MANAGEMENT REPORT
Consolidated net sales for Q4 2019 were € 3.23 million, up 14% when comparing sales of continued operations for the same period last year (Q4 2018: € 2.83 million). Fibreboard sales of € 2.78 million were up 16% due to new customers in the display board and door core segments. Furniture retail sales declined as a result of closure of its shops in Tartu (shop closed in November 2019), Vilnius, and Riga. The remaining retail shops in Tallinn and Pärnu will close on 31.01.2020.
The Group recorded EBITDA of € 141 thousand for Q4 2019 for its continuing operations (vs Q4 2018: EBITDA of € 190 thousand from continued operations). The Q4 EBITDA result for 2019 includes one-off operating income of € 324 thousand from revaluation of its property subsidiary Pärnu Riverside Development.
Fibreboard activities in Q4 2019 resulted in EBITDA being negative € 119 thousand (Q4 2018: negative € 69 thousand). Fibreboard profitability was negatively impacted due to leakages in one of its driers, which resulted in substantial higher consumption of energy during Q4. The replacement of elements in the drier is taking place in Q1 2020, which should result in energy consumption going back to normal levels. Furniture Retail EBITDA for Q4 2019 was negative € 66 thousand (Q4 2018: negative € 24 thousand). The reason for this loss was caused by declining sales and reduced sales margin from the closure of the Tartu shop and initiating closure sales from the remaining two shops, in Tallinn and Pärnu. Pärnu Riverside Development recorded Q4 2019 EBITDA of € 322 thousand, which included a one-off operating income of € 324 thousand resulting from the revaluation of the property
After depreciation and net financial costs, the Group’s net result for Q4 2019 from continuing operation was thus a loss of € 75 thousand (Q4 2018: net profit € 11 thousand from continuing operation).
Consolidated net sales for 12 months 2019 from continuing operations were € 13.33 million, being a 6% increase compared to the same period in 2018 from continuing operations (2018: € 12.53 million). Fibreboard activities showed sales of € 11.75 million in 2019, this being 7% sales increase from previous year, due to securing new customers in display board and door core segments. Furniture Retail sales in 2019 from its continuing shops in Tallinn and Pärnu of € 1.52 million were 1% lower than previous year. Sales from our new property subsidiary was € 111 thousand in 2019 (2018: no activities).
Group net loss for 12 months 2019 of € 1.13 million from continuing operations (2018: loss of € 360 thousand from continuing operations) were substantially influenced by the net loss of € 540 thousand recorded from the disposal of Skano Furniture Factory.
DIVISIONAL REVIEW
REVENUE BY BUSINESS SEGMENTS
| € thousand | € thousand | |||
| Q4 2019 | Q4 2018 | 12M 2019 | 12M 2018 | |
| Continued operations | ||||
| Fibreboards production and sales | 2,775 | 2,404 | 11,745 | 11,007 |
| Furniture retail | 390 | 441 | 1,515 | 1,536 |
| Real Estate Management | 63 | 0 | 111 | 0 |
| Group transactions | (1) | (10) | (38) | (15) |
| TOTAL from continued operations | 3,226 | 2,835 | 13,333 | 12,528 |
| Discontinued operations | 0 | 594 | 1,215 | 2,270 |
| TOTAL | 3,226 | 3,429 | 14,548 | 14,797 |
Profit by business segments
| € thousand | Q4 2019 | Q4 2018 | 12M 2019 | 12M 2018 |
| Continued operations | ||||
| EBITDA by business units: | ||||
| Fibreboards production and sales | (119) | (69) | 51 | 280 |
| Furniture retail | (66) | (24) | (200) | (104) |
| Real Estate Management | 322 | 0 | 352 | 0 |
| Group transactions | 5 | 283 | 104 | 253 |
| TOTAL EBITDA | 141 | 190 | 308 | 428 |
| Depreciation | 177 | 135 | 652 | 558 |
| TOTAL OPERATING PROFIT/ LOSS | (35) | 55 | (344) | (130) |
| Net financial costs | 39 | 42 | 783* | 228 |
| Income tax | 0 | 2 | 2 | |
| NET PROFIT/ LOSS | (75) | 11 | (1,127) | (360) |
| Discontinued operations | 0 | (397) | (271) | (532) |
| TOTAL | (75) | (386) | (1,398) | (891) |
* Discontinued operations, the subsidiary has been sold on 05.09.2019 which we incurred a loss of € 540 thousand on sale of Skano Furniture Factory.
