Skano Group Quarterly report 27.02.2015
THE FOURTH QUARTER IN SHORT
Consolidated net sales of the fourth quarter of 2014 was 4.66 mil. euros, representing a 4% decrease on the fourth quarter compared to the same period in 2013. At the same time, consolidated EBITDA amounted to minus 1,008 thousand euros (EBITDA minus 2 thousand euros in Q4 2013). 2014 fourth quarter result includes 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 minus 83 thousand euros.
The sales in Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 1.5 mil. euros, decreased as compared to the respective period last year by 10%, the operating loss of the fourth quarter was 145 thousand euros compared with the operating loss 143 thousand euros last year. Sale and profitability of Pärnu factory in the fourth quarter was affected by the fire accident in mid-November, which caused stoppage until the beginning of January 2015.
The turnover of Skano Fibreboard OÜ Püssi factory was 1.2 mil. euros, representing 8% increase in the fourth quarter compared to the same period in 2013. Operating loss amounted to 1,051 thousand euros compared with the operating loss 180 thousand euros last year. Without the write-down of Püssi assets operating loss in the fourth quarter would have been 126 thousand euros.
Sales mainly decreased due to a fire in Pärnu fibreboard factory on the 17th of November, which caused a partial deficit in sale of Pärnu factory’s production. As our main foreign markets Russia and Finland are still weak due to the general economic situation in Europe we have been continuously expanding the list of our target markets and made considerable efforts in product development. Remarkable sale to SAR in Q4 was a good sample of entering into new markets. 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.
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 Tuulileijona 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 fourth quarter by 14% and amounted to 1.5 mil. euros. The operating loss of the third quarter was 61 thousand euros as in 2013 the operating profit of the same period was 93 thousand euros. Profitability was impacted by low sales volumes. Sales in the fourth quarter of 2014 decreased mostly in Russia due to weak demand by 24% as compared to 2013, also sales to Finland decreased 5%. In addition to seeking new sales possibilities in the current markets the company has made considerable effort to enter into totally new markets like UK and France. Today sale in new markets is not covering the gap from our main markets.
The turnover of Skano Furniture OÜ retail chain increased 3% as compared to the same period last year being 662 thousand euros, operating loss was 304 thousand euros compared with the sales 640 thousand and operating profit 5 thousand euros in the fourth quarter of 2013. 2014 fourth quarter operating loss contains also a loss from a drop of currency exchange rate of hryvnia 137 thousand euros and cost of write-down of receivables against Skano Ukrainian subsidiary 216 thousand euros. Skano Furniture OÜ exchange rate loss and write-down cost amounting to 331 thousand euros is non-monetary and will be eliminated from the consolidated results as they are intragroup transactions against another group company (realized loss from currency exchange rate 20 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 fourth quarter in 2014 was 4.66 mil. euros (4.86 mil. euros in same period of 2013) representing a 4% decrease compared to Q4 2013. The Group’s gross margin in the fourth quarter of 2014 was 15.1% compared to 14.7% in the fourth quarter of 2013. Consolidated operating loss amounted to 1,228 thousand euros containing a write-down cost of Püssi factory assets 925 thousand euros. Without the write-down cost operating loss would have been 303 thousand euros (operating loss 225 thousand euros from main activities in same period 2013). The consolidated operating margin of net sales was -26.3% (-4.6% from main activities in Q4 2013).
Consolidated net loss amounted to 1,302 thousand euros (compared to net loss 291 thousand euros in Q4 2013), and the net margin was -27.9% (-6.0% in Q4 2013).
POSITION OF FINANCIAL STATEMENT
As of 31.12.2014 the total assets of Skano Group AS amounted to 13.3 mil. euros (31.12.2013: 14.6 mil. euros). The liabilities of the company accounted for 60.2% (31.12.2013: 53.8%) thereof, i.e. 8.0 mil. euros (31.12.2013: 7.8 mil. euros).
Receivables and prepayments have decreased by 0.1 mil. euros i.e. 10% decrease within 12 months.
Inventories have been at the same level with 12 months, amounting to 3.0 mil. euros on 31.12.2014. (31.12.2013: 3.0 mil. euros). Property, plant and intangibles decreased by 1.2 mil. euros mainly due to one-off write-down of Püssi factory assets.
Short-term loans have increased by 0.1 mil. euros and amounted to 2.0 mil. euros in 31.12.2014 which was result of increase of factoring liabilities of Suomen Tuulileijona OY recently acquired and usage of bank overdraft (31.12.2013: 1.9 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.2 mil. euros (31.12.2013: 2.3 mil. euros).
