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2013-02-28 16:00:00 CET 2013-02-28 16:00:37 CET REGULATED INFORMATION Neo Industrial Oyj - Financial Statement ReleaseNEO INDUSTRIAL PLC'S FINANCIAL STATEMENT RELEASE 2012Neo Industrial Plc FINANCIAL STATEMENT RELEASE 28 February 2013 at 5.00 p.m The demerger of Neo Industrial Plc was postponed. The Cable segment's operating result improved considerably from 2011. January-December: - The Neo Industrial Group's net sales were EUR 106.2 million (102.8 million in 2011), improving by 3.3 percent. - Its operating result was EUR 0.8 million (-4.8 million), improving by 116.6 percent. - The Cable segment's operating result was EUR 2.1 million (-3.1 million). - The Group's result for the period was EUR -3.8 million (-28.4 million), improving by 86.6 percent KEY FIGURES 2012 2011 Change Net sales (EUR million) 106.2 102.8 3.3 % Operating result (EUR million) 0.8 -4.8 116.6 % Result for the period (EUR million) -3.8 -28.4 86.6 % Earnings per share, EUR -0.81 -4.60 82.3 % Return on investment, ROI 1.7 % -32.1 % Eguity ratio 14.7 % 12.7 % MANAGING DIRECTOR JARI SALO: The Neo Industrial Group's Cable segment developed favourably from 2011. The segment's net sales grew by 3 percent to EUR 106.2 million (102.9 million in 2011). Its operating result improved considerably to EUR 2.1 million (-3.1 million). In spite of the difficult market situation, the Cable segment maintained its position in its main markets. The prices of the metals the segment uses as raw materials fluctuated less than they did in 2011. Working capital management presented challenges in preparing for the high season and choosing optimal times for raw material deliveries to production. All in all, the year 2012 was very challenging for the Neo Industrial Group. The Group decided to discontinue its Single Family Housing segment when the associated company Finndomo Ltd filed for corporate reorganisation. Neo Industrial's share in Finndomo was recorded as a write-off on the balance sheet. In the Viscose Fibres segment, Avilon Ltd's proposed corporate reorganisation programme was confirmed. The shutdown at Avilon's production plant continued throughout the review period. The Viscose Fibres segment's net sales mainly consisted of the sales of fire-retardant fibre to the United States from Avilon's inventory. Confirmed on 28 June 2012, Avilon's corporate reorganisation programme served to improve the company's future prospects. The company's strategy aims to change its focus from the production of standard viscose to special fibres, which have more stable prices and margins. An investment in the production of antimicrobial fibres was completed in the third quarter. The first licensing agreement on the PPV technology developed in the Viscose Fibres segment was signed with a major Chinese viscose manufacturer. In August, Neo Industrial's Board of Directors approved a demerger plan intended to separate the Viscose Fibres segment from the Group and establish it as a public limited company. The purpose of the demerger is to streamline business structures, improve transparency and help create more value for shareholders over the long term. Five of Neo Industrial's creditors opposed the demerger. Neo Industrial and the creditors decided to apply for postponement for the demerger hearing. The company and its creditors seek to negotiate a solution by 8 May 2013. Due to the demerger plan the Viscose Fibres segment is handled as discontinued operations. In the Board of Directors' report, information on the Viscose segment will be included in the actual report and the note related to discontinued operations. NET SALES AND OPERATING RESULT The Neo Industrial Group's net sales in 2012 were EUR 106.2 million (102.8 million in 2011). Its result for the full year was EUR -3.8 million (-29.1 million). Avilon's reorganisation debt cuts had a positive effect of EUR 10.3 million on the result. The conversion of Reka Cables' leases for premises into open-ended contracts also improved the result. As a result of the conversion, EUR 9.7 million was eliminated from tangible assets and liabilities on the balance sheet. Its effect on the result was EUR 0.9 million before taxes and EUR 0.7 million after taxes. Neo Industrial recorded its EUR 6.4 million share in Finndomo as a write-off on its balance sheet, which had a negative effect on the result. As a result of a review of and negotiations on liabilities and guarantees related to Avilon's corporate reorganisation debts, an expense of EUR 0.8 million was recognised in financial items. Previously, the item was presented in off-balance-sheet liabilities. BALANCE SHEET AND FINANCING Neo Industrial's liquidity situation remained tight throughout the review period. Reka Cables combined its sales receivables financing tools in July. It decided to abandon sales receivables purchase agreements and increased the total