NORDIC FIBREBOARD LTD: FIBREBOARD SALES
Fibreboard sales in Q4 2019 were € 2.78 million, up 16% from Q4 2018. We recorded sales increase in emerging markets in Asia and Africa while also continuing sales growth in EU due to securing new customers. Finland, our largest market, continued to experience sales decline despite Nordic Fibreboard keeping its market share within soft density fibreboard segment, thus reflecting the growth of other materials for use in the construction sector, mainly in new build of apartment houses. The increase in energy cost in the last quarter caused by leakages in one of our driers had a negative impact on our profitability, resulting in EBITDA for Q4 2019 being negative € 119 thousand (Q4 2018 EBITDA was negative € 69 thousand).
Fibreboard sales for 12 months 2019 were € 11.75 million, which is 7% increase from year 2018 sales of € 11.01 million. Sales growth in the EU were mainly driven by securing new customers in both the display board and the door core segments. Sales to Russia showed a modest increase in 2019, reflecting the slight increase in business confidence and business activity in that market. Middle East markets continue to experience subdued economic environment. In Asia we secured new customers in new countries, and in Africa we benefitted from a loss of a key competitor. Fibreboard recorded EBITDA of € 51 thousand for full year 2019 (2018: € 280 thousand), the reduced profitability in 2019 compared to 2018 were due to extra start-up costs being incurred as a result of working with new products for customers in the door core and display board segment, as well as the aforementioned increase in energy costs due to leakage in one of our driers.
SKANO FURNITURE FACTORY: FURNITURE PRODUCTION AND WHOLESALE
Furniture wholesale had no sales in Q4 2019, because the Furniture company was sold on 05.09.2019.
SKANO FURNITURE: RETAIL SALES
Furniture retail sales in Q4 2019 were € 390 thousand, down 13% (2018 Q4 € 441 thousand) from same period last year. The sales decline was mainly due to closure of Latvia, Lithuania and Tartu shops. The last two stores in Estonia were closed on 31.01.2020. These shops closures marks the end of the furniture retail business.
PÄRNU RIVERSIDE DEVELOPMENT: REAL ESTATE MANAGEMENT
Pärnu Riverside Development owns the property located at Suur-Jõe 48 in Pärnu. The property has some rental tenants which resulted in rental income, ie sales, of € 62 thousand in Q4 2019 (12 months 2019 sales were € 111 thousand). Q4 EBITDA was € 322 thousand, and included a one-off income of € 324 thousand due to the revaluation of the property. EBITDA for 12 months 2019 was € 352 thousand.
BALANCE SHEET AND CASH-FLOW
As of 31.12.2019 the total assets of Nordic Fibreboard AS were € 9.1 million (31.12.2018: € 10.3 million). The liabilities of the company as of 31.12.2019 were € 7.5 million (31.12.2018: € 7.4 million), of which the company has borrowings of € 4.6 million as at 31.12.2019 (31.12.2018: € 4.8 million).
Receivables and prepayments amounted to € 1.4 million as at 31.12.2019 (31.12.2018: € 1.1 million). Inventories were € 0.9 million as of 31.12.2019 (31.12.2019: € 2.3 million). Fixed assets were € 6.6 million as of 31.12.2019 (€ 6.8 million as of 31.12.2018). The decrease in balance sheet volume in 2019 is due to the sale of subsidiary.
As a result of the adoption of IFRS 16 as of 1 January 2019, the assets and liabilities amount has increased as date 31.12.2019 € 180 thousand. In addition in the consolidated statement of comprehensive income in 2019 fixed asset depreciation increased by € 77 thousand.
