2011-02-17 16:47:38 CET
2011-02-17 16:48:34 CET
REGULATED INFORMATION
Neomarkka - Financial Statement Release
NEO INDUSTRIAL PLC'S FINANCIAL STATEMENTS REVIEW
Neo Industrial PLC's result for the last quarter and full year 2010
Neo Industrial PLC STOCK EXCHANGE RELEASE 17
February 2011 at 5.45 pm
NEO INDUSTRIAL PLC'S FINANCIAL STATEMENTS REVIEW
Neo Industrial PLC's result for the last quarter and full year 2010
Comparable figures refer to last year's corresponding period unless otherwise
stated.
SUMMARY FOR 2010
- Neomarkka was renamed Neo Industrial Plc
- The Group became an industrial conglomerate: two new divisions, Single Family
Housing business (Finndomo) from Q2 and Viscose Fibers (Avilon) from Q3.
- The Group's net sales were EUR 83.4 (69.1) million, which consisted of the
Cable Industry net sales. The full year operating result was negative, EUR
-10.6 (-5.4) million, affected mainly by the establishment of the Viscose
Fibers division, i.e. Avilon's start-up investments.
- Cable business: Net sales for 2010 totaled EUR 83.4 (69.1) million. Operating
profit was negative, EUR -2.9 (-4.1) million. The breakdown of testing
machinery at the Riihimäki factory influenced both sales and profitability - A
EUR 3.1 million insurance claim is pending. Profitability improved however in
the third quarter to be positive.
- Viscose Fibers business: Activities did not as yet contribute to 2010 net
sales. Avilon's one-off production launch costs, mainly for the year 2010, were
EUR 6.7 million.
- Single Family Housing: Finndomo increased its net sales from May to December
by 28.2% to EUR 93.0 (72.6) million. Finndomo's May-December result however,
was a loss due to the high cost structure. Neo Industrial's share of the loss
was EUR -1.3 million.
SUMMARY FOR THE LAST QUARTER 2010
- The Group's net sales were EUR 23.7 (16.4) million, consisting of the Cable
business net sales. The operating loss, EUR -7.2 (-2.7) million arose mainly
from the Viscose-Fiber division startup costs.
- The Cable business increased its net sales from the previous year to EUR 23.7
(16.4) million, but the last quarter showed an EUR -0.3 (-2.4) million loss.
- The Viscose Fiber operation had not yet had any net sales in the fourth
quarter. Avilon's start-up costs of EUR 6.7 million were entered in the fourth
quarter. Production start-up planned for the December was moved to January 2011
owing to raw material availability problems.
- Single Family Housing Industry net sales was EUR 39.6 (30.1) million, an
increase of 31.5%. Neo Industrial's share of the operating loss was EUR -0.6
million.
Managing Director Markku E. Rentto:
- For Neo Industrial, 2010 was a year of change. Transforming to an industrial
conglomerate and acquiring new businesses requires a lot from the board and
management. Although we are in a tight financing situation, all of Neo's
business segments have good prospects.
The Viscose Fibers business start-up investments have been made, production is
in full swing and the market appears favorable. We can therefore expect Avilon
to record good results already this year. The rapid growth in net sales is a
positive challenge for the entire Avilon operation. It has been nice to hear
that when customers visit Valkeakoski, they say Avilon's fire-resistant fiber
is still the world market benchmark. These expectations are a good springboard.
The Cable business's difficulties are behind us. The Russian market showed a
significant increase for the previous year, although not as strong as we
expected. This year, all markets including Russia look promising. The
investments we have made and the reorganization that has been carried out have
made Reka Cables ready to cope with significantly growing production volumes.
The Single Family Housing business also supports a vibrant market in Finland
and Sweden, together with energy requirement changes. We also believe in strong
growth of exports to the Baltic countries and Russia. Refocusing Finndomo's
activities as well as new products give rise to positive expectations for the
current year.
NEW NAME
Neomarkka has transformed in accordance to its strategy as an industrial group
of companies, resulting in the board's proposal of the company's new name - Neo
Industrial. The Extraordinary General Meeting on 13.10.2010 approved the
proposal of the name change. The new name was registered on 25.10.2010.
NEW SEGMENTS
Neo Industrial Plc made investments in 2010, establishing two new financial
reporting segments alongside the Group's cable business, the Single Family
Housing business in May 2010 and the Fire- Retardant Fiber business in
September 2010.
Since the Single Family Housing segment, Finndomo, is an affiliated company, it
is taken into account on the income statement line - Share of the result of
associates. The line contains Neo Industrial's portion of Finndom's IFRS
modified May-December net profit and the associated acquisition allocation
entries. Finndomo net sales and operating profit are not included Neo
Industrial's net sales and profit figures. Since Single Family Housing is
however a new segment, Finndomo is covered in more detail than just the income
statement.
The Fire-Retardant Fiber business name was changed in early 2011 to reflect the
segment's operations better. The segment is now called Viscose Fibers. The name
change does not affect the scope of the segment reporting.
KEY FIGURES
10-12/2010 10-12/200 1-12/2010 1-12/2009
9
Net Sales, EUR millions, of which 23.7 16.4 83.4 69.1
- Cable business 23.7 16.4 83.4 69.1
- Viscose Fibers 0.0 0.0 0.0 0.0
- Other operations and eliminations 0.0 0.0 0.0 0.0
Operating result, EUR million, of -7.2 -2.7 -11.0 -5.4
which
- Cable business -0.3 -2.4 -2.9 -4.1
- Viscose Fibers -6.4 0.0 -6.7 0.0
- Other operations and eliminations -0.5 -0.3 -1.4 -1.3
Operating profit, EUR millions -5.3 -1.4 -10.6 -3.9
Earnings/share, EUR -1.06 -0.25 -1.76 -0.65
Return on investment, % (ROI) -12.7 % -3.0 %
Equity ratio, % 31.7 % 47.4 %
CONSOLIDATED FINANCIAL PERFORMANCE IN 2010
Neo Industrial Group's net sales in 2010 were EUR 83.4 (69.1) million. The
full-year result was a loss of EUR -10.6 (-3.9)million. The main reason for the
negative result was the establishment of Viscose Fiber business, namely the
Avilon plant start-up and the delay in start-up from December to the beginning
of January. A total of EUR 6.7 million non-recurring start-up costs heavily
burdened the Group's performance. The beginning of 2010 remained difficult for
the Cable business and the Group's operating loss of EUR 2.9 million was the
Cable business.