credit facility for sales receivables factoring agreements to EUR 18 million (EUR 9.5 million). Of this total, EUR 8.8 million (EUR 6.4 million) was in use at the end of 2012. Of the company's revolving bank credit of EUR 6.5 million (EUR 6.0 million), EUR 5.7 million (EUR 5.8 million) was in use at the end of the year. At the end of the review period, the balance sheet total stood at EUR 76.1 million (97.9 million). SEGMENTS Cable Q4/2012 Q4/2011 Change 2012 2011 Change Net sales (EUR million) 22.3 24.5 -9.0% 106.2 102.9 3.2% Operating result (EUR million) -0.2 -1.0 78.1% 2.1 -3.1 168.1% The Cable segment's net sales in January-December were EUR 106.2 million (102.9 million), representing an increase of 3 percent. Demand in the Nordic countries remained at a good level in early 2012 but weakened clearly at the end of the year when compared to 2011. Sales volumes grew in the Nordic countries but remained below the previous year's levels in Russia and the Baltic countries. The Cable segment's operating result for the full year improved considerably to EUR 2.1 million (-3.1 million). Increased operational efficiency, stable metal prices and increased investments in the Nordic countries were the key factors behind the improvement. The prices of metals used as raw materials fluctuated less than they did in 2011, whereas the prices of plastics fluctuated very strongly at times. The Cable segment continued to make changes to its organisation and operational processes in 2012. At the beginning of June, an operations steering team was established to optimise production. Investments in the Nordic markets were increased to achieve goals. Working capital management presented challenges throughout the year. For this reason, the conditions were not optimal for increasing inventories for the high season. In the spring and early autumn, Reka Cables was not always able to ensure adequate delivery times, which affected sales volumes. Towards the end of the year, the situation developed favourably, creating better conditions for ensuring better delivery times. In Finland, the capacity of the Keuruu production plant was in stable use until November. The capacity of the Hyvinkää production plant was in stable use until October, and the plant exceeded its annual goal for volumes. Considerable changes in capacity utilisation rates between peaks and slower seasons presented challenges at the Riihimäki plant, for which reason variable costs were higher than planned. Due to seasonal changes and with the market slowing down in early 2012 and at the end of the year, shutdowns were carried out at production plants and layoffs were carried out across the entire organisation. No significant new investments were made. Investments totalled EUR 1.0 million (0.4 million), mainly consisting of investments in maintenance and increasing the efficiency of production. Reka Cables continued to negotiate with the insurance company about the amount of insurance compensation that is due for the machinery breakdown in Keuruu in 2011. The compensation is estimated at EUR 0.8 million and was recognised accordingly in 2011. On the closing date of the financial period, the insurance company estimated the compensation at EUR 0.3 million. Reka Cables' estimate of the compensation is based on the extent of the breakdown: it affected operations and deliveries at all of Reka Cables' three production plants. In Russia, net sales from special cables met expectations. The operating result for the Cable segment's business operations in Russia was slightly negative. In July, the Cable segment decided to invest in increasing its production capacity of fire-retardant special cables. The project progressed as planned, and the goal is to launch production in the summer of 2013. The net sales of Nestor Cables - a manufacturer of telecommunications and fibre-optic cable - were EUR 27.4 million in 2012 (29.7 million). Its operating result was slightly negative. Adjustment measures were carried out due to the tight market situation. Viscose Fibres Q4/2012 Q4/2011 Change 2012 2011 Change Net sales (EUR million) 0.0 1.5 -99.4% 2.1 18.4 -88.5% Operating result (EUR million) -1.4 -2.1 35.3% 5.1 -11.0 146.9% The Viscose Fibres segment's net sales in 2012 were EUR 2.1 million (18.4 million), mainly consisting of the sales of fire-retardant fibre to the United States from Avilon's inventory in the first half of the year. As a result of the recognition of EUR 10.3 million in debt cuts, the segment recorded a positive operating result of EUR 5.1 million (-11.0 million). Due to demerger plan the Viscose Fibres segment is included in discontinued operations, the figures related to the segment will be presented in “Result for the period from discontinued operations”, together with the figures for the Single Family Housing segment. The District Court of Pirkanmaa accepted Avilon's proposal for a corporate