During 2019 twelve months, the Group’s cash flows from operating activities totalled cash inflow of € 443 thousand (2018 twelve months: cash outflow € 507 thousand). Investment activities resulted in cash outflows in amount of € 173 thousand during 2019 twelve months, compared to outflows in amount € 275 thousand during twelve months 2018. Financing activities also resulted in cash outflows of € 316 thousand during twelve months 2019 (2018 twelve months: cash outflow € 252 thousand). Net cash effect during 2019 twelve months cash outflows of € 47 thousand, which compares to 2018 twelve months cash outflows of € 20 thousand.
OUTLOOK
NORDIC FIBREBOARD LTD
Fibreboard sales is continuing its growth due to our expansion into door core and display board segments, which have secured more sales as a result of new customers and new markets. We are continuing our search for additional applications for our products, where our products environmentally beneficial properties could be applied. The recent exit from our furniture activities will provide management with more time and focus on the development of the growth and profitability of the fibreboard business.
REAL ESTATE MANAGEMENT
We will continue to manage and develop the property on Suur-Jõe Street 48, Pärnu.
PEOPLE
On the 31st of December 2019, the Group employed 126 people (compared to 216 people as of 31.12.2018). The average number of personnel in Q4 2019 was 125 (Q4 2018: 212).
For twelve months of 2019, wages and salaries with taxes amounted to € 2.5 million from continuing operations (twelve months 2018: € 2.3 million from continuing operations). Payments made to management board members of all group companies including all subsidiaries with relevant taxes were € 173 thousand in twelve months 2019 and € 187 thousand in twelve months 2018.
FINANCIAL HIGHLIGHTS
| € thousand | ||||
| Income statement | Q4 2019 | Q4 2018 | 12M 2019 | 12M 2018 |
| Revenue | 3,226 | 2,835 | 13,333 | 12,528 |
| EBITDA | 141 | 190 | 308 | 428 |
| EBITDA margin | 4% | 7% | 2% | 3% |
| Operating profit | (35) | 47 | (344) | (130) |
| Operating margin | (1%) | 2% | (3%) | (1%) |
| Net profit | (75) | 11 | (1,127) | (360) |
| Net margin | (2%) | 0% | (8%) | (3%) |
| Discontinued operations | 0 | (397) | (271) | (532) |
| TOTAL NET PROFIT | (75) | (386) | (1,398) | (891) |
| Statement of financial position | 31.12.2019 | 31.12.2018 | 31.12.2019 | 31.12.2018 |
| Total assets | 9,045 | 10,307 | 9,045 | 10,307 |
| Return on assets | (1%) | 0% | (12%) | (3%) |
| Equity | 1,542 | 2,901 | 1,542 | 2,901 |
| Return on equity | (5%) | 0% | (73%) | (12%) |
| Debt-to-equity ratio | 83% | 72% | 83% | 72% |
| Share | 31.12.2019 | 31.12.2018 | 31.12.2019 | 31.12.2018 |
| Last Price* | 0.41 | 0.36 | 0.41 | 0.36 |
| Earnings per share | (0.02) | (0.09) | (0.31) | (0.20) |
| Price-earnings ratio | (24.74) | (4.18) | (1.32) | (1.81) |
| Book value of a share | 0.34 | 0.64 | 0.34 | 0.64 |
| Market to book ratio | 1.20 | 0.56 | 1.20 | 0.56 |
| Market capitalization, € thousand | 1,845 | 1,611 | 1,845 | 1,611 |
| Number of shares, piece | 4,499,061 | 4,499,061 | 4,499,061 | 4,499,061 |
EBITDA = Earnings before interest, taxes, depreciation and amortization
EBITDA margin = EBITDA / Revenue
Operating margin = Operating profit / Revenue
Net margin = Net profit / Revenue
Return on assets = Net profit / Total assets
Return on equity = Net profit / Equity
