Kotkamills Group Oyj - Financial Statement Release

Kotkamills Group Oyj: INTERIM REPORT FOR JANUARY-DECEMBER 2016

Kotkamills Group Oyj

STOCK EXCHANGE RELEASE

28 February 2017, at 6.30 pm (CET + 1)







This is a summary of the January - December 2016 interim report. The complete
report is attached to this release and is also available at
www.kotkamills.com/fi/kotkamillsgroup/keyfinancials



KOTKAMILLS INTERIM REPORT
Due to new group structure since March 2015, stopping magazine paper production
in January 2016 and entering into new Consumer Boards business different
quarters (e.g. Q4/2016 versus Q4/2015) are not fully comparable.



October - December 2016 (10-12/2015)

The revenue of continuing operations of EUR 58,6 (EUR 49,9) million improved by
EUR 8,7 million mainly due to increased Consumer Boards sales.

The operating profit of continuing operations was EUR 13,8 (EUR 7,4) million
mainly due to profit of  disposal of the shares of L.P. Pacific Films ("LPPF"),
a Malaysian limited liability company and the subsidiary of Kotkamills Oy, (EUR
18,9 million)  and a negative impact from the ramp-up of Consumer Boards
operations.



January - December 2016 (1-12/2015)

The revenue of continuing operations of EUR 219,1 (EUR 146,4) million increased
clearly because year 2015 does not include business activities of continuing
operations of Q1/2015 (Kotkamills Group Oyj became the parent company on 24
March 2015, when the Company acquired the entire share capital of Kotkamills
Oy).

The operating profit of continuing operations of EUR -0,4 (EUR 40,9) million was
clearly lower due to start-up costs of Consumer Boards business and in Q1 2015
recognized gain, i.e. negative goodwill, of EUR 30,5 million on the acquisition
of Kotkamills Oy.



Events in October - December 2016

In November the Company sold the shares of LPPF to Surfactor Germany GmbH. The
enterprise value (on a debt and cash free basis) of LPPF was EUR 25 million. The
purchase price was subject to a closing accounts adjustment, which was not
material. The purchase price was paid to Kotkamills Oy in cash. The disposal
improved the Kotkamills Group's cash position, operating profit and equity, but
it did not have significant impact on Group's assets and liabilities.

In December the Company continued to take steps to improve liquidity,
performance and profitability of Kotkamills Oy by optimising and developing
existing operations. As part of such efforts, Kotkamills Group Oyj initiated a
strategic review process concerning the Imprex Business for the purposes of
evaluating strategic options with respect to the Imprex Business, including a
potential disposal.

The potential disposal of Imprex Business would require a consent from the
bondholders in accordance with the terms and conditions of the bonds. A written
procedure was initiated for the purpose of obtaining such consent for the event
that Kotkamills Group Oyj would, as a result of the ongoing strategic review
process, decide on a disposal of the Imprex Business.

The delivery volumes of Industrial Products segment decreased slightly compared
to the previous quarter due to seasonal variation but the demand still continued
to stay at a good level.

The commercial ramp-up of Consumer Boards products continued in the fourth
quarter.



Key figures

The business of Magazine Papers was classified as a discontinued operation in
January 2016 and thus the net result of the business of Magazine Papers is
presented in the statement of profit or loss under "Profit (loss) from
discontinued operations" separately from continuing operations for all periods
presented.



The Kotkamills Group Oyj became the parent company on 24 March 2015, when the
Company acquired the entire share capital of Kotkamills Oy, thus 1-12/2015
includes only business activities of 4-12/15 of continuing operations. The Group
recognized a gain, i.e. negative goodwill, of EUR 30,5 million on the
acquisition of Kotkamills Oy. The gain has been recognized in the other
operating income in Q1 2015.



