Kotkamills Group Oyj - Interim report (Q1 and Q3)

Kotkamills Group Oyj: KOTKAMILLS INTERIM REPORT FOR JANUARY - SEPTEMBER 2016

Kotkamills Group Oyj

STOCK EXCHANGE RELEASE

30 November 2016, at 7 pm (CET + 1)







This is a summary of the January - September 2016 interim report. The complete
report is attached to this release and is also available at
www.kotkamills.com/fi/kotkamillsgroup/keyfinancials



KOTKAMILLS INTERIM REPORT
Due to new group structure since March 2015, stopping magazine paper production
in January 2016 and entering into new Consumer Boards business different
quarters (e.g. Q3/2016 versus Q3/2015) are not fully comparable.



July-September 2016 (7-9/2015)

The revenue of continuing operations was MEUR 60,0 (47,3).

The operating profit of continuing operations of EUR -6,0 million (EUR 4,2
million) was effected by the start-up costs of Consumer Boards production.



January-September 2016 (1-9/2015)

The revenue of continuing operations of EUR 160,5 million (EUR 96,4 million)
increased clearly because Q1/2015 does not include business activities of
continuing operations (Kotkamills Group Oyj became the parent company on 24
March 2015, when the Company acquired the entire share capital of Kotkamills
Oy).

The operating profit of continuing operations of EUR -14,3 million (EUR 33,5
million) was clearly lower due to start-up costs of Consumer Boards business and
in Q1 2015 recognized gain, i.e. negative goodwill, of EUR 30,5 million on the
acquisition of Kotkamills Oy.



Events in July-September 2016

The Company utilized the EUR 20 million junior loan facility to complete the
board machine conversion project. The summary of the material terms of the
equity hybrid loan is presented in the listing prospectus available in the
company website.

The conversion project of paper machine 2 to board machine was finalized and the
new consumer board machine BM2 of Kotkamills Oy started production in July.

The shareholders of the Company unanimously resolved to offer by direct issue
both New A and B series shares. Pursuant to the terms of the share issue of the
New A Shares, the holders of series A shares granted in connection with their
participation in the share issue shareholder loans to the company in the
aggregate amount of approximately EUR 13,4 million. The terms of the shareholder
loans are in material respects equivalent to the terms of the existing
shareholder loans.

As a result of the share issue and the utilisation of the new shareholder loans,
the Company obtained financing in the aggregate amount of approximately EUR
15,0 million.

Company's subsidiary Kotkamills Oy signed a contract of approximately MEUR 20
with a Nordic financial institution concerning sale of trade receivables of the
company to the financial institution (on an ongoing, non-recourse basis on
customary market terms). This transaction is expected to reach its full effect
by the end of Q1 2017. Together with in May 2016 informed contract Kotkamills Oy
will obtain aggregate financing of approximately EUR 40 million by sale of trade
receivables.

The last deliveries of the magazine paper were done during the third quarter in
2016.

Demand of Industrial Products segment's products continued to stay at a good
level and delivery volumes improved compared to the previous quarter.

The first deliveries of Consumer Boards took place in the third quarter in 2016.



Key figures

The business of Magazine Papers was classified as a discontinued operation in
January 2016 and thus the net result of the business of Magazine Papers is
presented in the statement of profit or loss under "Profit (loss) from
discontinued operations" separately from continuing operations for all periods
presented.

The Kotkamills Group Oyj became the parent company on 24 March 2015, when the
Company acquired the entire share capital of Kotkamills Oy, thus 1-9/2015
includes only business activities of 4-9/15 of continuing operations. The Group
recognized a gain, i.e. negative goodwill, of EUR 30,5 million on the
acquisition of Kotkamills Oy. The gain has been recognized in the other
operating income in Q1 2015.



 (IFRS)                           7-9/2016 7-9/2015 1-9/2016 1-9/2015 1-12/2015

 Continuing operations

 Revenue, EUR million             60,0     47,3     160,5    96,4     146,4

 EBITDA, EUR million              -3,0     5,5      -8,4     36,1     46,0

 Operating profit, EUR million    -6,0     4,2      -14,3    33,5     40,9

 Operating profit/ Revenue (%)    -10,1    8,8      -8,9     34,8     27,9



 Group Total

 Return on equity (%)             -58,7    2,3      -106,7   117,3    122,4

 Equity ratio (%)                 4,2      12,8     4,2      12,8     13,1

 Equity ratio, adjusted (%)*      39,7     45,2     39,7     45,2     44,3



 *Equity includes shareholder
 loans




The Group monitors capital using an equity ratio and an adjusted equity ratio
based on the financial covenants, which is total equity added with shareholder
loan and divided by total assets. The Group's policy is to keep the adjusted
equity ratio above 30%. There have been no breaches of the financial covenants
of equity ratio in the current period.