reorganisation programme on 28 June 2012. As part of the proposal, creditors were offered an opportunity to convert their receivables into shares in Avilon Ltd. Avilon's debts decreased by a total of EUR 14.5 million, of which EUR 10.3 million were due to cuts in unsecured debts. Debts converted into shares totalled EUR 4.2 million, of which companies outside the Group represented EUR 2.3 million. After the debt cuts, Avilon's unsecured reorganisation debts totalled EUR 2.6 million. All in all, 80 percent of the company's unsecured debts were cut. Throughout the year, the world market price for standard viscose remained too low in terms of resuming production at the Valkeakoski plant. The market situation for fire-retardant fibre was difficult as well. Avilon focused on special fibres. In special products, the company began to develop antimicrobial fibre products. An investment in post-processing at the Valkeakoski plant made it possible for Avilon to start test and trial runs in antimicrobial post-processing. The first samples were submitted to customers for analysis at the end of the year. During the review period, Avilon held emission rights, all of which it sold. The gains from the sales of emission rights totalled EUR 1.1 million (2.2 million). In the third quarter, Avilon acquired the maintenance operations of its Valkeakoski plant from Maintpartner Ltd. The business transfer agreement concerned a total of 34 employees in maintenance and power plant operation. They were transferred to Avilon Ltd as existing employees on 1 September 2012. The transaction has no material effect on the figures for the review period. Avilon Ltd changed its name to Avilon Fibres Ltd in December. A fire in a peat silo at Avilon's production plant occurred in October. The assessment of the damage is still in progress. Avilon's deductible is EUR 0.1 million. The first licensing agreement on the PPV technology was signed with the Chinese company TangShan SanYou on 12 November 2012. The PPV technology is used for converting paper-grade pulp into raw material suitable for viscose production. The environmentally friendly carbamate technology was developed further. Other operations In June, Neo Industrial decided to write off its shares in Finndomo and discontinue its Single Family Housing segment. After the write off, the investment has no value in the balance sheet. The District Court of Northern Savonia confirmed Finndomo Ltd's corporate reorganisation programme on 3 December 2012. MAJOR EVENTS AFTER THE FINANCIAL PERIOD Reka Cables Ltd negotiated an additional financing package of EUR 2.0 million to alleviate the effects of seasonal changes. In conjunction with this, the company signed financing agreement related to the Cable segment. The intention is to update the financing agreement after the demerger. The Viscose Fibres segment has actively engaged in negotiations to acquire new financing and industrial partners. RISKS AND UNCERTAINTY FACTORS Neo Industrial's financial risks include currency, interest rate, commodity, liquidity, credit and investment market risks. Financial risks and the related protection measures are described in more detail in notes to the financial statements. The company's future risk factors are related to the business development of its portfolio companies. The liquidity situation is tight for many of the Group's companies. Avilon's corporate reorganisation procedure and the shutdown at its production plant have made financial negotiations more difficult for other companies. In the Cable segment, the fluctuation of raw material prices and currencies as well as seasonal changes present challenges in working capital management. The financial statements have been prepared on the assumption that the entity is a going concern. The continuity of the company's operations requires that it be able to secure additional funding and renegotiate payment terms or liquidate capital from its operations in other ways during 2013. Negotiations with financiers, suppliers and customers are in progress, and the company's management believes they will be successful. If, however, the company does not succeed in securing financing, it is possible that it will not be able to liquidate assets to a sufficient extent or sufficiently fast and pay its debts in its ordinary business operations. This would jeopardise the continuity of its operations in their current form. Avilon Fibres Ltd's assets have been valued in accordance with the values used in the corporate reorganisation procedure during the production shutdown. The situation is particularly challenging for Avilon Fibres Ltd, and the continuity of its operations requires financing arrangements. If the negotiations to acquire new financing and industrial partners for the Viscose Fibres segment fail, the continuity of Avilon Fibres Ltd's operations will be jeopardised. In such case, the reversal of