SEGMENTS
Cable
The Cable business sales grew in 2010. The industry's net sales in 2010 was EUR
83.4 (69.1) million, an increase of 21% and EUR 23.7 (16.4) million in
October-December, an increase of 45%. Operating income for the full year was
negative, EUR 2.9 (-4.1) million. The business operating income in
October-December was EUR -0.3 (-2.4) million. The year as a whole was difficult
for the cable business, although the cable market rebounded after the quiet
beginning to the year and the business profitability improved in the third
quarter.
The breakdown of testing machinery at the Riihimäki factory in June
significantly affected both sales and profitability. In practice, damages from
the breakdown, which lasted from June to October, is estimated at EUR 3.1
million, of which EUR 2.1 million is entered in the business's July-September
results taking into account interruption insurance. The procedure regarding the
insurance claim was still ongoing at the end of the year.
During the year, the Cable business also had an 0.8 million euro cost from
production restructuring in Finland.
The Finnish cable market, in particular, suffered early in the downturn caused
by the slow pace of construction and lack of industrial projects. Reka Cables
continued cost-cutting and streamlining measures introduced the previous year.
Personnel negotiations for all the factories in Finland were concluded in
summer of 2010 resulting in layoffs and redundancies of 15 employees. Demand
for cable used in construction picked up in the second half when the electrical
wholesale market also grew.
Other Nordic country cable markets improved towards the end of 2010 compared to
previous years. The Russia cable market also picked up as well as in the Baltic
countries of Estonia and Lithuania. Reka Cables' sales in Russia increased from
the previous year, although the testing machinery breakdown in Riihimäki
affected deliveries from Finland to Russia. Restructuring of Russian operations
during the period focused on centralized administration of two manufacturing
plants located in Podolsk. The Russian associated company, Expocable, whose
sales were at a good level during the year, produces special cables for the oil
and gas industry as well as nuclear power plants.
Raw material prices were a significant additional challenge for Reka Cables, as
aluminum and copper prices in particular rose sharply. Copper prices rose to an
all-time high at the end of the year and its availability is sometimes
challenging. Reka Cables strives to manage the situation with safeguards and
good working capital management. Fierce competition made it difficult to pass
the sharp price increases of metals and plastics on in product pricing in 2010.
Reka Cables strengths are value, flexible delivery and good customer service.
Adapting to the increase in the price of copper particularly affected the Reka
Cables factory in Keuruu, where installation cable products are about 90%
copper-based. In 2010, in order to improve its service, Reka Cables moved
copper wire drawing operations from Hyvinkää to Keuruu, where the wire-drawing
process is an integral part of the installation cable manufacturing. The Keuruu
factory was expanded for wire-drawing equipment and manufacturing with the new
process started successfully in March. The Keuruu plant will now serve the
growing construction industry needs more efficiently. At the end of the year,
Reka Cables began a project to transfer an aluminum wire drawing operation in
Hyvinkää from one factory to another as well as to Riihimäki. This production
restructuring will be completed in winter 2011, which will incur an estimated
EUR 0.3 million in expenses during the first quarter of 2011.
The Cable business faced reassessment with regard to its Russian activities in
2010 as Russia decided to abolish the duty-free status of metals. Part of the
Russian factories' raw materials have been imported for processing in Finland
and exported back to Russia for finishing. With the abolishment of the
duty-free status, the cable business model in Russia is likely to change this
year.
Reka Cables' Hyvinkää and Keuruu factory capacities were effectively utilized
from summer onwards. Medium and high voltage cable manufacturing suffered from
the machine breakdown in June until Riihimäki delivery capacity was restored in
mid-October. The Riihimäki factory delivery accuracy improved however, at the
end of the year. Neo Industrial invested in the Riihimäki factory expansion in
2008 and the modern factory's capacity and ability to serve the fast-growing
market are excellent.
At affiliated company, Nestor Cables Ltd, manufacturer of telecommunications
and fiber optic cables, net sales grew sharply during the year by 45 percent,
to 29.0 (19.9) million. Nestor's profit for the period remained negative.
Profitability was burdened by an exceptionally snowy winter leading to a weak
fourth quarter coupled with the company's product development investments. A
strong increase in the price of the raw material used in polymers has also not
been fully transferred to product prices.
Viscose Fibers
Neo Industrial established a new Viscose Fibers segment in September 2010. This
stemmed from the acquisition in 2008 of the bankrupted Kuitu Finland Ltd's
Valkeakoski factory in Finland. The EUR 10 million purchase price included
lease factory buildings with lease agreements, movable property and
intellectual property rights.
Under the brand name of Avilon Ltd, the company's operations began in the fall
of 2010. Personnel are largely experienced former staff and at the end of the
year numbered 135 persons. In addition, the factory employs some 80 subcontract
employees.
Avilon manufactures both standard and fire retardant viscose fiber. Fire
retardant fibers have a growing need in homes, offices and transportation.
Ordinary viscose fiber is mainly sold to China, whereas most of the fire
retardant fiber finds its main market in the United States.
The Avilon factory was scheduled to begin in December, but the ramp-up was
rescheduled because of availability problems of the main raw material,
dissolving pulp.
Avilon's current capacity is approximately 30,000 tons of fiber per year. The
Valkeakoski factory now runs on a single line and as demand grows, Avilon can
start another existing line at a reasonable investment cost. Based on the
plant's previous operation and Neo Industrial's own estimates, Avilon can
achieve roughly EUR 80 million net sales with a single production line in 2011.
