Neo Industrial Oyj - Financial Statement Release

THE PROFITABILITY AND FINANCIAL SITUATION IMPROVED

NEO INDUSTRIAL PlC          FINANCIAL STATEMENT RELEASE            27 February
2015 at 1.30 pm 

The profitability and financial situation improved

January-December:

- The Neo Industrial Group´s turnover was EUR 80.1 million (83.0 million in
2013), decreasing by 3.5 % 

- Its operating result improved by 26.0 % to EUR -0.7 million (-1.0 million)

- The Cable segment´s operating result was EUR 0.7 million (1.0 million)

- The Group´s result for the period improved by 248.9 % to EUR 1.8 million
(-1.2 million) 

KEY FIGURES

                                     2014   2013  Change 
Turnover (EUR million)               80.1   83.0   -3.5 %
Operating result (EUR million)       -0.7   -1.0   26.0 %
Result for the period (EUR million)   1.8   -1.2  248.9 %
Earnings per share                   0.30  -0.20  250.7 %

MANAGING DIRECTOR JARI SALO:

Year 2014 was significant for the future development of Neo Industrial.
Remarkable risk lowering activities, financing arrangements and profitability
improvements has been carried out in the Group to secure the future. 

In the beginning of the year the Cable segment signed a long-term financing
agreement, which enables the further development of the operations. The
financing agreement include also seasonar working capital funding. This
improves the capability to respond to the seasonal demand of the market. Terms
of the financing agreement included financial covenants for Cable segment. At
31 December 2014 terms of one financial covenant (turnover of capital) were not
fulfilled but that did not influence on financial terms because the financier
accepted the deviation. 

From the risk management point of view it was very important that Neo
Industrial Plc won the argument with the bankruptcy estate of Kuitu Finland at
the District Court of Pirkanmaa. The decision of District Court of Pirkanmaa
was positive to Neo Industrial Plc; The guarantee relating to real estate of
Avilon will be paid with yearly instalment as stated in the original agreement
instead of one time compensation. The decision of the District Court of
Pirkanmaa erased the circa one year encumbered uncertainty. 

Reka Cables carried meritoriously out the negotiations relating the breakdown
at Keuruu plant. Negotiations had lasted several years with the insurance
company. As outcome of the negotiations the result risk of EUR 0.8 million was
avoided. 

Neo Industrial Plc planned and negotiated regarding total arrangement which
included debt cuts, share issue and buying the shares of Reka Rubber Ltd from
Reka Ltd. The total arrangement could not be carried out in a planned way due
to the fact that one financier withdrew before implementation. However, Neo
Industrial was able to carry out part of the planned arrangement by buying back
convertible bonds with total principal amount of EUR 6 million with EUR 1
million. The purchase was financed with new debt financing. At the same time,
as a part of the arrangement, the maturity of earlier acquired EUR 1.1 million
loan was prolonged by ten (10) years. 

The arrangements implemented have positive effect on the Group´s gearing,
Balance Sheet and especially cash flow as the future financial costs will be
smaller. The arrangement has partly effected to the improvement of the Neo
Industrial Plc's share price in January-February 2015. The price of the share
has increased by over 300 per cent and also the trading volume has increased
significantly. 

The turnover of the Cable segment remained on the same level as in 2013 when
the turnover of the spring 2013 sold Russian activities are excluded from the
comparison. The profitability improved. The operating result of the Cable
segment was EUR 0.7 million better than in the comparative year when positive
effect from the sale of the Russian cable manufacturing companies is not taken
into the consideration. The good financial situation at the turn of the year
enabled additional installment of EUR 1.5 million to the financing agreement
signed before. The payment was made in January 2015. 

The Cable segment continues the activities to improve profitability and working
capital management. These are believed to have favourable effect on the result
development. Investment of EUR 1.5 million is made in  Hyvinkää Factory. The
investment enhances the productivity of cable manufacturing and enables
bringing new products to the market. 

The improvements of the grid construction with underground cables continue
specially in Finland. The development is boosted by the changed Electricity
Market Act regarding electricity supply reliability and also the remarkable
interrupts in the delivery of the electricity due to the winter conditions and
storms. The Cable business specially invest in delivery capability of the
underground cables. There is no picking up  seen yet in the construction in
Nordic countries. 

