Neo Industrial Oyj - Interim report (Q1 and Q3)

NEO INDUSTRIAL PLC’S INTERIM REPORT FOR JANUARY–JUNE 2015

NEO INDUSTRIAL PLCINTERIM REPORT4 August 2015 at 2.00 pm
NEO INDUSTRIAL PLC'S INTERIM REPORT FOR JANUARY-JUNE 2015 
The Cable segment's turnover improved, investments in cable manufacturing
technology and in production personnel. Operating result was burdened by
extraordinary costs. 

January-June
- The Neo Industrial Group´s turnover was EUR 43.6 million (42.0 million)
- Its operating result was EUR -0.6 million (0.6 million). Operating result was
burdened by extraordinary costs total circa EUR 0.9 million 
- The Cable segment´s operating result was EUR 0.1 million (1.3 million).
- The Group´s result for the period was EUR -1.3 million (-0.6 million).

MANAGING DIRECTOR JARI SALO:

The Cable segment´s turnover for the first half of year 2015 increased EUR 1.6
million comparing to the corresponding period of the previous year. The sales
volume in the cable market of Nordic countries, the main market area of Reka
Cables Ltd, was as a whole on the same level as the year before. The growth in
sales is mainly due to increased sales volumes in the other markets. 

The Cable segment´s operating result was EUR 1.2 million lower than the
comparable figures 2014. It contains circa EUR 0.4 million of extraordinary
costs due to management changes. The result is also burdened by costs due to
recruiting new production personnel and training as well as larger than normal
variations of factories´ load situations, total EUR 0.5 million. In the
beginning of the year circa 24 persons more were recruited to production in the
Cable segment comparing to the situation in the year end 2014. Received orders
have mainly been underground cable deliveries compared to the corresponding
period of the previous year and it has effected on load rates of factories and
also to utilisation rates. 

The Cable segment continues the operations to improve profitability, process
development and working capital management, which is believed to effect
positively on result development during the end of the year. The cable
manufacturing investment of EUR 1.5 million in Hyvinkää factory also increases
the efficiency in production. The investment enables launching new product
groups in the future. 

Cable segment has strong seasonal fluctuations. The high season is during
spring, summer and autumn months. During the high season the usage of factoring
financing and seasonal funding is at highest and also the stock levels are in
the high level. Equity ratio June 30 2015 was lower than 31 December 2014
showing the capital employed impact of high season and the effect of the result
for the period.  Equity ratio June 30 2015 was better than 30 June 2014 showing
the growth of inventory turnover rate due to Lean-operations. 

Strong financial situation of Cable segment in turn of the year 2014/2015
enabled additional installment of EUR 1.5 million to the financing agreement
signed earlier. The payment was made in January 2015. 

Improvement of grids with underground cables continues particularly in Finland.
Development is contributed by a change made to legislation of electricity
market concerning assurance of electricity supply and substantial disorders in
distribution of electricity due to weather conditions in winter and storms. The
Cable segment pays particularly attention to the delivery capacity of
underground cables. 

The financial arrangements carried out in 2014 have a positive effect on Neo
Industrial Group´s liabilities, balance and particularly on cash flow during
decrease of financial expenses. During the review period Neo Industrial´s
financial expenses have been almost EUR 0.5 million smaller than during the
corresponding period of the previous year. 

KEY FIGURES

                                     1-6/2015  1-6/2014  1-12/2014
Turnover  (EUR million)                  43.6      42.0       80.1
Operating result (EUR million)           -0.6       0.6       -0.7
Result for the period (EUR million)      -1.3      -0.6        1.8
Earnings per share, EUR                 -0.21      0.11       0.30
Return on investment, (ROI,%)            -1.5       2.2       12.1
Equity ratio, %                          14.2      11.0       21.1

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 the notes to the latest
financial statements. The company's future risk factors are related to the
business development of its portfolio companies. The uncertainty of the global
economy and financial market poses a risk to the financial arrangements of the
Group. 

Due to the significant financial arrangements carried out in 2014 the financial
situation got better. However, Neo Industrial continues to pay extra attention
to ensure the sufficient funding and ensuring liquidity situation. The
financial negotiations are continued and to assure liquidity, company
intensifies the working capital management and negotiates adjustments to
payment terms and agreements. 

In the Cable segment, the most significant risks are related to market
development, fluctuations of raw material prices and currencies as well as
working capital management in various situations. During considerable seasonal
changes, suppliers' terms of payment effect significantly on the ability to
ensure competitive delivery times through sufficient inventories. 

NEAR-TERM OUTLOOK

The construction has been picking up slightly in Nordic countries and in
Western Europe. The management believes that grid constructors will boost
ground cabling projects to ensure distribution reliability. The turnover of the
Cable segment is believed to slightly exceed the turnover in 2014 and the
operating result of the Cables segment is believed to be positive. 

The company will continue to pay special attention to liquidity and funding for
growth. In addition to negotiations on financing and payment terms, the
measures for boosting inventory turnover and freeing up capital assets are 
taken into action. 

DISCLOSURE POLICY OF INTERIM REPORT

Neo Industrial discloses relevant information related to its Interim Report
with this Stock Exchange Release. The entire Interim Report for January-June
2015 is attached to this release and is also available on company's website at
www.neoindustrial.fi. 

Hyvinkää, 4 August 2015

Neo Industrial Plc
Board of Directors

Further information:
Jari Salo, Managing Director, tel. +358 20 720 9196

All comments in this report that do not refer to actual facts are future
estimates. Such estimates include expectations concerning market trends, growth
and profitability as well as statements including the words "believe", "assume"
or "will be" or a similar expression. Since thses estimates are based on
current plans and estimates, they involve risks and uncertainty factors that
may cause the actual results to differ substantially from current statements. 

Among other things, such factors include 1) operating conditions, such as
continued success in production and the ensuing efficiency benefits,
availability and cost of production inputs, demand for new products and changes
in circumstances affecting the acquisition of capital under acceptable
conditions; 2) sector-specific circumstances, such as the intensity of demand
for products, the competition, current and future market prices for the Group´s
products and related pricing pressures, the financial situation of the Group´s
customers and competitors and competitors´ possible new products; and 3) the
general economic situation, such as economic growth in the Group´s main market
areas and change in exchange rates and interest rates. 

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 segment is Cable Industry. 

ENCL: Neo Industrial's Interim Report for January-June 2015

Attachments:

Interim Report January-June 2015.pdf