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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Skano 2014 3Q Interim report ENG.pdf