 NET SALES AND OPERATING RESULT

The Neo industrial Group´s turnover in 2014 was EUR 80.1 million (83.0 million
in 2013). Its result for the full year was EUR 1.8 million (-1.2 million. 

BALANCE SHEET AND FINANCING

In March new financial agreement for the Cable segment was signed and old loans
were replaced with new one´s and working capital funding increased with EUR 2
million. 

In December Neo Industrial carried out arrangement where it bought back
convertible bonds issued in 2011 and due in 2016. At the same time, as a part
of the arrangement, the maturity of earlier acquired EUR 1.1 million loan was
prolonged by ten (10) years. 

At the end of the review period, the balance sheet total stood at EUR 44.7
million (47.2 million). 

MAJOR EVENTS DURING THE FINANCIAL PERIOD


The negotiations relating to the breakdown at Reka Cables´ Keuruu plant in 2011
were closed with the insurance company in February 2014. The compensation was
on a par with the estimation recognised in the financial statements in 2011,
EUR 0.8 million. 

The financial negotiations of the Cable segment were finalised and new
long-term financing agreement was signed in March. With this arrangement the
Cable segment replaced previous short-term loans with long-term loans and at
the same time enabled a working capital increase with EUR 2 million. Terms of
the financing agreement include financial covenants for Cable segment. In
addition, the use and distribution of the funds requires consent from the
financier.  At 31 December 2014 terms of one financial covenant were not
fulfilled but that did not influence on financial terms because the financier
accepted the deviation. 

The action initiated in April 2013 by the bankruptcy estate of Kuitu Finland
against Neo Industrial Plc regarding the personal guarantee on the purchase of
the mill real estate of Neo Industrial's subsequently bankrupted Avilon Fibres
Ltd as non-current compensation was dismissed by the District Court of
Pirkanmaa on 17 March 2014. The guaranteed debt of EUR 5 million as well as
building cost index is due for payment within 25 years as stated in the
original agreement made in 2010. The bankruptcy estate of Kuitu Finland did not
file a letter of complaint by the closing date. Thereby the decision of
District Court of Pirkanmaa is final and legally valid. The decision of the
District Court is in accordance with Neo Industrial's interpretation and has
thus no effect on balance sheet values. 

Extraordinary Shareholders´ Meeting held in September authorized the Board to
decide on an issue of new class B shares according to the Board of Directors
propose. The new class B shares may be issued in deviation from the
shareholders´ pre-emptive rights. The maximum number of new B shares issued may
amount to a total of 5,000,000 shares. The authorization does not replace or
cancel any earlier authorizations for share issues. 

In October Neo Industrial Plc published sale and purchase agreement on buying
all the shares of Reka Rubber Ltd and notice to the Extraordinary Shareholders´
Meeting. The sale and purchase agreement was related to financing arrangements
of Neo Industrial and share issue to raise new capital. The whole arrangement
was conditional to the acceptance of the Extraordinary Shareholders´ Meeting to
be held on 3 November 2014.  The financing arrangements, which were part of the
total arrangement, were not actualized as a whole as Neo Industrial predicted.
Therefore the whole arrangement published 13 October 2014 is delayed or can be
totally or partly unaccomplished and the Board of Directors of Neo Industrial
Plc called off the Extraordinary Shareholders´ Meeting on 3 November 2014. 

In December Neo Industrial carried out arrangement where it bought back
convertible bonds issued in 2011 and due in 2016. The purchase was financed
with new debt financing. At the same time, as a part of the arrangement, the
maturity of earlier acquired EUR 1.1 million loan was prolonged by ten (10)
years. 

In year 2011 issued and subscribed convertible Bonds are senior unsecured loans
due 2016 with total principal amount of EUR 6 million and entitle cash
compensation based on the Company's class B share price. The Bonds carry a
coupon of 7.50% per annum. Neo Industrial group bought the Bonds back with EUR
1 million. The arrangement had positive, round EUR 4.7 million, effect on to
the net result of Neo Industrial group. 

SEGMENTS

Neo Industrial's business segment is Cable Industry.