Long-term loans have increased by 0.2 mil euros and amounted to 3.6 mil. euros in 31.12.2014 (31.12.2013: 3.4 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 0.2 mil. euros to 8.0 mil. euros (31.12.2013: 7.8 mil. euros).
DIVISIONAL REVIEW
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q4 2014 | Q4 2013 | Q4 2014 | Q4 2013 | |
| Skano Fibreboard OÜ | 2,763 | 2,826 | 59.3% | 58.2% |
| Skano Furniture Factory OÜ | 1,467 | 1,708 | 31.5% | 35.2% |
| Skano Furniture OÜ retail | 662 | 640 | 14.2% | 13.2% |
| Suomen Tuulileijona OY | 839 | 0 | 18.0% | 0.0% |
| Elimination | (1,070) | (317) | (23.0%) | (6.5%) |
| TOTAL | 4,661 | 4,857 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q4 2014 | Q4 2013 | Q4 2014 | Q4 2013 | |
| Finland | 1,351 | 1,311 | 29.0% | 27.0% |
| Russia | 1,151 | 1,342 | 24.7% | 27.6% |
| Estonia | 660 | 771 | 14.2% | 15.9% |
| Great Britain | 403 | 369 | 8.6% | 7.6% |
| Latvia | 233 | 170 | 5.0% | 3.5% |
| SAR | 184 | 0 | 3.9% | 0.0% |
| Ukraine | 162 | 222 | 3.5% | 4.6% |
| Sweden | 103 | 153 | 2.2% | 3.1% |
| Lithuania | 100 | 82 | 2.1% | 1.7% |
| Kazakhstan | 56 | 48 | 1.2% | 0.9% |
| Netherlands | 48 | 85 | 1.0% | 1.7% |
| Germany | 38 | 84 | 0.8% | 1.7% |
| Other countries | 172 | 220 | 3.7% | 4.5% |
| TOTAL | 4,661 | 4,857 | 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 EUR | Q4 2014 | Q4 2013 |
| Skano Furniture factory | (61) | 93 |
| Skano Furniture retail | (304) | 5 |
| Skano Fibreboard | (1 199) | (327) |
| Suomen Tuulileijona OY | (18) | 0 |
| Elimination | 354 | 4 |
| TOTAL | (1 228) | (225) |
| Net financial costs | (73) | (61) |
| Income tax | (1) | (5) |
| NET PROFIT | (1 302) | (291) |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the fourth quarter of 2014 amounted to 2.8 mil. euros and operating loss to 1,199 thousand euros containing a write-down cost of Püssi factory assets 925 thousand euros. In the same period last year, the turnover of Skano Fibreboard totaled also to 2.8 mil. euros and the operating loss from main activities 327 thousand euros.
The drop in sales in the fourth quarter compare to last year took place in Estonia and Sweden, but the main reason behind the modest sale was the fire accident in Pärnu factory in the middle of November, which caused deficit of the product.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q4 2014 | Q4 2013 | Q4 2014 | Q4 2013 | |
| Finland (incl. to Suomen Tuulileijona OY) |
857 | 826 | 31.0% | 29.2% |
| Russia | 541 | 537 | 19.6% | 19.0% |
| Great Britain | 393 | 400 | 14.2% | 14.2% |
| Estonia | 322 | 432 | 11.7% | 15.3% |
| SAR | 184 | 0 | 0 6.7% | 0.0% |
| Latvia | 100 | 85 | 3.6% | 3.0% |
| Sweden | 89 | 153 | 3.2% | 5.4% |
| Netherlands | 48 | 85 | 1.7% | 3.0% |
| Ukraine | 42 | 37 | 1.5% | 1.3% |
| Germany | 38 | 84 | 1.4% | 3.0% |
| Lithuania | 26 | 20 | 1.0% | 0.7% |
| Other countries | 123 | 167 | 4.5% | 5.9% |
| TOTAL | 2,763 | 2,826 | 100.0% | 100.0% |
| th EUR | Net sales | Operating Profit | ||
| Q4 2014 | Q4 2013 | Q4 2014 | Q4 2013 | |
| Pärnu Fibreborad factory | 1 ,024 | 1,099 | (139) | (116) |
| Püssi Fibreboard factory | 1,220 | 1,128 | (1 051) | (180) |
| Pärnu interior boards factory (Isotex) | 497 | 587 | (5) | (27) |
| Not allocated | 22 | 12 | (4) | (4) |
| TOTAL | 2,763 | 2,826 | (1 199) | (327) |
The net sales of the Pärnu fibreboard factory and interior board’s line decreased 10% in the fourth quarter of 2014 compared to the same quarter of 2013 and amounted to 1.5 mil. euros.