the recognition of EUR 10.3 million in debt cuts related to Avilon Fibres Ltd's corporate reorganisation would have the most significant effect on the Group's operating result. The value of Avilon Fibres Ltd's industrial premises is EUR 2.1 million on the consolidated balance sheet (IFRS). If it is necessary to discontinue the company's operations and liquidate its assets, it is possible that the revenues from the sale of the assets will be lower than their book values. In the Cable segment, the most significant risks are related to market development, working capital management and fluctuations in the prices of raw materials and currencies. During considerable seasonal changes, suppliers' terms of payment have a material effect on the company's ability to ensure competitive delivery times through sufficient inventories. The Viscose Fibres segment´s production plant is on the production shutdown and there are risks related to start up the production and restart the business activities. The other main risks include market and competitor development, the availability of financing, currency fluctuations and fluctuations in the prices of raw materials, along with the availability of raw materials. The Viscose Fibres segment's most important raw materials are pulp and sodium hydroxide. Neo Industrial believes in the growth and development of the Russian cable market. The company has made significant investments in making use of business opportunities in Russia. The investments entail the risk that growth in Russia will not meet expectations. NEAR-TERM OUTLOOK The global economy is currently causing significant uncertainty, which may affect the business of Neo Industrial. For the Cable segment, the ground cabling operations are expected to increase in Finland in the spring and early summer. Investments made in previous years as well as changes made to processes create conditions for profitable operations as well as for maintaining volumes at their previous levels in spite of the decreasing main markets. The segment expects to record a positive result in 2013. The Viscose Fibres segment continues to focus on acquiring new financing and industrial partners. Price level in the standard viscose market continues to be low, although the market is expected to grow by 10 percent/year. Growth in the volumes of antimicrobial fibre, the segment's new product group, depends on customers' schedules, the results of trial runs and decision-making processes. Procurement logistics must also be developed to ensure continuous and stable production volumes in different situations. Costs and operations will be adjusted to customer demand. Viscose production will be launched after the operating conditions, right product mix and funding have been secured. Negotiations related to the PPV technology will be continued with selected target companies. Practical measures related to the first contract will be advanced. Throughout the year, the company will pay special attention to liquidity and funding for growth. Neo Industrial will carry out negotiations on financing and payment terms as well as boost inventory turnover and free up capital assets. DIVIDEND POLICY Neo Industrial aims to distribute at least 30 percent of its net earnings as dividends. DIVIDEND PROPOSAL On 31 December 2012, the parent company's unrestricted equity was EUR 15,940,254.63. The Board proposes to the Annual General Meeting that no dividends be paid for 2012. No dividends were paid for 2011. ANNUAL GENERAL MEETING 2013 Neo Industrial Plc's Annual General Meeting will be held in Helsinki on 4 April 2013 at 1 p.m. A separate invitation will be published later. DISCLOSURE PROCEDURE OF FINANCIAL REVIEW Neo Industrial follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority, and discloses relevant information related to its Financial Statement Release with this Stock Exchange Release. Neo Industrials Financial Statement Release for 2012 is attached to this release and is also available on company's website at www.neoindustrial.fi. BRIEFING OF THE FINANCIAL STATEMENTS A briefing for investors and media will be arranged on February 28 at 2.15 pm. at the Neo Industrials office in Helsinki (Aleksanterinkatu 48 A). Helsinki, 28 February 2012 Neo Industrial Plc Board of Directors More information: Jari Salo, Managing Director, tel. +358 20 720 9196 Sari Tulander, CFO, tel. +358 20 720 9192 www.neoindustrial.fi Neo Industrial's strategy is to invest mainly in industrial companies with similar synergic benefits. The aim of investments is with active ownership to develop the purchased companies and establish additional value. Returns are sought through both dividend flow and an increase in value. Neo Industrial's class B shares are listed on the NASDAQ OMX Helsinki Stock Exchange.Neo Industrial's business segments are Cable and Viscose Fibers. |
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