Neo Industrial Oyj - Financial Statement Release

NEO INDUSTRIAL’S FINANCIAL STATEMENTS REVIEW 2011

Neo Industrial plc                   FINANCIAL STATEMENTS RELEASE      28
February 2012 at 1.00 pm 

NEO INDUSTRIAL'S FINANCIAL STATEMENTS REVIEW 2011

SUMMARY FOR 2011

Neo Industrial Group
Net sales were EUR 121.2 (83.4) million, operating result was negative, EUR
-29.1 (-10.6) million. 

Cable segment:
Net sales were EUR 102.9 (83.4) million, operating profit was EUR -3.4 (-2.9)
million negative. The weak performance resulted from strong fluctuations in
metal prices, machinery breakdown at the Keuruu plant and tight liquidity
situation, which impacted production efficiency. 

Viscose Fibres segment
Net sales were EUR 18.4 (0.0) million. The operating result was EUR -11.0
(-6.8) million. Because of the recession, the market for fire-retardant fibre -
the main product of Avilon Ltd's plant in Valkeakoski - was smaller than
expected, and also the market for regular viscose fibre weakened considerably.
Since July 2011, the Valkeakoski plant has been under a production curtailment
shutdown, which still continues. In September, Avilon's market-related
difficulties resulted in such a tight liquidity situation that the company
filed a petition for corporate restructuring programme in order to secure its
long-term operating conditions. 

Single Family Housing segment
Net sales for Finndomo, associated company of Neo Industrial, were EUR 86.1
million (93.0 million in May-December 2010). Neo Industrial's share of the
operating loss was EUR -8.9 million (-1.3 million in May-December 2010),
including -2.5 million value adjustment, as well as  -1.2 million write-offs
related to divestmend in Sweden. Operation  in Finland showed a loss because of
decreases in volumes and construction projects. 

SUMMARY FOR THE LAST QUARTER 2011

Neo Industrial Group
Net sales were EUR 26.0 (23.7) million and the operating loss EUR -12.8 (-5.3)
million, resulting mainly from the Viscose Fibres segment's loss-making
operations and the corporate restructuring process of the Single Family Housing
segment's business operation in Sweden. 

Cable Segment
Net sales increased from the previous year to EUR 24.5 (23.7) million, but the
last quarter showed EUR -1.0 (-0.3) million loss, caused by the strong
fluctuations in metal prices and write-offs in Russia. 

Viscose Fibres segment
Net sales were EUR 1.5 (0.0) million, operation profit was EUR -2.1 (-6,4)
million negative due to the corporate restructuring programme. 

Single Family Housing segment
Net sales for associated company Finndomo were EUR 18.7 million with an
decrease of  52.7 percent when compared to 2010 (39.6 million). Consumer
uncertainty about economic development in the eurozone was reflected in the
demand for prefabricated homes in the second half of 2011, and the positive
growth predictions made in early 2011 turned negative. 

KEY FIGURES                           10-12/201  10-12/201  1-12/2011  1-12/2010
                                              1          0                      
Turnover, EUR million, of which            26.0       23.7      121.2       83.4
- Cable business                           24.5       23.7      102.9       83.4
- Viscose Fibers                            1.5        0.0       18.4        0.0
- Other operations                          0.0        0.0        0.0        0.0
Operating result, EUR million, of          -3.5       -7.2      -15.6      -11.0
 which                                                                          
- Cable business                           -1.0       -0.3       -3.4       -2.9
- Viscose Fibers                           -2.1       -6.4      -11.0       -6.8
- Other operations                         -0.5       -0.5       -1.2       -1.3
Profit or loss for the period, EUR        -12.8       -5.3      -29.1      -10.6
 million                                                                        
Earnings per share, EUR                   -2.02      -1.06      -4.60      -1.76
ROI, %                                                        -32.1 %    -12.7 %
Equity ratio, %                                                12.7 %     31.7 %