The turnover of Püssi fibreboard factory amounted to 1.2 mil. euros growing 8% compared to the same quarter in 2013 (turnover 1.1 mil. euros in Q4 2013). Output of Püssi Fibreboard factory grew in the fourth quarter but the main challenge is still to secure Püssi Fibreboard factory with sufficient sales volumes 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 fourth quarter in 2014.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores |
||||
| Q4 2014 | Q4 2013 | Q4 2014 | Q4 2013 | 31.12.2014 | 31.12.2013 | |
| Estonia | 326 | 308 | 49.2% | 48.1% | 4 | 4 |
| Latvia | 133 | 85 | 20.1% | 13.3% | 1 | 1 |
| Lithuania | 74 | 62 | 11.2% | 9.7% | 1 | 1 |
| Ukraine | 120 | 185 | 18.1% | 28.9% | 4 | 4 |
| TOTAL | 662 | 640 | 100.0% | 100.0% | 10 | 10 |
Retail sale amounted to 662 thousand euros in the fourth quarter of 2014 and operating loss 304 thousand euros (sales 640 thousand euros and operating profit 5 thousand euros in Q4 2013). Current year fourth quarter operating loss 304 thousand euros contains also loss from drop of currency exchange rate of hryvnia 137 thousand euros and cost of write-down of receivables against Skano Ukrainian subsidiary 216 thousand euros. Skano Furniture OÜ exchange rate loss and write-down cost amounting to 331 thousand euros are eliminated from the consolidated results as they are intragroup transactions against another group company (realized loss from currency exchange rate 20 thousand euros in the same period of 2013).
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the fourth quarter amounted to 1.5 mil. euros and operating loss to 61 thousand euros. In the same period last year, the turnover of the factory amounted to 1.7 mil. euros and the profit to 93 thousand euros. As compared to the previous year the turnover of the factory has decreased 14%. In the fourth quarter the sales decreased in Russia by 24% and in Finland by 5% due to colder economic and political environment and weaker demand for durable goods.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| Q4 2014 | Q4 2013 | Q4 2014 | Q4 2013 | |
| Russia | 610 | 805 | 41.6% | 47.1% |
| Finland | 462 | 485 | 31.5% | 28.4% |
| Other countries | 116 | 111 | 7.9% | 6.5% |
| Subsidiaries | 279 | 307 | 19.0% | 18.0% |
| TOTAL | 1,467 | 1,708 | 100.0% | 100.0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. Sales of Skano Fibreboard in Q1 2015 will remain at the same level compared to sales of the same period last year. One reason behind stagnated sale’s growth in the first quarter is the fire in Pärnu fibreboard factory on the 17th of November as the factory was restarted in the first half of January 2015. One and half month production break caused a partial deficit in sale of Pärnu factory’s production including in January 2015. Total direct fire damage to buildings and equipment amounts up to 80 thousand euros and the process about damage compensation with the insurance is still pending.
Further escalation of conflict in Ukraine impacts negatively to fibreboard sales in our main markets Russia and Eastern Europe. Despite of geopolitical developments we are taking actions to enter into new export markets.
In addition to production portfolio the management’s priority is to improve energy efficiency in the production process, where 2015 first quarter investment and improvement program is aimed. Although we have achieved in 2014 significant progress in the production cost compared to prior year, we expect also higher production efficiency in 2015 compared to 2014. 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 2015 to decrease 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 first quarter of 2015 we expect remarkably smaller sales of the furniture factory compared to the same period in 2014 because of the deteriorated economic situation in the near regions. In Finland sales are down due to general weak economic conditions, in Russia due to weak currency, predictable broad-based economic downturn and low consumer confidence.
Sales to new markets in Q1 2015 are not covering the lag from our main markets. In 2015 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.
