Neo Industrial Oyj - Financial Statement Release

CORRECTION TO NEO INDUSTRIAL PLC’S FINANCIAL STATEMENT RELEASE OF 28 FEBRUARY 2013

 Neo Industrial Plc   FINANCIAL STATEMENT RELEASE     13 March 2013 at 5.50 pm.

 Neo Industrial Plc published its financial statement release on 28 February
2013. The companies of its Viscose Fibres segment, Avilon Fibres Ltd and
Carbatec Ltd, filed for bankruptcy on 6 March 2013, after the publication of
the financial statement release, in which the Viscose Fibres segment was
presented in discontinued operations. Because the financial statements for 2012
had not yet been completed in full on 28 February 2013, the date of the
publication of the financial statement release, the effect of the bankruptcies
has been taken into account in this corrected financial statement release and
in the financial statements to be published on 14 March 2013. 

The most significant differences between this corrected release and the release
published on 28 February 2013 are as follows: 

 The information presented in this corrected financial statement release on the
Viscose Fibres segment is no longer based on the principle of continuity. In
accordance with the IFRS standards, the assets and liabilities of the companies
of the Viscose Fibres segment have been recorded as write-offs on the balance
sheet. The Group's guarantee liabilities related to Avilon Fibres Ltd have been
recorded as liabilities on the consolidated balance sheet through profit or
loss. Combined, they had a negative effect of EUR 2.5 million on the
consolidated income statement. The corrected result for the financial period
from continuing operations is EUR -6.0 million (-2.2 million before the
correction). The Group's corrected result is EUR -6.3 million (-3.8 million
before the corrections). The balance sheet total decreased from EUR 76.1
million to EUR 62.9 million. The Group's corrected equity ratio is 13.8% (14.7%
before the correction). 

After the shares of subsidiaries had been recorded as write-offs on the balance
sheet and guarantee liabilities and credit losses had been recorded through
profit or loss, distributable funds decreased by EUR 13 million on the balance
sheet of the parent company (Finnish Accounting Standards, FAS). After the
change, the parent company's equity ratio is 63.7%. 

Based on the authorisation granted to the Board of Directors by the general
meeting of November 2012, the Board decided on 13 March 2013 not to enforce the
demerger due to changed circumstances. 



CORRECTED FINANCIAL STATEMENT RELEASE INFORMATION

The Cable segment's operating result improved considerably from 2011. The
demerger was not carried out due to changed circumstances. 



January-December:

- The Neo Industrial Group's net sales increased by 3.3 percent to EUR 106.2
million (102.8 million in 2011). 

- Its operating result improved by 116,7 percent to EUR 0.8 million (-4.8
million). 

- The Cable segment's operating result was EUR 2.1 million (-3.1 million).

- The Group's result for the period improved by 78.4 percent to EUR -6.3
million (-29.1 million). 



KEY FIGURES

                                      2012   2011  Change
Net sales (EUR million)              106.2  102.8    3.3%
Operating result (EUR million)         0.8   -4.8  116.7%
Result for the period (EUR million)   -6.3  -29.1   78.4%
Earnings per share, EUR              -1.25  -4.60   72.8%

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). 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 factories. 



All in all, the year 2012 was particularly challenging for the Neo Industrial
Group. Of the Neo Industrial Group's three segments (Cable, Viscose Fibres,
Single Family Housing), the Cable segment is presented in continuing operations
in 2012. The Single Family Housing segment and Viscose Fibres segment are
presented in discontinued operations. In the financial period, Neo Industrial
discontinued its Single Family Housing segment by recording its share in
Finndomo as a write-off on its balance sheet. The Viscose Fibres segment was
recorded in discontinued operations based on a demerger plan, which was in
effect on the closing date of the financial period. The purpose of the demerger
plan was to separate the Viscose Fibres segment from the Group and establish it
as a public limited company. 



Neo Industrial's creditors opposed the demerger. After 10 January 2013, the
closing date of the financial period, Neo Industrial and the creditors decided
to apply for postponement for the demerger hearing.  The companies of the
Viscose Fibres segment filed for bankruptcy on 6 March 2013. 



