Skano Group Quarterly report 27.11.2015
THE THIRD QUARTER IN SHORT
Consolidated net sales of the third quarter of 2015 were 4.8 mil. euros, representing a 3% decrease on the third quarter compared to the same period in 2014. At the same time, consolidated EBITDA amounted to 287 thousand euros (EBITDA 165 thousand euros in Q3 2014). Net sales during 9 month in 2015 amounted to 14.5 mil. euros, representing 7% decrease (2014 9 months net sales: 15.7 mil. euros). First 9 months EBITDA in 2015 was 811 thousand euros exceeding a bit last year level (2014 9 months EBITDA: 696 thousand euros). Although consolidated net sales have decreased mainly due to weak demand in Finland and Russia, the company has managed to improve EBITDA margin and achieved a better result compared to last year. The main reasons behind it are improvements of fibreboard production process allowing to reduce production cost and keep profitability at much lower production volumes.
The sale in Skano Fibreboard OÜ Pärnu factory (incl. Isotex) was 2.0 mil. euros, being at the same level as compared to the respective period last year, the operating profit of the third quarter was 140 thousand euros compared with the operating profit 48 thousand euros last year.
The turnover of Skano Fibreboard OÜ Püssi factory was 1.3 mil. euros, representing 7% decrease in the third quarter compared to the same period in 2014. Operating profit amounted to 5 thousand euros compared with the operating loss 24 thousand euros last year.
Sales mainly decreased in our core markets. As our main foreign markets Russia and Finland are still very weak due to the general economic situation we have been continuously expanding the list of our target markets and made significant efforts in product development. 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 and break-even point.
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.
Sales of Suomen Tuulielijona OY in Q3 2015 decreased 2% compared to last year, which amounted to 1.3 mil. euros. Suomen Tuulileijona OY is the wholesaler of Skano fibreboard products in Finland, which was acquired at the beginning of July 2014.
The turnover of Skano Furniture Factory OÜ in Pärnu decreased in the third quarter by 2% and amounted to 1.1 mil. euros. The operating loss of the third quarter was 88 thousand euros as in 2014 the operating loss of the same period was 65 thousand euros. Profitability was impacted by low sales volumes. In the third quarter of 2015 sales to Russia decreased due to very weak demand by 13% as compared to 2014. Sales to Finland increased slightly and also in the Baltics. In addition to seeking new sales possibilities in the current markets the company has made considerable effort to enter into new markets like UK, France and USA.
The turnover of Skano Furniture OÜ retail chain increased 8% as compared to the same period last year being 602 thousand euros, operating profit was 6 thousand euros compared with the sales 543 thousand and operating loss 14 thousand euros in the third quarter of 2014. 2015 third quarter operating profit 6 thousand euros contains also a loss from a drop of currency exchange rate of hryvnia 22 thousand euros (realized loss from currency exchange rate 20 thousand euros in the same period of 2014).
Retail sale increased in Estonia, Latvia and Ukraine but decreased slightly in Lithuania. Retail sale is still very weak in Ukraine due to the conflict and difficult economic situation. 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 2015 was 4.8 mil. euros (5.0 mil. euros in same period of 2014) representing a 3% decrease compared to Q3 2014. The Group’s gross margin in the third quarter of 2015 was 22% compared to 18% in the third quarter of 2014. Consolidated operating profit amounted to 79 thousand euros (operating loss 58 thousand euros from main activities in same period 2014). The consolidated operating margin of net sales was 1.6% (-1.2% from main activities in Q3 2014).
Consolidated net profit amounted to 5 thousand euros (compared to net loss 135 thousand euros in Q3 2014), and the net margin was 0.1% (-2.7% in Q3 2014).
POSITION OF FINANCIAL STATEMENT
As of 30.09.2015 the total assets of Skano Group AS amounted to 14.3 mil. euros (30.09.2014: 15.5 mil. euros). The liabilities of the company accounted for 64% (30.09.2014: 58%) thereof, i.e. 9.1 mil. euros (30.09.2014: 8.9 mil. euros).
Receivables and prepayments have decreased by 0.1 mil. euros i.e. 2% decrease within 12 months due.
Inventories have slightly decreased with 12 months, amounting to 3.4 mil. euros on 30.09.2015. (30.09.2014: 3.5 mil. euros). Property, plant and intangibles decreased by 1.2 mil. euros mainly due to one-off write-down of Püssi factory assets by 0.9 mil. euros, the rest was as a result of depreciation.
