22 849
AND EQUITY
Additional information:
Tiit Arro
Chairman of Management Board
+37255 525560
Andrus Aljas
CFO
+37244 78355