NET SALES AND OPERATING RESULT



The Neo Industrial Group's net sales in 2012 were EUR 106.2 million (102.8 in
2011). Its result for the full year was EUR -6.3 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”. The information presented
in the financial statements on the Viscose Fibres segment is not based on the
principle of continuity. In accordance with the IFRS standards, the assets and
liabilities of the companies of the Viscose Fibres segment have been recorded
as write-offs on the balance sheet. The Group's guarantee liabilities related
to Avilon Fibres Ltd have been recorded as liabilities on the consolidated
balance sheet through profit or loss. Combined, they had a negative effect of
EUR 2.5 million on the consolidated income statement. 



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 (9.5
million in 2011). Of this total, EUR 8.8 million was in use at the end of 2012
(6.4 million). Of the company's revolving bank credit of EUR 6.5 million (6.0
million), EUR 5.7 million was in use at the end of the year (5.8 million). 

In the Cable segment, due to the conversion of leases for premises into
open-ended contracts, EUR 9.7 million was eliminated from “Tangible assets” and
“Interest-bearing liabilities” on the balance sheet. 

At the end of the review period, the balance sheet total stood at EUR 62.9
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). 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. 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 quick enough delivery times, which affected sales volumes. Towards the
end of the year, the situation developed favourably, creating better conditions
for ensuring sufficient deliveries. 

 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 1.3 million
(0.4 million), mainly consisting of investments in maintenance and enhancing
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 for the financial period was slightly negative. Adjustment measures were
carried out due to the difficult 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) and mainly consisted of the sales of fire-retardant fibre to the
United States from Avilon's inventory. As a result of the recognition of EUR
10.3 million in debt cuts in accordance with Avilon's corporate reorganisation
programme, the segment recorded a positive operating result of EUR 5.1 million
(-11.0 million). The Viscose Fibres segment is presented as a single item under
“Result for the period from discontinued operations” in the income statement,
together with 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 proposed programme,
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 financial 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
TangShan SanYou Xingda Chemical Fibre Company 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



Finndomo Ltd filed for corporate reorganisation in early 2012. The
reorganisation procedure was started on 2 March 2012. The District Court of
Northern Savonia confirmed Finndomo Ltd's corporate reorganisation programme on
3 December 2012. 



MAJOR EVENTS AFTER THE FINANCIAL PERIOD



In February, 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 a financing agreement related to the Cable segment.
The intention is to update the agreement in the spring of 2013. 



On 6 March 2013, Neo Industrial announced that Avilon Fibres Ltd and Carbatec
Ltd had filed for bankruptcy. 



Based on the authorisation granted to the Board of Directors by the general
meeting of November 2012, the Board decided on 13 March 2013 not to enforce the
demerger due to changed circumstances. 



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. 



With regard to the Cable segment, the financial statements have been prepared
in accordance with the principle of continuity. The continuity of operations
requires that the Group be able to secure additional funding to replace
maturing loans 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 Group
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 the Group's operations in their current form. 



In the Viscose Fibres segment, low market prices did not allow for the
financing and profitable relaunch of viscose production. The corporate
reorganisation programme was discontinued after the closing date of the
financial period, and Avilon Ltd and Carbatec Ltd filed for bankruptcy. For
these reasons, it was no longer reasonable to assume continuity of operations.
The information presented in the financial statements on the Viscose Fibres
segment is not based on the principle of continuity. In accordance with the
IFRS standards, the assets and liabilities of the companies of the Viscose
Fibres segment have been recorded as write-offs on the balance sheet. The
Group's guarantee liabilities related to Avilon Fibres Ltd have been recorded
as liabilities on the consolidated balance sheet through profit or loss. 



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. 



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 Neo Industrial's business operations. 



However, 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 the main markets. The segment
expects to record a positive result in 2013. 



Avilon Fibres Ltd and Carbatec Ltd filed for bankruptcy on 6 March 2013 and are
no longer part of the Neo Industrial group on the publication date of the
financial statements. However, to the best of its ability, the Group will
support solutions that enable viscose business operations to continue in
Valkeakoski and facilitate the commercialisation of the PPV technology. 



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



The parent company's unrestricted equity stood at EUR 2,866,136.01 on 31
December 2012. 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 was published on 12 March 2013. 



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. 



Helsinki, 13 March 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 segment is Cable. 

Attachment Corrected Financial Statement Release 2012

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