FINANCIAL HIGHLIGHTS
| th EUR | 12 m 2014 | 12 m 2013 | 12 m 2012 |
| Income statement | |||
| Revenue | 20,330 | 19,186 | 19,080 |
| EBITDA | (312) | 438 | 1,040 |
| EBITDA margin | (1.5%) | 2.3% | 5.5% |
| Operating profit | (1,199) | (467) | 74 |
| Operating margin | (5.9%) | (2.4%) | 0.4% |
| Net profit | (1,481) | (706) | (201) |
| Net margin | (7.3%) | (3.7%) | (1.1%) |
| Balance sheet (31.12) | |||
| Total assets | 13,329 | 14,722 | 15,471 |
| Return on assets | (11.1%) | (4.8%) | (1.3%) |
| Equity | 5,300 | 6,805 | 7,482 |
| Return on equity | (27.9%) | (10.4%) | (2.7%) |
| Debt-to-equity ratio | 60.2% | 53.8% | 51.6% |
| Share (31.12) | |||
| Closing price | 0,85 | 1,22 | 1,24 |
| Earnings per share | (0.33) | (0.16) | (0.04) |
| Price-earnings ratio | (2.58) | (7.63) | (31.00) |
| Book value of a share | 1.18 | 1.51 | 1.66 |
| Market to book ratio | 0.72 | 0.81 | 0.75 |
| Market capitalization | 3,824 | 5,489 | 5,579 |
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 | 31.12.2014 | 31.12.2013 |
| Cash and bank | 432 | 355 |
| Receivables and prepayments (Note 1) | 1,232 | 1,368 |
| Inventories (Note 2) | 2,962 | 2,974 |
| Total current assets | 4,626 | 4,697 |
| Investment property (Note 3) | 407 | 408 |
| Tangible fixed assets (Note 4) | 8,267 | 9,505 |
| Intangible fixed assets (Note 5) | 29 | 26 |
| Total fixed assets | 8,703 | 9,939 |
| TOTAL ASSETS | 13,329 | 14,636 |
| Debt obligations (Note 6) | 2,030 | 1,919 |
| Payables and prepayments (Note 7) | 2,198 | 2,255 |
| Short-term provisions (Note 8) | 15 | 14 |
| Total current liabilities | 4,243 | 4,188 |
| Non-current debt obligations (Note 6) | 3,563 | 3,413 |
| Non-current provisions (Note 8) | 223 | 230 |
| Total non-current liabilities | 3,786 | 3,643 |
| Total liabilities | 8,029 | 7,831 |
| Share capital at nominal value (Note 9) | 2,699 | 2,699 |
| Issue premium | 364 | 364 |
| Statutory capital reserve | 288 | 288 |
| Currency translation | (16) | 8 |
| Retained profits | 3,446 | 4,152 |
| Net profit (loss) for the year (Note 10) | (1,481) | (706) |
| Total equity | 5,300 | 6,805 |
| TOTAL LIABILITIES AND EQUITY | 13,329 | 14,636 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 4th Q 2014 | 4th Q 2013 | 2014 | 2013 |
| RETURN ON SALES (Note 11) | 4,661 | 4,857 | 20,330 | 19,186 |
| Cost of production sold | (3,955) | (4,140) | (16,727) | (16,204) |
| Gross profit | 706 | 717 | 3,603 | 2,982 |
| Marketing expenses | (841) | (723) | (3,077) | (2,612) |
| General administrative expenses | (150) | (208) | (622) | (763) |
| Other income | 59 | 54 | 103 | 152 |
| Other expenses | (1,002) | (65) | (1,206) | (226) |
| Operating profit (loss) (Note 11) | (1,228) | (225) | (1,199) | (467) |
| Financial income and financial expenses | (73) | (61) | (281) | (233) |
| Profit (loss) before taxes | (1,301) | (286) | (1,480) | (700) |
| Prepaid income tax | (1) | (5) | (1) | (6) |
| NET PROFIT (LOSS) FOR THE PERIOD | (1,302) | (291) | (1,481) | (706) |
| Basic earnings per share (Note 10) | (0.29) | 0.06 | (0.33) | (0.16) |
| Diluted earnings per share (Note 10) | (0.29) | 0.06 | (0.33) | (0.16) |
| Other comprehensive income: | ||||
| Currency translation differences | 16 | 6 | (24) | 29 |
| TOTAL COMPREHENSIVE INCOME | (1,286) | (285) | (1,505) | (677) |
The planned time of publishing of interim report of the first quarter of 2015 is week 22 (25-29 May 2015)
Martin Kalle
CEO
+372 447 8331
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Skano 2014 4Q Interim report ENG.pdf