 (IFRS)                             10-12/2016 10-12/2015 1-12/2016 1-12/2015

 Continuing operations

 Revenue, EUR million               58,6       49,9       219,1     146,4

 EBITDA, EUR million                17,9       9,9        9,5       46,0

 Operating profit, EUR million      13,8       7,4        -0,4      40,9

 Operating profit/ Revenue (%)      23,6       14,7       -0,2      27,9



 Group Total

 Return on equity (%)               58,3       9,3        -53,2     122,4

 Equity ratio (%)                   7,8        13,1       7,8       13,1

 Equity ratio, adjusted (%)*        50,1       44,3       50,1      44,3



 *Equity includes shareholder loans
 and the junior term loan




The Group monitors capital using an equity ratio and an adjusted equity ratio
based on the financial covenants, which is total equity added with shareholder
loans and the junior term loan and divided by total assets. The Group's policy
is to keep the adjusted equity ratio above 30%. There have been no breaches of
the financial covenants of equity ratio in the current period.



Events after reporting date

In January 2017 the Company was informed by Nordic Trustee Oy, acting as the
Trustee under the bonds, that the bondholders have given the requested consent
(as revised on 23 December 2016) for a disposal of the Imprex Business in
accordance with the terms and conditions of the bonds.

In February 2017 the shareholders of the Company unanimously resolved to offer
by a directed issue a maximum of 1,875,417 new series A shares of the company
for subscription to the holders of series A shares pro rata to their holding of
series A shares, a maximum of 63,125 series B shares held by the company for
subscription to certain key employees of the Kotkamills Group and a maximum of
203,885 new series B shares of the company for subscription to the holders of
series B shares pro rata to their holding of series B shares.

Pursuant to the terms of the share issue of the New A Shares, the holders of
series A shares were in connection with their participation in the share issue
required to grant shareholder loans to the company up to the aggregate amount of
EUR 17,920,698. The terms of the shareholder loans are in material respects
equivalent to the terms of the existing shareholder loans.

The purpose of the share issue and the utilisation of the shareholder loans was
to ensure full utilization of the commercial ramp-up of the new board machine.

As a result of the share issue and the utilisation of the new shareholder loans,
the Company obtained financing in the aggregate amount of approximately EUR
20,0 million.



Outlook for 2017

The revenue of the first quarter in 2017 is estimated to be higher than in the
fourth quarter 2016 due to increase in the delivery volumes. The profit of
continuing operations for the first quarter of 2017 is estimated to improve from
the previous quarter (excluding the profit of disposal of LPPF) although the
commercial ramp-up of Consumer Boards business is estimated to have a negative
effect on the profit of the first quarter.

Markets of the other continuing operations' businesses are expected to be at the
same level as in the last year, but ongoing economic situation in Europe and
geopolitical risks may have weakening impact on demand.

Present euro exchange rate is expected to support the Group's performance, but
possible increases in raw material prices could adversely impact the Group's
profit development.



Kotkamills Group Oyj
Board of Directors



For additional information, please contact:

CFO Petri Hirvonen, tel.+358 40 571 0834, petri.hirvonen@kotkamills.com



DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media
www.kotkamills.com





Kotkamills Group in brief

Kotkamills is a responsible partner that delivers renewable products and
performance to its customers' processes via product innovations created from
wood, a renewable raw material. The key brands of the company include Absorbex®
and Imprex®, both innovative laminating paper products for the laminate, plywood
and construction industries. Moreover, Kotkamills offers ecological, technically
sound and visually attractive wood products for demanding joinery and
construction. In summer 2016, Kotkamills started up a new board machine
producing AEGLE(TM) Folding Boxboard and ISLA(TM) Food Service Boards, including
the capability to add barriers on-machine. All Consumer Board material solutions
are fully recyclable and repulpable.

Kotkamills has two production sites in Finland, located in Kotka and Imatra. The
majority shareholder of Kotkamills is MB Funds, a Finnish private equity firm.
www.kotkamills.com

Disclaimer
The information contained in this release shall not constitute an offer to sell
or the solicitation of an offer to buy securities of Kotkamills Group Oyj in any
jurisdiction.









[]

Attachments:

Kotkamills Group Oyj Interim Report Q4-2016.pdf