Neo Industrial Oyj - Company Announcement

NEO INDUSTRIAL’S GROUP COMPANIES, AVILON FIBRES LTD AND CARBATEC LTD, FILE FOR BANKCRUPTCY

NEO INDUSTRIAL PLC    STOCK EXCHANGE RELEASE      6 March 2013 at  8.30 am

NEO INDUSTRIAL'S GROUP COMPANIES, AVILON FIBRES LTD  AND CARBATEC LTD,
FILE FOR BANKCRUPTCY

The companies of discontinued Viscose segment of Neo Industrial Plc, Avilon
Fibres Ltd and Carbatec Ltd, have today filed for bankcruptcy at the District
Court of Pirkanmaa. Avilon Fibres Ltd (previously Avilon Ltd) applied  for
corporate restructuring on 7 September 2011 and was accepted for restructuring
program on 28 June 2012. The restructuring's objective was to secure company's
long-term development by ensuring short-term operating conditions. After
bankcruptcy the restructuring program expires and the cut debts of Avilon
Fibres Ltd will revert to former state accordingly. 

The most significant factor for the current situation has been the extremely
low market price level of viscose fiber during the last two years, and this
trend is still continuing. Therefore, restarting and financing  profitable
viscose production have not been possible. Despite of the fact that global
viscose market is increasing annually by over 10 per cent, the market price
level is not expected to go up. The biggest viscose producer is China. The most
crucial factor that reduced the competitiveness of Avilon Fibres Ltd has been
the cost of energy which is remarkably lower in the operational environments of
its competitors. The production of viscose is typically energy-intensive
process industry where the Finnish cost of labour is not a critical factor. 

Avilon Fibres Oy  has aimed at specializing in niche products with high degree
processing. The fire-retardant fiber products developed by Avilon Fibres Ltd
and Carbatec Ltd have not been selling according to expectations due to the
weak level of construction business during the last two years in the United
States, the main market of this product. Launching of the antimicrobial fibers
have been delayed. First test batches have been delivered  and positively
tested by the customers but the actual volume sales is still on negotiation
level. 

First steps taken for the commercialization of PPV (Paper Pulp to Viscose)
technology, enabling the usage of paper pulp in the viscose manufacture 
process, could not bring enough cash flow to ensure the operation of Avilon
Fibres Ltd and Carbatec Ltd. 

The above mentioned factors together with the financing situation have led
Avilon Fibres Ltd to the situation where the continuity of present operation
mode is not possible. In this connection it was decided that also Carbatec Ltd,
 the parent company of Avilon Fibres Ltd, will also file for bankcruptcy.
Carbatec Ltd owns PPV and other technologies connected with viscose
manufacturing. 

The bankruptcy of Avilon Fibres Ltd and Carbatec Ltd has no influence on the
Cable Segment of Neo Industrial, because the business is conducted in separate
companies. The interest groups, customers, raw-material suppliers as well as
the financiers of Cable Segment are entirely different from the financiers of
Avilon Fibres Ltd and Carbatec Ltd. Therefore the Cable Segment is not in any
way dependent on Avilon Fibres Ltd or Carbatec Ltd. 

The Cable segment's operating result improved considerably in 2012 compared to
2011. The segment expects to record a positive result in 2013. In February,
Reka Cables Ltd negotiated an additional financing package of EUR 2.0 million
to alleviate the effects of seasonal changes. 

The bankruptcy of Avilon Fibres Ltd and Carbatec Ltd is considered not to have
any immediate effects on the cash flow of Neo Industrial Plc or Neo Industrial
Group. The effects of the bankcruptcy on Financial Statements for  2012 of Neo
Industrial Plc and Neo Industrial Group will be cleared as soon as possible. 



Neo Industrial Plc

Jari Salo
Managing Director



Further information:
Markku E. Rentto, Chairman of the Board, tel + 358 207 209 191
Jari Salo, Managing Director, tel +358 207 209 196
Sari Tulander, Managing Director, Avilon Fibres Ltd, tel +358 44 044 1015



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 main list of NASDAQ OMX Helsinki Stock
Exchange. Neo Industrial's business segment is Cable industry.