CONSOLIDATED FINANCIAL PERFORMANCE IN 2011

The year 2011 was very challenging for Neo Industrial, with all of its segments
showing a loss. Neo Industrial Group's net sales in 2011 were EUR 121.2 (83.4)
million. Its operating result was EUR -29.1 (-10.6)  million. The loss largely
resulted from the Viscose Fibres segment, which - in addition to containing
loss-making operations - saw the estimate of deferred tax assets updated, with
the result that the deferred tax assets recorded in the previous year's
financial statements were recorded as write-offs in the income statement.
Purchase price allocations related to Swedish operations, recorded in
accordance with IFRS in conjunction with the Finndomo investment in 2010, were
recorded as impairments through profit or loss. In addition, based on test
calculations related to the Single Family Housing segment, EUR 2.5 million was
recognised in impairment under “Share of the results of associates”. 

OTHER EVENTS DURING THE PERIOD

In January, Neo Industrial announced that Avilon would launch its production of
fire-retardant fibre.The fibre is used for interior design and protective
clothing, main market being the United States. The development project for
environmental friendly carbamate technology was also announced in January. 

In February, Neo Industrial made an additional investment of EUR 2.8 million in
Finndomo, the company constituting its Single Family Housing segment, in order
to strengthen the company's financial position. 

In May, Neo Industrial announced that Avilon had made a groundbreaking
innovation for producing dissolving pulp from paper-grade pulp. The new
technology permanently solves problems related to the primary raw material in
viscose production. 

In July, Neo Industrial announced that Avilon would discontinue production
until further notice because of the weak market. In September it was announced
that Avilon would file a petition for corporate restructuring in order to
secure its long-term operating conditions. In October, Neo Industrial announced
changes in Avilon's management. Sari Tulander, M.Sc. (Econ), who also serves as
CFO of Neo Industrial, was appointed as Managing Director of Avilon. Heikki
Hassi, the long-term Managing Director of Avilon, will focus on the development
and commercialisation of technologies in the Viscose Fibres segment. 

In November, Neo Industrial issued a loan that entitles investors to a cash
compensation based on the value of the underlying shares. Due 2016, the loan
was issued at a principal amount of EUR 6 million and offered to institutional
investors. The purpose was to improve the company's liquidity position and the
flexibility of its business development. The issue was carried out
successfully, and the subscription was accepted immediately 

EVENTS AFTER THE PERIOD
Reka Cables launched employee cooperation negotiations in January 2012 in order
to ensure its competitiveness, considering seasonal changes and sales
development. Because of the increased order backlog, the adjustments will be
carried out as working-time and holiday adjustments and by partly shifting to
four-day workweeks. No layoffs were needed.

Avilon has continued to invest in expanding its special product range.
Antimicrobial fibres, in particular, seem to have significant potential in this
respect. 

The District Court of Pirkanmaa accepted the extension to the deadline by which
Avilon must submit its proposed corporate reorganisation programme. The new
deadline is 7 May 2012. Working in collaboration with the reorganisation
administration, the company seeks to complete its proposed reorganisation
programme well before the due date. The goal is to have the reorganisation
programme confirmed by the District Court of Pirkanmaa in the early autumn of
2012 at the latest. 

Finndomo will enhance its efficiency by centralising its operations. Its
headquarters will be moved from Vantaa to Sonkajärvi, and its financial
administration will be relocated from Jyväskylä to Sonkajärvi, where financial
planning operations will also be located. The production line in Hartola will
operate under the Sonkajärvi plant. The locations in Vantaa, Jyväskylä, Kuopio
and Lahti will be closed. 

Finndomo submitted an application for corporate restructuring on 15 February
2012  to secure the continuity of operation conditions because the financing
arrangement, which would have secured the short-term liquidityand the
continuance of the normal business, was miscarried during the final
negotiations.. 

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 2011 financial
statements. The company's future risk factors are related to the business
development of its portfolio companies. 

The Group's liquidity situation is tight at some places. Avilon's corporate
restructuring procedure has made financial negotiations more difficult for
other companies. In the Cable segment, the liquidity situation has tightened
particularly because of growth and strong fluctuations in metal prices. 