The launching costs of Viscose Fibers business are entered as expenses. By the
end of the year the launching expenses as well as the costs of moving the
launching to January 2011 totaled 6.0 million, and the segment's operating loss
was EUR 6.7 million. The costs were mainly related to the fourth quarter. Some
costs related to the ramp-up of the business can be expected to also affect
2011.
Single Family Housing
In April 2010, Neo Industrial invested in a 30% holding of single family
housing producer, Finndomo Ltd. Finndomo is the leading Nordic manufacturer of
wooden houses. Its brands in Finland are FinndomoKoti, Omatalo and Kotitalo, in
Sweden, Hjältevadshus and Modulenthus.
Finndomo sales from May to December were EUR 93.0 (72.6) million, an increase
of 28.2%, and from October to December, EUR 39.6 (30.1) million, an increase of
31.5%. Despite the increase in turnover Finndomo's-year return was a loss due
to the high cost structure. Neo Industrial's share of the company's
May-December loss was EUR 1.3 million. The Finndomo loss however, decreased
from the previous year. The company has stepped up operations and has reduced
fixed costs, but the impact of some of the measures will not appear until 2011.
Finndomo will further continue to strengthen its operations.
The revival in the single family housing market is seen in the number of orders
received by Finndomo, especially in Finland, the company's market share also
rose slightly. The company's market share also increased in Sweden. In consumer
sales, Finndomo is also Finland's leading supplier in regional construction
projects. In the summer of 2010, Finndomo began first construction and sales in
the Myllykylä project. Homes in the Helsinki suburb of Myllypuro will total 125
units, of which the first 13 homes were completed in the fourth quarter.
The Finndomo Hartola and Sonkajärvi house factories' capacity was fully
utilized during the year under review. In Sweden, one of three factories was
closed until further notice, and in the Hjältevad and Hässleholm factories
production optimization measures were taken, which enabled traditional house
production to be concentrated in Hjältevad and other houses manufactured in
Hässleholm.
In some prefabricated houses, Finndomo uses a machine drying solution in the
house base, the functioning of which was the publicly questioned in the autumn
of 2010. In this context, there was fear of a mold problem in a few Finndomo
ready house deliveries. Finndomo offered customers expert assistance to check
the condition of the house base. Checks were still pending at the end of the
year, and Finndomo will disseminate the results as they are ready.
OTHER EVENTS DURING THE PERIOD
In April, Neo Industrial invested in a 30% share of single family housing
manufacturer Finndomo, which became the group's Single Family Housing business
segment.
In April, Neo Industrial announced the start of personnel negotiations in its
subsidiary Reka Cables. Codetermination negotiations started on 9 April 2010
and ended on 24 May 2010 with layoffs and 15 redundancies. Reka Cables adjusted
its business to the weaker market conditions.
In June, Neo Industrial announced negotiations into the possibility of
investing in the specialty fiber business. In July, a letter of intent was made
and creditors of Kuitu Finland accepted it in August. On 9 September 2010, Neo
Industrial acquired the Kuitu Finland production facilities including premises,
furnishings and leases for a purchase price of EUR 10 million, and began to
launch operational activities and production under the name Avilon Ltd.
In August, Neo Industrial announced the change of Managing Director of its
subsidiary Reka Cables. The Managing Director Markku E Rentto of Neo Industrial
included the Managing Directorate of Reka Cables to his present duties from 1
September 2010. The Managing Director, Jorma Leskinen, retired at the end of
2010. Neo Industrial intends to recruit a new Managing Director for Reka Cables
during 2011.
Neomarkka changed its name to Neo Industrial in October. The new name, approved
by the extraordinary shareholders meeting of18 October 2010, reflects better
the company transformation to an industrial conglomerate.
In November, the company announced a delay in Avilon production start-up.
Start-up would have been possible as early as December 2010, but because
availability of the main raw material, dissolving pulp, could not be verified
the start was moved to January 2011.
EVENTS AFTER THE PERIOD
Avilon Ltd started production on 13 January 2011 when dissolving pulp
deliveries had been secured. The first batch of viscose fibers for a Chinese
customer was completed in the middle of January 2011. Additional dissolving
pulp capacity is under construction, for instance in Sweden and Canada, so raw
material availability will improve this year. Neo Industrial announced the
delay on 18 November 2010 and the start-up on 12 January 2011. At the end of
January Avilon agreed sales for production to date. The first orders amount to
a total of EUR 2.7 million. Neo Industrial announced this on 25 January 2011.
In January 2011, Avilon began testing licensed technology, from the Technical
Research Centre of Finland, which replaces carbon disulphide necessary in the
viscose fiber production process. Neo Industrial announced this on 19 January
2011.
In January 2011, Finndomo in Sweden combined brand names to a single umbrella
brand, FinndomoHem. Two Swedish sales and marketing organizations were cost
merged into one organization supporting three product families.
In February, Avilon reached an agreement with Finnish conglomerate, Berner, to
supply sodium sulfate. The sale of sodium suplhate, a byproduct of the viscose
process, brings Avilon about EUR 1.0 million in additional revenue each year
the plant is running a single line. Neo Industrial announced this on 9 February
2011.
FINANCIAL STATEMENT 2010
The consolidated financial statements have been prepared to international
financial reporting standards (IFRS). Consolidated net sales (IFRS) for the
year end was EUR 83.4 (69.1) million. Consolidated income statement (IFRS)
shows a loss of EUR 10.6 (-3.9) million.
CONSOLIDATED FINANCIAL STATUS AND PERFORMANCE INDICATORS (IFRS)
2010 2009 2008
Net Sales, EUR millions 83.4 69.1 116.6
Operating profit, % net sales -13.2 -7.8 -1.3
Share of the result of associates, MEUR -1.3 -0.2 -0.8
Return on equity, % neg. neg. neg.
Return on capital employed, % neg. neg. neg.
