Neo Industrial Oyj - Financial Statement Release

NEO INDUSTRIAL PLC: Turnover increased clearly, operating result deteriorated compared to previous year

NEO INDUSTRIAL PLC                  Financial Statement Release     25 February
2016 at 6.00 pm 

Turnover increased clearly, operating result deteriorated compared to previous
year 

January-December:

- The Neo Industrial Group´s turnover was EUR 84.6 million (80.1 million)
- Its operating result was burdened by extraordinary and one- time costs total
EUR - 1.6 million. 
- The operating result was EUR -2.0 million (-0.7 million)
- The Cable segment´s operating result was EUR -0.1 million (0.7 million),
operating result was burdened by extraordinary costs total EUR – 0.8 million 
- The Group´s result for the period was EUR -3.7 million (1.8 million)

KEY FIGURES

                                      2015  2014  Change  
Turnover (EUR million)                84.6  80.1     5.6 %
Operating result (EUR million)        -2.0  -0.7  -185.0 %
Result for the period (EUR million)   -3.7   1.8  -305.1 %
Earnings per share                   -0.62  0.30  -307.5 %
                                                          

MANAGING DIRECTOR RALF SOHLSTRÖM:

Year 2015 was full of changes. The turnover was able to turn into growth.
Specially change is seen in the last quarter of the year. October-December the
turnover was EUR 20.2 (16.8) million with growth of 20 per cent compared to
last year. New big contracts were able to make and this enables the growth also
in the future. 

The operating result is burdened by extraordinary costs and transfer to defined
benefit plan, in total EUR -1.6 million. The operating result contains
extraordinary costs of circa EUR -0.6 million due to management changes. The
result is also burdened by costs due to recruiting new production personnel and
training as well as larger than normal load fluctuations in factories, total
EUR -0.5 million. In addition to that the transfer of pensions to the defined
benefit plan in IFRS caused one time effect to the operating result of EUR -0.5
million. 

Cable segment has strong seasonal fluctuations and last quarter of the year is
usually the weakest quarter and the effect is shown in the Group result. In
October- December the operating result was EUR -0.6 (-1.6) million, thus
improved from earlier year. 

Reka Cables Ltd started in October efficiency improvement program which aims to
ensure competitiveness of the company in the long term. Winning large contracts
and active measures to improve delivery performance enable better usage of
capacity and therefore improved production efficiency and delivery performance. 

NET SALES AND OPERATING RESULT

The Neo Industrial Group´s turnover in 2015 was EUR 84.6 million (80.1 million
in 2014). Its result for the full year was EUR -3.7 million (1.8 million). 

BALANCE SHEET AND FINANCING

Good financial situation of Cable industry enabled additional installment of
EUR 1.5 million to the financing agreement signed in March 2014. The payment
was made in January 2015. 

The financing agreement made in 2014 will end at March 2016. The management
believes that old financing agreement will be replaced by new financing
agreement. 

At the end of the review period, the balance sheet total stood at EUR 49.2
million (44.7 million). 

MAJOR EVENTS DURING THE FINANCIAL PERIOD

Reka Cables Ltd got substantial underground power cable order in January. The
value of the order is EUR 6.0 million. The deliveries are made during 2015 and
2016. The underground power cables are used when building grids that are not
vulnerable to weather conditions. 

Reka Cables Ltd invested EUR 1.5 million in cable manufacturing technology in
Hyvinkää Factory. With the investment the productivity of cable manufacturing
is enhanced and developing and manufacturing of new products is enabled. During
the financial year the investments in cable segment totalled EUR 4.7 million. 

Good financial situation of Cable industry enabled additional installment of
EUR 1.5 million to the financing agreement signed in March 2014. The payment
was made in January 2015. 

Reka Cables Ltd started in October efficiency improvement program which aims to
ensure competitiveness of the company in the long term. As a part of the
efficiency improvement program Reka Cables Ltd started the co-determination
negotiations, which resulted in dismissal of six persons and temporary laid
offs regarding three persons 

Mr. Ralf Sohlström was appointed as Managing Director of Reka Cables ltd
starting May 1 2015 and Managing Director of Neo Industrial Plc September 1
2015. 