Debt-to-equity ratio = Liabilities / Total assets
Earnings per share = Net profit / Total shares
Price-earnings ratio = Last price / Earnings per share
Book value of a share = Equity / Total shares
Market to book ratio = Last price / Book value of a share
Market capitalization = Last price * Total shares
*http://www.nasdaqbaltic.com/
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| € thousand | 31.12.2019 | 31.12.2018 | 31.12.2017 |
| Cash and cash equivalents (Note 2) | 7 | 54 | 74 |
| Receivables and prepayments (Note 3) | 1,394 | 1,142 | 1,214 |
| Inventories (Note 4) | 894 | 2,255 | 2,336 |
| Total current assets | 2,296 | 3,452 | 3,624 |
| Investment property (Note 5) | 1,121 | 175 | 170 |
| Available-for-sale financial assets (Note 8) | 397 | 422 | 182 |
| Other shares and issues | 0 | 0 | 6 |
| Property, plant and equipment (Note 6) | 5,212 | 6,223 | 6,908 |
| Intangible assets (Note 7) | 19 | 34 | 47 |
| Total non-current assets | 6,749 | 6,855 | 7,313 |
| TOTAL ASSETS | 9,045 | 10,307 | 10,937 |
| Borrowings (Notes 9) | 4,547 | 652 | 593 |
| Payables and prepayments (Notes 10) | 2,665 | 2,418 | 1,956 |
| Short-term provisions (Note 11) | 20 | 15 | 13 |
| Total current liabilities | 7,232 | 3,085 | 2,562 |
| Long-term borrowings (Notes 9) | 92 | 4,112 | 4,422 |
| Long-term provisions (Note 11) | 179 | 210 | 200 |
| Total non-current liabilities | 271 | 4,321 | 4,622 |
| Total liabilities | 7,503 | 7,406 | 7,184 |
| Share capital (at nominal value) (Note 12) | 2,699 | 2,699 | 2,699 |
| Share premium | 364 | 364 | 364 |
| Statutory reserve capital | 288 | 288 | 288 |
| Other reserves | 84 | 45 | 8 |
| Unrealised currency differences | 0 | 0 | 0 |
| Retained earnings (loss) | (1,894) | (496) | 393 |
| Total equity | 1,542 | 2,901 | 3,753 |
| TOTAL LIABILITIES AND EQUITY | 9,045 | 10,307 | 10,937 |
*The notes to the financial statements presented on pages 16 to 33 are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
| € thousand | Q4 2019 | Q4 2018 | 12M 2019 | 12M 2018 |
| Continued operations | ||||
| Revenue (Note 14) | 3,226 | 2,835 | 13,333 | 12,528 |
| Cost of goods sold (Note 15) | 2,928 | 2,452 | 11,538 | 10,480 |
| Gross profit | 298 | 383 | 1,795 | 2,047 |
| Distribution costs (Note 16) | 381 | 479 | 1,698 | 1,898 |
| Administrative expenses (Note 17) | 248 | 150 | 658 | 498 |
| Other operating income (Note 19) | 327 | 1 | 351 | 14 |
| Other operating expenses (Note 19) | 31 | (292) | 133 | (205) |
| Operating profit (loss) (Note 11) | (35) | 47 | (344) | (130) |
| Finance income (Note 20) | 19 | 22 | 19 | 14 |
| Finance costs (Note 20) | 59 | 56 | 803 | 243 |
| LOSS BEFORE INCOME TAX | (75) | 13 | (1,127) | (358) |
| Corporate income tax | 0 | 2 | 0 | 2 |
| NET PROFIT (LOSS) FOR THE PERIOD FROM CONTINUING OPERATIONS | (75) | 11 | (1,127) | (360) |
| NET PROFIT (LOSS) FOR THE PERIOD FROM DISCONTINUING OPERATIONS | 0 | (397) | (271) | (532) |
| NET PROFIT (LOSS) FOR THE PERIOD | (75) | (386) | (1,398) | (891) |
| Basic earnings per share (Note 13) | (0.02) | (0.09) | (0.31) | (0.20) |
| Diluted earnings per share (Note 13) | (0.02) | (0.09) | (0.31) | (0.20) |
*The notes to the financial statements presented on pages 16 to 33 are an integral part of these consolidated financial statements.
TORFINN LOSVIK
Chairman of the board
Phone: +372 56 99 0988
torfinn.losvik@nordicfibreboard.com
Attachment