Equity ratio, % 31.7 47.4 47.8
Earnings/share, EUR -1.76 -0.65 -0.84
SHARE PRICE AND TRADING VOLUME
The company's B series shares traded on the NASDAQ OMX Helsinki in 2010, a
total of 381,127 (278,431) shares, corresponding to 6.3 percent (4.7%) of the
number of all shares and EUR 2.5 (1.6) million. The closing price on 30
December 2010 was EUR 5.60 (6.85) and the period average share price was EUR
6.32. The lowest quotation during the period was EUR 5.40 (4.45) and the
highest was EUR 8.20 (6.85). On 30 December 2010 the value of all company
shares according to the share price was EUR 33.3 (40.7) million.
GROUP STRUCTURE AND SHAREHOLDERS
Neo Industrial PLC is the parent company of the group, which includes the Neo
Industrial wholly owned subsidiaries Novalis PLC, Alnus Carbatec Ltd. and its
subsidiaries and associated companies. The domicile of the parent company is
Hyvinkää. Carbatec Ltd is Avilon Ltd's parent company.
On 31 December 2010, Neo Industrial had 12,453 shareholders. The company's
largest shareholder, Reka Ltd, held 50.76% of shares and 65.77% of votes. Neo
Industrial PLC is part of the Reka Group. Reka Ltd is domiciled in Hyvinkää.
At the end of the year, the combined holding of the ten largest shareholders
was 61.4% of the shares and 73.1% of the votes. On 31 December 2010, Members of
the Board, CEO and CFO directly owned and controlled a total of 2,957,017 Neo
Industrial B series shares.
SHARES AND SHARE CAPITAL
Neo Industrial corporation's share capital is divided into A and B shares. The
total share capital including all shares stood at EUR 24,082,000 at the end of
2010 and the number of shares was 6,020,360. The number of shares includes
92,727 Neo Industrial B shares. The holding represents 1.5% of the company's
share capital and 1.1% of the votes. The company held no A-shares. Neo
Industrial Corporation B-shares (NEO1V) are listed on the NASDAQ OMX Helsinki
Stock Exchange's Main List.
Company shares 31.12.2010 31.12.2009 31.12.2008
Company share capital (EUR) 24,082,000 24,082,000 24,082,000
A shares (20 votes/share) B shares (1 139,600 139,600 139,600
vote/share)
B shares (1 vote/share) 5,880,760 5,880,760 5,880,760
Total 6,020 360 6,020,360 6,020,360
B shares held by the company 92,727 61,407 0
PURCHASING OF OWN SHARES
Neo Industrial obtained authorization to purchase its own shares at the Annual
General Meeting (10 June 2009 and 9 June 2010) Company's own shares. Company
shares were acquired during the year to total of 31,320 B-shares at cost 217,
319.65 euros. The value of the acquired shares at the closing price on 31
December 2010 was 175,392 euros. On 31 December 2010, the company's own holding
of B series shares amounted to a total of 92,727 shares.
RESEARCH AND DEVELOPMENT
The Group's investments in research and product development were EUR 0.3 (0.4)
million. In accounting, these investments in the Cable business are recognized
as expenses.
PERSONNEL
During the fiscal period, the Group employed an average number of 539 (484)
persons. At the end of 2010, the Group had 614 (502) employees, of which 476
(499) were in the Cable business, 135 in Viscose Fibers, and three in corporate
administration. The total sum of the Group's performance-based salaries and
fees paid during the period was EUR 12.8 (12.4) million.
ENVIRONMENT
Since Neo Industrial is an industrial group, environmental issues are key
concerns in all businesses. Caring for the environment and the continuous
improvement of environmental well-being are part of Reka Cables' daily
operations. Reka Cables' environmental management system is certified to the
ISO 14001 standard.
Avilon started production under the terms of the factory's previous
environmental permits. In accordance with the normal application procedure, the
company applied under its own name for new environmental permits in December
2010. Avilon is also preparing renewal of Kuitu Finland Ltd's previously
received ISO 14001 - and ISO 9001 certifications under the Avilon name.
CORPORATE GOVERNANCE
Neo Industrial Plc publishes its financial statements together with its
corporate governance statement, prepared in accordance with the recommendation
51 of the Finnish Corporate Governance Code. The statement has been issued as a
separate report and the Group's Audit Committee has reviewed the statement.
Furthermore, the statement is available on Neo Industrial's website at
www.neoindustrial.fi.
The Annual General Meeting on 9 June 2010 confirmed the number of Board members
is six (6) and re-appointed the following members to the Board of Directors:
Matti Lainema (Chairman), Pekka Soini (Deputy Chairman), and as members, Ilpo
Helander, Risto Kyhälä, Matti Lappalainen and Taisto Riski. Deputy members were
not selected. Neo Industrials audit committee members are Taisto Riski, Pekka
Soini and Ilpo Helander.
The Annual General Meeting elected Authorized Public Accountants Ernst & Young
Oy, with Authorized Public Accountant Heikki Ilkka as responsible auditor of
the company.
Separate information on the decisions and authority of the Annual General
Meeting were issued on 9 June 2010. The company arranged an Extraordinary
General Meeting 13 January 2010 and issued a separate announcement of the
decisions that took place.
RISKS AND UNCERTAINTY FACTORS
Neo Industrials main financial risks are currency, interest rate, commodity,
liquidity, credit and investment market risks. Financial risks and protection
measures are described in more detail in the financial statements. The
company's future risk factors are related to the business development of the
portfolio companies.
The Group's liquidity situation is tight. Previously promised funding,
connected to the decision on Avilon's acquisition and start-up, has not
materialized within the agreed timetable. In addition, it has not been possible
to take up part of Avilon Ltd's financing solution because the related loan
guarantee by the municipality is still pending. The market price of the Viscose
Fiber business's main raw material, dissolving pulp, rose almost vertically at
the end of the year and remains at a high level. The Cable business liquidity
is particularly tight due to copper price increases.
The financial statements are prepared on the assumption that the entity is a
going concern. Business continuity requires that the company is capable of
obtaining additional financing and negotiating changes to payment terms during
the year 2011. Negotiations with financiers, suppliers and customers are
already underway and the company's management is confident in a successful
outcome. If the company does not succeed in arranging the financing, it is
possible that the company's business operations are reorganized.