 Events after reporting date

In October, 2016 the Company informed that it has taken steps to improve
liquidity, performance and profitability of its wholly owned subsidiary
Kotkamills Oy by optimising and developing existing operations. As part of such
efforts, the Company initiated a strategic review process concerning Kotkamills
Oy's wholly owned subsidiary L.P. Pacific Films ("LPPF"), a Malaysian limited
liability company, for the purposes of evaluating strategic options with respect
to LPPF, including a potential disposal.

LPPF operates an impregnating plant in Pasir Gudang, Malaysia, focusing on
Imprex® films and core stock. The operations of LPPF are part of the Group's
Industrial Products segment. For the financial year ended 31 December 2015, the
turnover of LPPF was EUR 13.9 million (MYR 60.3 million).

Under the terms and conditions of the Company's EUR 105,000,000 Senior Secured
Callable Bonds 2015/2020 (ISIN: FI4000148705), a disposal of shares in LPPF
would require a consent from the bondholders in accordance with the terms and
conditions of the bonds. At the same time a written procedure was initiated for
the purpose of obtaining such consent for the event that the Company would, as a
result of the ongoing strategic review process, decide on a disposal of the
shares in LPPF.

On November 15, 2016, the Company informed that it has been informed by Nordic
Trustee Oy, acting as the Trustee under the bonds, that the bondholders have
given the requested consent for a disposal of shares in LPPF in accordance with
the terms and conditions of the bonds.

On November 18, 2016, the Company informed that LPPF's sole shareholder
Kotkamills Oy has on 18 November 2016 signed and completed a share purchase
agreement concerning the sale and purchase of all issued and outstanding shares
in LPPF to Surfactor Germany GmbH. The ownership to LPPF's shares has been
transferred to Surfactor Germany GmbH with immediate effect.

The enterprise value (on a debt and cash free basis) of LPPF is EUR 25 million.
The purchase price is subject to a closing accounts adjustment, which is not
expected to be material. The purchase price is paid to Kotkamills Oy in cash.

The disposal improves the Kotkamills Group's cash position and operating profit,
but the Company does not expect it to have significant impact on the Company's
balance sheet.



 Outlook for 2016

The revenue of the fourth quarter is estimated to be lower than in the third
quarter due to seasonal lower demand. The profit for the fourth quarter of 2016
is estimated to improve from the previous quarter although the start-up costs of
the new board machine and Consumer Boards business are estimated to have
negative effect on the profit of the fourth quarter.

Markets of the other continuing operations' businesses are expected to be at the
same level as in the last year, but ongoing uncertain economic situation in
Europe and geopolitical risks may have weakening impact on demand.

Present energy price levels and weakened euro are expected to support the
Group's performance, but possible increases in raw material prices could
adversely impact the Group's profit development.







Kotkamills Group Oyj
Board of Directors







For additional information, please contact:

CFO Petri Hirvonen, tel.+358 40 571 0834, petri.hirvonen@kotkamills.com



DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media
www.kotkamills.com



Kotkamills Group in brief



Kotkamills is a responsible partner that delivers renewable products and
performance to its customers' processes via product innovations created from
wood, a renewable raw material. The key brands of the company include Absorbex®
and Imprex®, both innovative laminating paper products for the laminate, plywood
and construction industries. Moreover, Kotkamills offers ecological, technically
sound and visually attractive wood products for demanding joinery and
construction. In summer 2016, Kotkamills started up a new board machine
producing AEGLE(TM) Folding Boxboard and ISLA(TM) Food Service Boards, including
the capability to add barriers on-machine. All Consumer Board material solutions
are fully recyclable and repulpable.



Kotkamills has two production sites in Finland, located in Kotka and Imatra. The
majority shareholder of Kotkamills is MB Funds, a Finnish private equity firm.


www.kotkamills.com



Disclaimer


The information contained in this release shall not constitute an offer to sell
or the solicitation of an offer to buy securities of Kotkamills Group Oyj in any
jurisdiction.







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Attachments:

Kotkamills Group Oyj Interim Report Q3-2016.pdf