Short-term loans have increased by 0.2 mil. euros and amounted to 1.9 mil. euros in 30.09.2015 which was a result of usage of bank overdraft and restructuring of the loan between short- and long-term payment schedule (30.09.2014: 1.7 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.9 mil. euros (30.09.2014: 2.9 mil. euros).
Long-term loans have decreased by 0.1 mil euros and amounted to 4.0 mil. euros in 30.09.2015 (30.09.2014: 4.1 mil. euros). The decrease 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 9.1 mil. euros (30.09.2014: 8.9 mil. euros).
DIVISIONAL REVIEW
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| Q3 2015 | Q3 2014 | Q3 2015 | Q3 2014 | |
| Skano Fibreboard OÜ | 3,307 | 3,369 | 68.9% | 67.8% |
| Skano Furniture Factory OÜ | 1,097 | 1,119 | 22.8% | 22.5% |
| Skano Furniture OÜ retail | 602 | 556 | 12.5% | 11.2% |
| Suomen Tuulileijona OY | 1,346 | 1,376 | 28.0% | 27.7% |
| Elimination | (1,549) | (1,452) | (32.3%) | (29.2%) |
| TOTAL | 4,803 | 4,968 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q3 2015 | Q3 2014 | Q3 2015 | Q3 2014 | |
| Finland | 1,794 | 1,867 | 37.4% | 37.6% |
| Estonia | 894 | 806 | 18.6% | 16.2% |
| Russia | 882 | 1,061 | 18.4% | 21.4% |
| Great Britain | 349 | 286 | 7.3% | 5.8% |
| Latvia | 196 | 168 | 4.1% | 3.4% |
| Lithuania | 142 | 143 | 3.0% | 2.9% |
| Sweden | 121 | 158 | 2.5% | 3.2% |
| Ukraine | 115 | 92 | 2.4% | 1.9% |
| Denmark | 47 | 15 | 1.0% | 0.3% |
| United Arab Emirates | 45 | 45 | 0.9% | 0.9% |
| Germany | 37 | 30 | 0.8% | 0.6% |
| France | 28 | 27 | 0.6% | 0.5% |
| Other countries | 153 | 270 | 3.2% | 5.4% |
| TOTAL | 4,803 | 4,968 | 100.0% | 100.0% |
Regarding the markets, turnover has increased in Estonia, Latvia and Great Britain. The turnover has decreased most in Russia and Sweden.
PROFIT BY BUSINESS SEGMENTS
| th EUR | Q3 2015 | Q3 2014 |
| Skano Furniture factory | (88) | (65) |
| Skano Furniture retail | 6 | (14) |
| Skano Fibreboard | 145 | 24 |
| Suomen Tuulileijona OY | 4 | (12) |
| Elimination | 12 | 9 |
| TOTAL | 79 | (58) |
| Net financial costs | (74) | (77) |
| Income tax | 0 | 0 |
| NET PROFIT | 5 | (135) |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in the third quarter of 2015 amounted to 3.3 mil. euros and operating profit to 145 thousand euros. In the same period last year, the turnover of Skano Fibreboard totaled to 3.4 mil. euros and the operating profit from main activities 24 thousand euros.
The decrease in sales in the third quarter compare to last year took place in Russia. Sales increased in Estonia and Great Britain.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| Q3 2015 | Q3 2014 | Q3 2015 | Q3 2014 | |
| Finland (incl. to Suomen Tuulileijona OY) |
1,297 | 1,298 | 39.2% | 38.5% |
| Estonia | 542 | 476 | 16.4% | 14.1% |
| Russia | 502 | 623 | 15.2% | 18.5% |
| Great Britain | 331 | 250 | 10.0% | 7.4% |
| Sweden | 121 | 158 | 3.7% | 4.7% |
| Latvia | 87 | 83 | 2.6% | 2.5% |
| Denmark | 47 | 15 | 1.4% | 0.4% |
| United Arab Emirates | 45 | 45 | 1.4% | 1.3% |
| Lithuania | 43 | 45 | 1.3% | 1.3% |
| Ukraine | 41 | 42 | 1,2% | 1,2% |
| Other countries | 251 | 334 | 7.6% | 9.9% |
| TOTAL | 3,307 | 3,369 | 100.0% | 100.0% |
| th EUR | Net sales | Operating Profit | ||
| Q3 2015 | Q3 2014 | Q3 2015 | Q3 2014 | |
| Pärnu Fibreborad factory | 1,425 | 1,421 | 138 | 36 |
| Püssi Fibreboard factory | 1,319 | 1,395 | 5 | (24) |
| Pärnu interior boards factory (Isotex) | 529 | 553 | 3 | 12 |
| Not allocated | 34 | 0 | 0 | 0 |
| TOTAL | 3,307 | 3,369 | 145 | 24 |
The net sales of the Pärnu fibreboard factory and interior board’s line remained at the same level in the third quarter of 2015 compared to the same quarter of 2014 and amounted to 2.0 mil. euros.