The Cable business's most significant risks are related to market development
as well as raw material prices and currency fluctuations. Elevated metals
prices and strong volume growth will increase working capital needs required
for operational activities. This, together with strong seasonal fluctuations
bring pressure to liquidity management. Reka Cables' Riihimäki testing
equipment failure caused the company a reputation risk, which the company is
trying to control by bringing the flexibility of production back to normal and
ensuring good customer service.
For the Single Family Housing business, the main risks of the industry are
demand and competitor development, production capacity and utilization level,
raw material price fluctuations and success of the restructuring.
Viscose Fibers is a new business that is subject to the risks associated with
any business start-up. The main risks of the sector are market and competitor
development, currency fluctuations and raw material price fluctuations and
availability. The most important raw material is dissolving pulp.
In 2009, Audit Committee was focusing on risks on business operations in Russia
by initiating a risk assessment. The results of the assessment was utilized in
2010 when drafting the audit plan for internal audit.
The company believes in growth and development in the Russian cable markets and
has invested substantially in Russia's business opportunities. These
investments include a risk that the growth in Russia will not materialize as
expected.
NEAR-TERM OUTLOOK
Although results for the first quarter of 2011 are negative due to the cable
business seasonality and Avilon start up expenses, the Group's earnings outlook
for 2011 is positive.
Cable industry market conditions and profitability improved at the end of 2010.
Additionally, significant non-recurring expenses caused by production
reorganization have been largely exhausted. Cable business results are expected
to rise in 2011 to be positive.
Viscose Fiber manufacturing was successfully launched at the beginning of the
year. If the whole production from the started line can be sold, net sales will
be reach approximately EUR 80 million. As the bulk of production start-up
investments were made in 2010, the business result is expected to turn
profitable towards the end of the year.
The market situation for the Single Family Housing business sector is expected
to continue to develop favorably. Finndomo's Finnish business operating margin
was positive for the second half of 2010 and restructuring has proceeded well.
Restructuring of Swedish operations will be intensified in the near future.
Finndomo profitability is expected to improve in 2011.
As net sales are doubled in the beginning, liquidity is critical at the
beginning of the year and requires special attention throughout the year. In
order to ensure liquidity and to allow strong growth, in addition to the
financing and payment term negotiations, actions will be taken to boost
inventory turnover and free up capital assets.
DIVIDEND POLICY AND PROPOSAL FOR DISPOSAL OF PROFITS
Neo Industrial's aim is to use at least 30% of net earnings for dividend
payouts. The parent company's distributable funds at the end of 2010 are EUR
28,488,037.34, of which profit for the period is EUR 160,415.38. The Board
proposes to the Annual General Meeting of 30.3.2011, that authorization be
granted to the Board to decide upon dividend payment of a maximum of EUR 0.25
per share.
In 2009 the company paid a dividend of EUR 0.25 per share, totaling EUR 1.5
million.
ANNUAL GENERAL MEETING
Neo Industrial Plc's Annual General Meeting will be held on 30 March, 2011, at
1 pm in Helsinki. A separate invitation to the Annual General Meeting will be
published later on.
Helsinki, 17 February 2011
Neo Industrial Plc
Board of Directors
For further information please contact:
Markku E. Rentto, Managing Director, tel: +358 20 720 9191
Sari Tulander, Chief Financial Officer, tel: + 358 20 720 9192
www.neoindustrial.fi
Neo Industrial Plc'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 B
shares are listed on the NASDAQ OMX Helsinki Stock Exchange.
CONSOLIDATED INCOME STATEMENT (IFRS)
Eur 1,000 1/1 - 1/1 -
31/12/2010 31/12/2009
Net sales 83,421 69,095
Change in inventories of finished products and -3,209 2,733
production in progres
Production for own use 52 72
Materials and services -59,173 -45,464
Personnel expenses -14,897 -14,835
Depreciation and impairment -4,909 -4,748
Other operating income and expenses -10,849 -12,270
-94,460 -74,514
Operating loss -11,040 -5,419
Financial income 2,340 3,078
Financial expenses -2,734 -1,621
Share of the result of associates -1,332 -202
Profit or loss before taxes -12,765 -4,163
Taxes 2,175 269
Profit or loss for the financial year -10 591 -3,894
Profit or loss attributable to:
Equity holders of the parent -10,416 -3,872
Minority interests -175 -22 -10,591 -3,894
Earnings per share attributable to the
shareholders
of the parent after and before dilution, EUR -1,76 -0,65
Number of shares 5,926,793 5,958,953
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit -10,591 -3,894
Other comprehensive income items
Translation difference related to international 977 -389
units
Total 977 -389
31/12/2010 31/12/2009
Total comprehensive income -9,614 -4,283
Total comprehensive income attributable to
Shareholders of the parent company -9,450 -4,202
Minority interests -164 -81
-9,614 -4,283
CONSOLIDATED BALANCE SHEET (IFRS)
EUR 1,000 31/12/2010 31/12/2009
ASSETS
Non-current assets
Goodwill 3,624 3,520
Other intangible assets 7,765 6,794
Tangible assets 43,719 32,978
Holdings in associates 4,668 0
Receivables 1 0
Derivative contracts 66 55
Deferred tax assets 3 ,040 909
Total non-current assets 62,883 44,257
Current assets
Inventories 17,529 21,085
Available-for-sale financial assets 0 3,733
Sales receivables and other receivables 19,880 15,431
Tax receivables from the profit 17 131
Derivative contracts 1,174 1,170
Other financial assets 2,894 7,016
Cash and cash equivalents 2,734 3,000
Total current assets 44,229 51,566
Total assets 107,112 95,823
