Neo Industrial Oyj - Financial Statement Release

NEO INDUSTRIAL PLC'S FINANCIAL STATEMENT RELEASE 2012

Neo 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.

Attachments:

Tilinpaatostiedote 2012_ENG.pdf