The turnover of Püssi fibreboard factory amounted to 1.3 mil. euros declining 7% compared to the same quarter in 2014 (turnover 1.4 mil. euros in Q3 2014).
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 11 stores in Tallinn (3), Tartu, Pärnu, Riga, Vilnius, Kiev (2), Kharkiv and Dnipropetrovs’k at the end of the third quarter in 2015.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| Q3 2015 | Q3 20154 | Q3 2015 | Q3 2014 | 30.09.15 | 30.09.14 | |
| Estonia | 344 | 323 | 57.1% | 58.1% | 4 | 5 |
| Latvia | 109 | 85 | 18.1% | 15.3% | 1 | 1 |
| Lithuania | 75 | 98 | 12,5% | 17.6% | 1 | 1 |
| Ukraine | 75 | 50 | 12.3% | 9.0% | 4 | 4 |
| TOTAL | 602 | 556 | 100.0% | 100.0% | 10 | 11 |
Retail sale amounted to 602 thousand euros in the third quarter of 2015 and operating profit 6 thousand euros (sales 556 thousand euros and operating loss 14 thousand euros in Q3 2014). Current year third quarter operating profit 6 thousand euros contains also loss of currency exchange rate of hryvnia 22 thousand euros (realized loss from currency exchange rate 20 thousand euros in the same period of 2014).
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in the third quarter amounted to 1.1 mil. euros and operating loss to 88 thousand euros. In the same period last year, the turnover of the factory amounted also to 1.1 mil. euros and the operating loss to 65 thousand euros. As compared to the previous year the turnover of the factory has decreased 2%. In the third quarter the sales decreased in Russia by 13% due to colder economic environment and weaker purchasing power for imported durable goods. Sales in Finland decreased slightly and in the Baltics remained almost at the same level.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| Q3 2015 | Q3 20154 | Q3 2015 | Q3 2014 | |
| Finland | 404 | 362 | 36,8% | 32.4% |
| Russia | 380 | 438 | 34.6% | 39.1% |
| Other countries | 51 | 35 | 4.6% | 3.1% |
| Subsidiaries | 262 | 284 | 24.0% | 25.4% |
| TOTAL | 1,097 | 1,119 | 100,0% | 100,0% |
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. We expect sales of Skano Fibreboard in Q4 2015 to be similar compared to sales of the same period last year. Sales in our core markets are lower due to weak demand which we expect to compensate with sales in new markets. On the other hand we see already better results in efficiency even with lower production volumes compared to last year as a result of the recent production improvement plan.
The management’s priority is to secure the factories with sufficient sales volumes and to improve energy efficiency in the production process, where 2015 investment and improvement program is aimed. 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 Q4 2015 to be lower compared to sales of the same period last year. We expect steady sales in the Baltics but decrease in Ukraine due to political and economic instability.
SKANO FURNITURE FACTORY. In Q4 2015 we expect smaller sales of the furniture factory compared to the same period in 2014 because of the deteriorated economic situation in the near regions, especially in Russia. In Russia sales are down due to weak currency, broad-based economic downturn and low consumer confidence.