SHAREHOLDERS' EQUITY AND LIABILITIES
EUR 1,000 31/12/2010 31/12/2009
Shareholders' equity
Share capital 24,082 24,082
Premium fund 66 66
Reserve fund 1,221 1,221
Own shares -599 -381
Translation differences -1 239 -2,013
Retained profit -11,492 -309
Other unrestricted equity 21,327 21,327
Equity attributable to shareholders of the parent 33,366 43,992
company
Minority interest 593 1,445
Total shareholders' equity 33,939 45,437
Non-current liabilities
Deferred tax liabilities 4,047 4,012
Provisions 839 650
Interest-bearing liabilities 25,905 18,472
Non-interest-bearing liabilities 1,584 0
Derivative contracts
Current liabilities
Tax liabilities from the profit 24 46
Reserves 0 176
Short-term interest-bearing liabilities 16,314 10,432
Derivative contracts 0 32
Accounts payable and other liabilities 24,459 16,568
Total liabilities 73,172 50,386
Shareholders' equity and liabilities 107,112 95,823
BALANCING ACCOUNT OF SHAREHOLDERS EQUITY (IFRS)
A B C D E F G H I J
EUR
1,000
--------------------------------------------------------------------------------
Shareh 24,082 66 1,221 0 -1,683 21,327 5,067 50,080 1,526 51,606
olders
'
equity
31/12/
2008
Transl -330 -330 -59 -390
ation
differ
ence
Profit -3,872 -3,872 -3,872
for
the
financ
ial
year
Divide -1,504 -1,504 -1,504
nds
paid
Purcha -381 -381 -381
se of
own
shares
Minori 0 -22 -22
ty
intere
st
Shareh 24,082 66 1,221 -381 -2,013 21,327 -308 43,993 1,444 45,437
olders
equity
31/12/
2009
A B C D E F G H I J
EUR
1,000
--------------------------------------------------------------------------------
Shareh 24,082 66 1,221 -381 -2,013 21,327 -308 43,993 1,444 45,437
olders
'
equity
31/12/
2009
Transl 1,153 1,153 1,153
ation
differ
ence
Profit -9,974 -9,974 -189 -10,162
for
the
financ
ial
year
Divide -1,483 -1,483 -1,483
nds
paid
Purcha -218 -218 -218
se of
own
shares
Minori -41 -41 41 0
ty
intere
st
Shareh 24,082 66 1,221 -599 -860 21,327 -11,807 33,429 1,297 34,726
olders
equity
31/12/
2010
Letter code explanations:
A Share capital
B Premium fund
C Reserve fund
D Own shares
E Translation differences
F Other unrestricted equity
G Retained profit
H Total
I Minority interest
J Total shareholders' equity
CONSOLIDATED CASH FLOW STATEMENT (IFRS)
1 000 euros 1/1 - 1/1 -
31/12/2010 31/12/2009
--------------------------------------------------------------------------------
Cash flows from operating activities
Payments received from operating activities 79,573 73,956
Payments received from operating activities -77,405 -75,726
Paid interests and other financial expenses -1,164 -2,109
Interest received and other financial incomes 415 779
Direct taxes paid 59 1,408
Net cash provided by operating activities 1,478 -1,691
Cash flows from investing activities
Change in purchase price of subsidiary shares 0 1,200
Investments in associates -6,000 0
Investments in tangible assets -7,271 -3,566
Investments in intangible assets - 178 -2
Sales of intangible assets 0 0
Proceeds from sale of other investments 3,679 0
Cash withdrawals and cash equivalents 7,443 0
Investments in other financial assets -3,000 -7,016
Loans granted -309 -2,000
Net cash provided by investing activities -5,636 -11,385
Cash flows from financing activities
Acquisition of own shares -217 -381
Increase in loans 8,091 0
Decrease in loans -1 877 -3,479
Payment of finance lease activities -719 -749
Dividends paid -1,483 -1,678
Net cash provided by financing activities 3,794 -6,287
Change in cash and cash equivalent -364 -19,363
Cash and cash equivalents at the beginning of 3,000 22,382
period
Exchange rate differences 98 -19
Changes of fair value in investments
Cash and cash equivalents at the end of period 2 ,734 3,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Neo Industrial PLC is the parent company in a Group consisting of Neo
Industrial's fully owned subsidiaries Novalis Plc, Alnus Ltd and Carbatec Ltd
and their subsidiaries. The domicile of the parent company is Hyvinkää. Neo
Industrial PLC's address is Aleksanterinkatu 48 A, FI-00100 Helsinki, Finland.
Neo Industrial Plc's B shares are listed on NASDAQ OMX Helsinki.
Neo Industrial Group is part of Reka Group. The parent company of Reka Group is
Reka Ltd, domiciled in Hyvinkää. Reka Ltd's address is Niinistönkatu 8 - 12,
FI-05800 Hyvinkää, Finland.
Neo Industrial Group has three segments: Cable businee, Viscose Fibers and
Single Family Housing. As the share of investments in securities has decreased
considerably it is no longer reported as a separate segment from 1 January 2009
onwards. The remaining investments are included in other operations.
Neo Industrial Group operates, in addition to Finland, in Russia, Sweden, the
Baltic countries, Denmark and Norway.
ACCOUNTING POLICIES OF THE CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with the
International Financial Reporting Standards (IFRS), in compliance with the IAS
and IFRS standards as well as SIC and IFRIC interpretations effective on 31
December 2009. International Financial Reporting Standards stands for standards
and their interpretations enacted in the Finnish Accounting Act and in
regulations passed by the force of the Act, which have been approved by the
European Union in accordance with EC Regulation.The notes of the consolidated
financial statements also comply with Finnish accounting and companies'
legislation that supplement IFRS regulations.
The consolidated financial statements have been prepared based on original cost
except for the following assets that have been measured at fair value:
derivative contracts, liquid assets, other financial assets and tangible and
intangible assets measured at fair value in the calculation of the acquisition
cost of Reka Cables Ltd (2007), OAO Expokabel (2008) and Finndomo Ltd (2010)
under IFRS 3.
The financial statements review is unaudited.
SEGMENT INFORMATION
According to the new IFRS 8 standard, the reporting is based on management's
internal reporting. The accounting principles did not change but assets and
liabilities have been more accurately allocated. Distribution of turnover by
product group and sales area is presented as complementary information.