Challenges for the 2012 financial period include ensuring growth in the Cable
segment and securing Avilon's operating conditions in the short and long terms.
In 2012, the company seeks to secure additional funding and renegotiate payment
terms. Negotiations with financiers, suppliers and customers are in progress,
and management believes they will be successful. If the company fails to secure
additional funding, it is possible that its business operations will be
reorganised.The financial statements have been made in accordance with the
continuity principle. Avilon's assets have been recognised in accordance with
the continuity principle. Any changes that Avilon's corporate restructuring may
cause in the company's liabilities have not been taken into account. 

In the Cable segment, the most significant risks are related to market
development as well as fluctuations in the prices of raw materials and
currencies. Along with the increased volume of operations, fluctuations in
metal prices increase the need for working capital in operational activities.
Combined with strong seasonal fluctuation, this adds pressure to liquidity
management. 

In the Single Family Housing segment, the most significant risks are related to
the development of demand and the competition situation as well as the
production capacity utilisation rate, fluctuations in the prices of raw
materials and the level of success in implementing a more cost-efficient
operating model. 

The Viscose Fibres segment is a new business subject to the risks associated
with any business start-up. Its main risks include market and competitor
development and currency fluctuations as well as 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. 

In 2011, Neo Industrial's audit committee reviewed business risks, financing,
liquidity, and test calculation procedures as well as the effects of various
financial arrangements and structural changes on reporting.  The results of
earlier risk assessments were considered in guiding internal auditing measures. 

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 all of Neo Industrial's segments. 

In the Viscose Fibres segment, demand and price development are difficult to
predict. The decision to relaunch production depends on the demand for
high-margin specialty products as well as on securing sufficient funding. The
segment seeks to expand its product range to increasingly cover specialty
products, of which antimicrobial special fibres appear to hold the most
potential. The segment's result is affected by the market situation, the
continuing shutdown and the progress of the new technology business. The
company reorganisation plan also covers future considerations, including
opportunities related to markets, product groups and technology expansions. 

Demand in the Cable segment is expected to increase during the first half of
2012, if not beyond. The segment expects to record a positive result in 2012. 

The market for the Single Family Housing segment is expected to be smaller in
2012 when compared to 2011. Finndomo divested operations and property that were
not part of its core business and weakened its profitability, which will
improve its economy. Finndomo's corporate restructuring is expected to decrease
sales in 2012, at least at the beginning of the year. However, the
reorganisation and new operating method will lay the foundation for better
performance and service abilities. 

Throughout the year, the company will pay special attention to liquidity and
funding for growth. To ensure liquidity and to facilitate strong growth in the
different segments, Neo Industrial will carry out negotiations on financing and
payment terms as well as boost inventory turnover and free up capital assets. 

DIVIDEND POLICY AND PROPOSAL FOR PROFIT DISTRIBUTION

Neo Industrial aims to distribute at least 30 percent of its net earnings as
dividends.The parent company's distributable funds at the end of 2011 are EUR
23,793,515.36 of which loss for the period is 4,694,521.98. The Board proposes
to the Annual General Meeting that no dividends be paid for 2011. 

ANNUAL GENERAL MEETING 2012

Neo Industrial Corporation's Annual General Meeting will be held in Helsinki on
29 March 2012 at 1.00 p.m. A separate invitation will be published later. 

DISCLOSURE PROCEDUREOF FINANCIAL REVIEW

Neo Industrial  follows the disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority, and discloses
relevant information related to its Financial Statement Release with this Stock
Exchange Release. Neo Industrial's Financial Statement Release for 2011 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 1.30 pm.
at the Neo Industrial's office in Helsinki (Aleksanterinkatu 48 A). 

Helsinki, 28 February 2012

Neo Industrial Plc
Board of Directors

For further information, please contac
Markku E. Rentto,  Managing Director, tel. +358 207 209 191
Sari Tulander, CFO,  tel + 358 207 209 192

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. 

ENCL Neo Industrial's Financial Statements Review  2011

Attachments:

Financial Statement Review 2011_eng_final.pdf