Neo Industrial Oyj - Financial Statement Release

NEO INDUSTRIAL PLC FINANCIAL STATEMENT RELEASE 7 February 2017 at 5:05 pm

Turnover of Cable Segment increased significantly, operating result improved
clearly compared to previous year 

January-December:
- The Neo Industrial Group’s turnover was EUR 101.0 million (84.6 million)
- The operating result was EUR 5.9 (-2.0) million. The operating result of the
comparison year was burdened by extraordinary costs total EUR -1.6 million 
- The Cable segment´s operating result was EUR 6.5 million (-0.1 million). The
operating result was burdened by extraordinary costs total EUR -0.8 million 
- The Group’s result for the period was EUR 3.3 million (-3.7 million)

KEY FIGURES

                                    1-12/2016  1-12/2015  Change
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Turnover, EUR million                   101.1       84.6   19.4%
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Result for the period, EUR million        5.9       -2.0  395.1%
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Operating result, EUR million             3.3       -3.7  189.6%
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Earnings per share, EUR                  0.55      -0.62  189.1%
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ROI, %                                   22.6       -6.0        
----------------------------------------------------------------
IAS 19 corrected Equity ratio, %         22.0       12.7        
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MANAGING DIRECTOR RALF SOHLSTRÖM:

Cable segment’s turnover increased 19% and the operating result increased by
EUR 6.6 million compared to previous year. 

The turnover and operating results increased due to delivery contracts of
underground cables concluded previous year as well as active actions taken to
increase the utilisation rates and delivery capacities of the factories. The
investments agreed upon earlier have been implemented successfully, and the
efficiency improvement program started in October 2015 has resulted in improved
cost-effectiveness of the Cable Segment and improved productivity of the
factories. 

Due to business development and financial reorganisation the Group's financing
debts have reduced almost to half compared to previous year. At the end of the
reporting period the financial debts were EUR 13.8 million (26.5). 

The company joined a pension fund in 31 December 2015 and the balance sheet
capital, non-interest bearing debts and total are fluctuated by the pension
liabilities according to IAS 19, for which the largest contributing factor is
the fluctuation of the discount rate. In the December 31.2016 Financial
Statement the pension liabilities according to IAS 19 burden the company’s own
capital by EUR 1.9 million and the non-interest bearing debts according to IAS
19 amount to EUR 2.4 million in the balance sheet. The company uses IAS 19
corrected alternative indicators in order to follow business development more
effectively. 

TURNOVER AND OPERATING RESULT

The Neo Industrial Group’s turnover in 2016 was EUR 101.0 million (84.6 million
in 2015). Its result for the full year was EUR 3.3 million (-3.7 million). 

BALANCE SHEET AND FINANCING

As part of a financing agreement signed by the Reka Group, the loans of the
Cable Segment were rearranged at the beginning of the year. According to the
financing solution implemented in March, the Cable Segment loans were
rearranged as long-term financing plans. 

The Group’s financing debts have decreased significantly. Due to business
development and financial reorganisation the Group's financing debts have
reduced almost to half compared to previous year. At the end of the reporting
period the financial debts were EUR 13.8 million (26.5). In the end of the
financial period the balance sheet total stood at EUR 44.2 million (49.2). 



MAJOR EVENTS DURING THE FINANCIAL PERIOD

As part of a financing agreement signed by the Reka Group, the loans of the
Cable Segment were rearranged at the beginning of the year. According to the
financing solution implemented in March, the Cable Segment loans were
rearranged as long-term financing plans 

In the end of the year the Cable Segment acquired a significant order for
underground cables. The value of the order is approximately EUR 12 million and
the deliveries will be divided between 2017 and 2018. Underground cables are
used when building power distribution networks that are uninfected by weather
conditions. 


SEGMENTS

Neo Industrial's business segment is Cable Industry.

CABLE

                             H2 / 2016  H2/2015    Change   2016  2015    Change
--------------------------------------------------------------------------------
Turnover, EUR million             50.8     41.0   24.0  %  101.0  84.6      19.4
--------------------------------------------------------------------------------
Operating result, EUR              2.2     -0.2  1198.2 %    6.5  -0.1  6596.5 %
 million                                                                        
--------------------------------------------------------------------------------


The Cable segment’s turnover was EUR 101.0 million (84.6). Its operating profit
was EUR 6.5 million (-0.1 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 significantly higher than year before. The sales volume
in other market areas decreased from previous year. 

At the end of the financial year the EUR prices of aluminium and copper were at
higher level compared to the price level at the previous turn of the year. 

Investments fulfilled, EUR 1.8 million (4.7 million in 2015) were mainly
targeted at improving productivity. Also maintenance investments were made.
Also included in the comparison year investments is a long term lease agreement
which is processed as financing leasing. 

Turnover for Nestor Cables Ltd, an associated company, was EUR 25.0 million
(26.0 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

There has been no major events after the end of the review period.

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. 

The Group has made financial arrangements since 2014. In addition to ensuring
liquidity and sufficient funding by conducting negotiations on financing and
payment terms, measures for boosting inventory turnover and freeing up capital
assets are taken into action. Due to improved financial situation the
management has been able to concentrate on business development. 

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. Also,
operation models are being developed in order to balance out the effects of
seasonal changes on the load rates of factories. 

In the Cable Segment the key raw materials are metals (copper and aluminium)
and plastics. In the metals purchases partial price hedging is used with the
aid of commodity derivatives. Important with metals are the development of both
the dollar-denominated price and the USD / EUR exchange rate. 

NEAR-TERM OUTLOOK

The construction has been picking up in Nordic countries and in Western Europe.
The management believes that grid constructors will continue to invest in
ground cabling projects to ensure distribution reliability. The turnover of the
Cable Segment is believed to increase in 2016. The operating result of the
Cable Segment is believed to be positive. The turnover and operating result are
believed to increase clearly from previous year. 

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 565,376,45 including the
result of the review period EUR 4,799.156,31. The Board proposes to the Annual
General Meeting that a dividend of EUR 0.04 per share will be paid for 2016. No
dividends were paid for 2015. 

ANNUAL GENERAL MEETING 2016

Neo Industrial Plc’s Annual General Meeting will be held in Helsinki on 30
March 2017 at 2.00 p.m. A separate invitation will be published on 1 March
2017. 

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, 7 February 2017

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.

Attachments:

Neo Industrial Financial Statement 2016 EN.pdf