2010 Cable Viscose Single Family Eliminations and Group
business Fibers House Industry other opeartions total
EUR 1,000
Turnover 83,434 0 83,434
Segment's -2,939 -6,734 -9,673
operating profit
Unallocated -1,366 -1,366
items
Operating profit 0 -1,366 -11,040
Share of the 0 -1,332 -1,332
result of
associates
Unallocated 1,780 1,780
items
Profit or loss -10,591
for the period
Assets
Segment's assets 81,573 15,300 4,668 101,542
Unallocated 5,570 5,570
items
Total assets 81,573 15,300 4,668 5,570 107,112
Liabilities
Segment's 57,648 16,822 74,469
liabilities
Unallocated 0 -1,296 -1,296
items
Total 57,648 16,822 0 -1,296 73,173
liabilities
Assets - 23,926 4,668 6,867 33,939
liabilities
Investments 1,507 13,684 0 50 15,241
Depreciations -4,841 0 0 -68 -4,909
2009 Cable Viscose Single Family Eliminations and Group
business Fibers House Industry other operation total
--------------------------------------------------------------------------------
EUR 1,000
--------------------------------------------------------------------------------
Turnover 69,095 0 0 69,095
--------------------------------------------------------------------------------
Segment's -4,110 -4,110
operating profit
--------------------------------------------------------------------------------
Unallocated 0 -1,309 -1,309
items
--------------------------------------------------------------------------------
Operating profit 0 -1,309 -5,419
--------------------------------------------------------------------------------
Share of the -202 -202
result of
associates
--------------------------------------------------------------------------------
Unallocated 1,726 1,726
items
--------------------------------------------------------------------------------
Profit or loss -3,894
for the period
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Segment's assets 84,340 84,340
--------------------------------------------------------------------------------
Unallocated 11,482 11,482
items
--------------------------------------------------------------------------------
Total assets 84,340 0 11,482 95,823
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Liabilities
--------------------------------------------------------------------------------
Segment's 59,421 59,421
liabilities
--------------------------------------------------------------------------------
Unallocated 0 -9,036 -9,036
items
--------------------------------------------------------------------------------
Total 59,421 0 -9,036 50,385
liabilities
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Assets - 24,919 0 20,518 45,437
liabilities
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Investments 3,915 0 0 3,915
--------------------------------------------------------------------------------
Depreciations -4,747 0 -1 -4,748
--------------------------------------------------------------------------------
Cable business turnover per product group 1-12/2010 1-12/2009
LV energy 28.2 28.3
Power cable 55.2 40.8
Total 83.4 69.1
Cable business turnover per sales area 1-12/2010 1-12/2009
EU-countries 65.5 58.8
Non-EU-countries 17.9 10.3
Total 83.4 69.1
ACQUIRED BUSINESSES
In April Neo Industrial invested on 30% share of prefabricated small house
manufacturer Finndomo Ltd. Below is the purchase price allocation calculation.
Possible table in table detected.
Object reference not set to an instance of an object.
LIABILITIES AND DERIVATIVE CONTRACTS
1 000 euros Positive Negavtive Current Current Nominal Nominal
current current net net values values
values values values values 2010 2009
2010 2009
--------------------------------------------------------------------------------
Interest
rate
derivatives
Interest 0 0 0 0 0 9,800
rate ceiling
options
Currency
derivatives
Forward 0 -26 -26 -32 1, 545 1,500
exchange
agreements
Option 0 0 0 0 0 0
contracts
Credit
derivatives
Credit risk 0 0 0 78 0 10,000
swaps
Raw material
options
Metal 1,240 0 1, 240 1,147 4,366 3,406
derivatives
--------------------------------------------------------------------------------
Total 1,240
derivatives
Long-term
derivatives
deducted
Metal 66
derivatives
Short-term 1,174
share
OTHER LIABILITIES
1 000 euros 31.12.2010 31.12.2009
----------------------------------------------------------
Debts with corporate mortgages
Loans from financial institutions 10,520 6,489
Granted corporate mortgages 21,820 15,000
Debts with securities or guarantees
Loans from financial institutions 13,533 10,767
Other collaterals 5,400 0
Book value of pledged securities 25,712 25,787
Pledges given 18,933 10,767
Other collaterals
Guarantees and payment commitments 3,173 1,058
Deposits 2,894 0
Real-estate mortgages 3,000 0
Reka Cables Ltd has granted a promissory note for the raw material purchases of
its subsidiary ZAO Reka Cables. The promissory note is included in the above
figures.
The guarantee for the factoring credit is the accounts receivable in question,
which on December 31, 2010 amounted to EUR 6.0 million (EUR 3.6 million on
December 31, 2008). The factoring credit amounted to EUR 3.6 million on
December 31, 2009 (EUR 3.2 million on December 31, 2009).
The above mentioned loans from credit institutions include covenants and terms.
The main terms are:
- Neo Industrial Group's holding in the companies taking out the loans cannot
drop below 100% without the financer's agreement.
- Internal financing (subordinated loan EUR 13.6 million) provided by Neo
Industrial Group can only be repaid once the above-mentioned loans have been
repaid.
- Reka Cables' adjusted equity ratio must be at least 16% in the 2010 financial
statements and 20% after this.
- Turnover + depreciation must be at the agreed sub-group level of at least EUR
1.6 million in the 2010 financial statements.
In the above Viscose Fiber activities are Avilon Ltd's financial institution
loans and bank guarantees with covenants and conditions. The main conditions
are:
- Neo-Industrial Group's shareholding (share of votes) in Carbatec Ltd must be
at least 51% and Carbatec Oy's ownership of Avilon Ltd will be 100%. The
above-mentioned structure of ownership shall not be altered without the prior
consent of the creditors.
- The agreed level of operating margin / net financial expenses should be at
least 4, and the equity ratio at least 25%.
- Dividends distribution and use of equity is constrained and business is
ongoing (sale, transfer, merger tmv prohibition).
Financial Lease liabilities are disclosed in note 24 and other lease
liabilities are disclosed in note 29.
