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