Sales to new markets in Q4 2015 are not covering the lag from our main markets but 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 | 9 m 2015 | 9 m 2015 | 9 m 2015 |
| Income statement | |||
| Revenue | 14,564 | 15,699 | 14,329 |
| EBITDA | 811 | 696 | 440 |
| EBITDA margin | 5,6% | 4,4% | 3,1% |
| Operating profit | 183 | 29 | (242) |
| Operating margin | 1,3% | 0,2% | (1.7%) |
| Net profit | (43) | (179) | (415) |
| Net margin | (0.3%) | (1.1%) | (2.9%) |
| Balance sheet (30.09) | |||
| Total assets | 14,291 | 15,503 | 14,916 |
| Return on assets | (0.3%) | (1.2%) | (2.8%) |
| Equity | 5,180 | 6,586 | 7,090 |
| Return on equity | (0.8%) | (2.7%) | (5.9%) |
| Debt-to-equity ratio | 63.8% | 57.5% | 52.5% |
| Share (30.09) | |||
| Closing price | 0,70 | 0,93 | 1,30 |
| Earnings per share | (0.01) | (0.04) | (0.09) |
| Price-earnings ratio | (70.00) | (23.25) | (14.44) |
| Book value of a share | 1,15 | 1,46 | 1,58 |
| Market to book ratio | 0,61 | 0,64 | 0,82 |
| Market capitalization | 3,149 | 4,184 | 5,849 |
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 | 30.09.2015 | 31.12.2014 | 30.09.2014 |
| Cash and bank | 624 | 432 | 509 |
| Receivables and prepayments (Note 1) | 1,735 | 1,232 | 3,487 |
| Total current assets | 5,798 | 4,626 | 5,757 |
| Investment property (Note 3) | 406 | 407 | 407 |
| Tangible fixed assets (Note 4) | 8,064 | 8,267 | 9,309 |
| Intangible fixed assets (Note 5) | 23 | 29 |
30 |
| Total fixed assets | 8,493 | 8,703 |
9,746 |
|
|
|||
| Investment property (Note 3) | 406 | 407 |
407 |
| Tangible fixed assets (Note 4) | 8,064 | 8,267 |
9,309 |
| Intangible fixed assets (Note 5) | 23 | 29 |
30 |
| Total fixed assets | 8,493 | 8,703 |
9,746 |
|
|
|||
| TOTAL ASSETS | 14,291 | 13,329 | 15,503 |
| Debt obligations (Note 6) | 1,908 | 2,030 | 1,651 |
| Payables and prepayments (Note 7) | 2,942 | 2,198 | 2,897 |
| Short-term provisions (Note 8) | 4 | 15 | 3 |
| Total current liabilities | 4,854 | 4,243 | 4,551 |
| Non-current debt obligations (Note 6) | 4,013 | 3,563 | 4,127 |
| Non-current provisions (Note 8) | 244 | 223 | 239 |
| Total non-current liabilities | 4,257 | 3,786 | 4,366 |
| Total liabilities | 9,111 | 8,029 | 8,917 |
| Share capital at nominal value (Note 9) | 2,699 | 2,699 | 2,699 |
| Issue premium | 364 | 364 | 364 |
| Statutory capital reserve | 288 | 288 | 288 |
| Other reserves | 4 | 0 | 0 |
| Currency translation | (90) | (16) | (32) |
| Retained profits | 1,961 | 3,446 | 3,446 |
| Net profit (loss) for the year (Note 10) | (46) | (1,481) | (179) |
| Total equity | 5,180 | 5,300 | 6,586 |
| TOTAL LIABILITIES AND EQUITY | 14,291 | 13,329 | 15,503 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 3rd Q 2015 | 3rd Q 2014 | 9 m 2015 | 9 m 2014 |
| RETURN ON SALES (Note 11) | 4,803 | 4,968 | 14,564 | 15,669 |
| Cost of production sold | (3,753) | (4,053) | (11,327) | (12,772) |
| Gross profit | 1,050 | 915 | 3,237 | 2,897 |
| Marketing expenses | (768) | (785) | (2,395) | (2,237) |
| General administrative expenses | (168) | (141) | (521) | (472) |
| Other income | 63 | 21 | 329 | 44 |
| Other expenses | (98) | (68) | (467) | (203) |
| Operating profit (loss) (Note 11) | 79 | (58) | 183 | 29 |
| Financial income and financial expenses | (74) | (77) | (226) | (208) |
| Profit (loss) before taxes | 5 | (135) | (43) | (179) |
| Prepaid income tax | 0 | 0 | (3) | 0 |
| NET PROFIT (LOSS) FOR THE PERIOD | 5 | (135) | (46) | (179) |
| Basic earnings per share (Note 10) | (0.00) | 0.03 | (0.01) | (0.04) |
| Diluted earnings per share (Note 10) | (0.00) | 0.03 | (0.01) | (0.04) |
| Other comprehensive income: | ||||
| Currency translation difference | 39 | (16) | (74) | (40) |
| TOTAL COMPREHENSIVE INCOME | 44 | (151) | (120) | (219) |
The planned time of publishing of interim report of the fourth quarter of 2015 is week 9 (29th of February 2016)
Martin Kalle
CEO
+372 4478 331
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Skano 2015 3Q interim ENG.pdf