Capital commitments
Investment commitments for tangible fixed assets on 31 December 2010 amounted
to EUR 0.4 (0.4) million.
RELATED PARTY TRANSACTIONS
Neo Industrial Plc and therefore Neo Industrial Group belongs to Reka Group.
Reka Ltd had a 50.76% (50.76%) holding of shares and 60.77% (60.77%) of votes.
TRANSACTIONS WITH REKA-GROUP
EUR 1,000 1-12/2010 1-12/2009
Sales 15 30
Dividends -764 -764
Acquisition of Reka Cables Ltd 0 1,200
Other purchases -1,516 -1,204
Interest revenues 23 0
Sales receivables and other receivables at end of the 1,467 917
period
Finance leases (activated on the balance sheet) -10,983 -8,488
Other debts at end of the period -1 -3
TRANSACTIONS WITH ASSOCIATES
Sales to Nestor Cables Ltd in year 2010 were 0 euro (44 thousand euros in year
2009) and purchases 0 euro (0 euro in year 2009). Receivables at the end of the
year were 4 thousand euros (4 thousand euros in year 2009). There were no open
debts.
TRANSACTIONS WITH OTHER RELATED PARTIES
EUR 1,000 1-12/2010 1-12/2009
Interest revenues 162 99
Loan receivables 2,000 1,000
Sales receivables and other receivables at end of the 38 9
period
The Managing Director of Neo Industrial has significant controlling power in
SAV Rahoitus Plc.
Other related parties consist of companies that have connection through owner
having significant controlling power. Transactions with other related parties
consist of transactions with SAV Rahoitus Plc. Loan receivables consist of
short-term corporate loans, which have been made in 2009 after comparing
different possibilities to invest cash funds with better revenues than what
could be got with temporal bank deposits. Loans have collaterals.
Management fringe benefits
1 000 euros 2010 2009
---------------------------------------------------------
Salaries and other
short-term employment benefits 392 298
Pension expenses - defined contribution plans 68 51
KEY FIGURES FROM THE INCOME STATEMENT AND BALANCE SHEET
EUR 1,000 2010 2009 2008
Turnover 83,421 69,095 116,647
Operating profit or loss -11,040 -5,419 -1,465
Operating profit or loss % -13.2 -7.8 -1.3
Profit before taxes -12,765 -4,163 -6,012
% of turnover -15.3 -6.0 -5.2
Profit or loss for the financial year -10,591 -3,894 -4,951
Return on equity % (ROE) neg. neg. neg.
Return on investment % (ROI) neg. neg. neg.
Equity ratio, % 31.7 47.4 47.8
Net-debt-equity ratio (Gearing), % 107.8 41.6 20.9
Investments in tangible assets 15,241 3,135 9,313
Number of employees in average 539 484 403
2010 2009 2008
Equity/share, EUR 5.71 7.59 8.57
Earnings/share (EPS), EUR -1.75 -0.65 -0.84
Dividend/share, EUR n.n. 0.25* 0.25
Dividend/earnings, % neg. neg. neg.
Effective dividend yield, % n.n 3.7 4.3
P/E- ratio neg. neg. neg.
Share performance, EUR
- average quotation 6.32 5.76 9.06
- lowest quotation 5.40 4.45 5.31
- highest quotation 8.20 6.85 10.50
- quotation at the end of period 5.60 6.85 5.80
Market capitalisation, EUR 1,000 33,295 40,667 35,373
Trading in shares, no.
B shares 381,127 278,431 408,186
-- % of B shares 6.3 4.6 6.8
Adjusted and weighted average number of shares during the year
6,020,360 6,020,360 6,020,360
A shares 139,600 139,600 139,600
B shares 5,880,760 5,880,760 5,880,760
Adjusted number of shares at the end of period 6,020,360 6,020,360 6,020,360
A shares 139,600 139,600 139,600
B shares 5,880,760 5,880,760 5,880,760
CALCULATION OF KEY FIGURES
Return on = Profit for the period / shareholders' equity (average) x 100
equity (ROE)
%
Return on = Profit before taxes + interest and other financial x 100
investment expenses /[ balance sheet total - obligatory provisions
(ROI) % and non-interest bearing debts] (average)
Equity ratio, = Shareholders' equity + minority interest less deferred x 100
% tax assets / balance sheet total - advances received
Net-debt-equi = Interest bearing-liabilities - cash in hand and at bank x 100
ty ratio and other liquid financial and investment securities /
(Gearing) % shareholders' equity + minority interest
Earnings per = Profit for the review period belonging to parent
share, EUR company owners / number of shares, adjusted for share
issues (average)
Equity per = Shareholders' equity - minority interest less deferred
share, EUR taxes / number of shares adjusted for share issues at
the end of the financial period
Dividend per = Dividend for the financial year / number of shares
share, EUR adjusted for share issues at the end of the financial
period
Dividend/earn = Dividend per share / earnings per share x 100
ings, %
Effective = Dividend per share / closing price at year-end adjusted x 100
dividend for share issues
yield, %
P/E - ratio = Closing price at year-end adjusted for share issues /
Earnings per share
Market = ((Number of series B shares - own B shares) x closing
capitalizatio price at year-end + number of Series A shares x average
n share price
Any statements in the financial statement that do not apply to actual facts are
estimates concerning the future. Such estimates include expectations concerning
market development, growth and profitability, as well as any sentences
containing such words as "believe", "assume", "may", "expect", and other
similar terms. Because such estimates are based on current plans and
assessments, they include risks and uncertainty factors that may result in
actual results deviating clearly from the statements made concerning them.
These factors include: 1) operational preconditions, such as successful
production and generated efficiency benefits, availability of production input
and costs, demand for new products, changes in the availability of financing at
reasonable terms; 2) conditions in the industry, such as the strength for
product demand, the competitive situation, the prevailing and future market
prices for Group products and related price pressure, the financial situation
of the Group's customers and competitors, possible new products launched by
competitors; and 3) the general economic situation, such as economic growth in
the Group's main market areas or changes in exchange rates and interest rate
levels.
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