Cable



                                H2/2014  H2/2013    Change  2014  2013   Change
Turnover (EUR million)             38.1     37.5     1.5 %  80.1  83.0   -3.5 %
Operating result (EUR million)    - 0.5      0.7  -172.7 %   0.7   1.0  -25.6 %



The Cable segment´s turnover in the review period decreased by 3.5 percent from
the previous year. The turnover was EUR 80.1 million (83.0 million). The sold
Russian companies held totally 3.4 per cent share of the net sales in the Cable
segment in 2013. 

The Cable segment´s turnover was EUR 80.1 million (83.0 million in 2013). The
comparable figures for 2013 include EUR 2.8 million turnover of the Russian
cable manufacturing companies sold in spring of 2013. Operating result was EUR
0.7 million (1.0 million) in the Cable segment. Operating result for 2013
include a positive effect of EUR 1.0 million from the sale of the Russian cable
manufacturing companies. 

The sales volume in the cable market of Nordic countries, the main market area
of Reka Cables Ltd, was on the same level as the year before. However, there
were regional differences. The sales volume of Russia was clearly lower than in
2013. Deliveries to teh Baltic countries were lower than in year 2013. 

 Of the metals used as raw materials, the price of aluminium increased and the
price of copper decreased during 2014. The prices of plastics decreased. The
EUR/USD exchange changes decreased the effect of price changes of copper and
plastics but strengthened the price increase effect of aluminium in EUR. 

Investments fullfilled, EUR 0.4 million (1.7 million) were mainly related to
optimizing production and maintenance. 

Turnover for Nestor Cables Ltd, an associated company, was EUR 30.4 million
(25.4 million). The operating result was positive and better than in the
previous year. 

MAJOR EVENTS AFTER THE REVIEW PERIOD

Neo Industrial Plc´s subsidiary Reka Kaapeli Ltd got substantial underground
power cable order in January. The value of the order is EUR 6.0 million. The
deliveries are made during 2015 and 2016. The underground power cables are used
when building grids that are not vulnerable to weather conditions. 

Neo Industrial Plc´s subsidiary Reka Kaapeli Ltd invests EUR 1.5 million in
cable manufacturing technology in Hyvinkää Factory. With the investment the
productivity of cable manufacturing is enhanced and developing and
manufacturing of new products is enabled. The investment will be ready by the
end of April 2015. 

Good financial situation of Cable industry has enabled additional installment
of EUR 1.5 million to the financing agreement signed in March 2014. The payment
was made in January 2015. 

RISKS AND UNCERTAINTY FACTORS

Neo Industrial´s financial risks include currency, interest rate, commodity,
liquidity, credit and investment 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 uncertainty of the international
economy and financial markets poses a risk to the Group´s financial
arrangements. 

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 not been picking up in Nordic countries nor in Baltics and
the outlook for Russia is unstable. Also the market situation in Europe does
not show any signs of picking up. However, 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. 

Neo Industrial continues to pay extra attention to ensure the sufficient
funding and ensuring liquidity situation. The measures are negotiations on
financing and payment terms as well as boosting inventory turnover and freeing
up capital assets. 

DIVIDEND POLICY

Neo Industrial aims to distribute at least 30 percent of its net earnings as
dividends. 

DIVIDEND PROPOSAL

The parent company´s unrestricted equity stood at EUR -8,659,157.65 including
the result of the review period EUR -1,246,908.23. The Board proposes to the
Annual General Meeting that no dividends will be paid for 2014. No dividends
were paid for 2013. 

ANNUAL GENERAL MEETING 2015

Neo Industrial Plc´s Annual General Meeting will be held in Helsinki on 9 April
2015 at 1.00 p.m. A separate invitation will be published on 27 February 2015. 

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 Industrial´s Financial Statement Release is attached to
this release and is also available on company´s website at
www.neoindustrial.fi. 

Hyvinkää, 27 February 2015

Neo Industrial Plc

Board of Directors

Further 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 main list of NASDAQ OMX Helsinki Stock
Exchange. Neo Industrial's business segment is Cable Industry.

Attachments:

Neo Industrial Financial Statements release_2014_EN.pdf