Mr. Jari Salo, former Managing Director of Neo Industrial Plc, continues the
development of cable business as a board member of Reka Cables Ltd. 

SEGMENTS

Neo Industrial's business segment is Cable Industry.

Cable

                                H2/2015  H2/2014  Change  2015  2014    Change
Turnover (EUR million)             41.0     38.1   7.6 %  84.6  80.1     5.6 %
Operating result (EUR million)    - 0.2     -0.5  58.3 %  -0.1   0.7  -111.7 %

The Cable segment´s turnover was EUR 84.6 million (80.1 million). Its operating
profit was EUR -0.1 million (0.7 million). The cable segment´s operating result
was burdened by extraordinary costs total EUR – 0.8 million 

The sales volume in the cable market of Nordic countries, the main market area
of Reka Cables Ltd, was slightly higher than year before. However, there were
regional differences. The sales volume to other market areas increased. 

Of the metals used as raw materials, the prices of aluminium and copper
fluctuated during 2015. At the end of the financial year the EUR prices of
aluminium and copper were at lower level than year ago. Also the prices of
plastics have fluctuated. 

Investments fulfilled, EUR 4.7 million (0.4 million) were mainly related to
improving productivity and enabling development and manufacturing of new
products in future. Also maintenance investments were made. Investments include
also long-term rental contract which is handled as financial lease. 

Turnover for Nestor Cables Ltd, an associated company, was EUR 26.0 million
(30.4 million). The operating result was positive but lower than year before. 
The company’s value on the consolidated balance sheet is zero and the result of
the company is not included in the Group figures. The Group does not carry any
liabilities regarding Nestor Cables Ltd. 

MAJOR EVENTS AFTER THE REVIEW PERIOD

As a part of financial agreement signed by Reka Group the loans of cable
segment will be rearranged. Financial agreement is targeted to be implemented
during March. 

RISKS AND UNCERTAINTY FACTORS

Neo Industrial´s financial risks include currency, interest rate, commodity,
liquidity, credit and investment 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. The uncertainty of the international
economy and financial markets poses a risk to the Group´s financial
arrangements. 


Due to the financial arrangements carried out since 2014 the financial
situation has improved. The financial negotiations are continued and to assure
funding and liquidity. 

As a part of financial agreement signed by Reka Group the loans of cable
segment will be rearranged. Financial agreement is targeted to be implemented
during March. 

In the Cable segment, the most significant risks are related to market
development, fluctuations of raw material prices and currencies as well as
working capital management in various situations. During considerable seasonal
changes, suppliers’ terms of payment effect significantly on the ability to
ensure competitive delivery times through sufficient inventories. 

NEAR-TERM OUTLOOK

The construction has been picking up slightly in Nordic countries and in
Western Europe. The management believes that grid constructors will boost
ground cabling projects to ensure distribution reliability. The turnover of the
cable segment is believed to slightly exceed the turnover in 2015. The
operating result of the cable segment is believed to be clearly positive. 

To ensure funding and liquidity, the negotiations on financing and payment
terms, the measures for boosting inventory turnover and freeing up capital
assets are continued. 

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 -4,261,547.86 including
the result of the review period EUR 4,302,609.79. The Board proposes to the
Annual General Meeting that no dividends will be paid for 2015. No dividends
were paid for 2014. 

 ANNUAL GENERAL MEETING 2016

Neo Industrial Plc´s Annual General Meeting will be held in Helsinki on 31
March 2016 at 2.00 p.m. A separate invitation will be published on 25 February
2016. 

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 Industrial´s Financial Statement Release is attached to
this release and is also available on company´s website at
www.neoindustrial.fi. 


Hyvinkää, 25 February 2016

Neo Industrial Plc
Board of Directors

Further information:
Ralf Sohlström, Managing Director, tel. +358 40 770 2720

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 Helsinki Stock Exchange.
Neo Industrial's business segment is Cable Industry.

Priedai:

Neo Financial Statements Release_2015_EN.pdf