The net sales of AS Viisnurk for the 9 months of 2007 were 180.5 mil. kroons/11.5 mil. euros (160.2 mil. kroons/10.2 mil. euros during the same period in 2006) and the net profit amounted to 11.4 mil. kroons/0.7 mil. euros (7.9 mil. kroons/0.5 mil. euros during the same period in 2006). As of the end of September 2007 the total assets of Viisnurk amounted to 151.4 mil. kroons/9.7 mil. euros (30.9.2006: 142.0 mil. kroons/9.1 mil. euros). The liabilities of the company accounted for 54% (30.6.2006: 57%) thereof, i.e. 81.4 mil. kroons/5.2 mil. euros (30.9.2006: 80.5 mil. kroons/5.1 mil. euros). The turnover of the Furniture Division in the 9 months of 2007 amounted to 94.8 mil. kroons/6.1 mil. euros (91.8 mil. kroons/5.9 mil. euros during the same period in 2006) and the profit amounted to 2.9 mil. kroons/0.2 mil. euros (3.1 mil. kroons/0.2 mil. euros during the same period in 2006). The turnover of the Building Materials Division in the 9 months of 2007 amounted to 85.7 mil. kroons/5.5 mil. euros (68.4 mil. kroons/4.4 mil. euros during the same period in 2006) and the profit amounted to 12.6 mil. kroons/0.8 mil. euros (8.6 mil. kroons/0.5 mil. euros during the same period in 2006). The profit of the Divisions does not reflect the general administrative costs of the corporation in the amount of 1.7 mil. kroons/0.1 mil. euros (1.4 mil. kroons/90 thousand euros during the same period in 2006) and the financial expenses of 2.0 mil. kroons/0.1 mil. euros (1.9 mil. kroons/0.1 mil. euros during the same period in 2006) that have been recorded in the report of business segments as unallocated expenses. The division plan of AS Viisnurk was signed on June 29, 2007 as the result of which the part of the previous Viisnurk engaged in production became separate, namely the Furniture and Building Materials Division. The aforementioned decision was also approved by the general meeting of shareholders on August 6, 2007. The division was registered in Commercial Register on September 19, 2007. The separated unit engaged in production named to AS Viisnurk and trading with the share of AS Viisnurk started in Tallinn Stock Exchange on September 25, 2007. The division engaged in production maintain the real estate necessary for its principal activity also in the future as well as the Rääma street real estate development project. Real estate located at Niidu street which was not used in the production activity of Viisnurk, was separated. All assets, liabilities, revenues and costs related to separated unit, are eliminated. 3rd quarter of 2007 The net sales of the 3rd quarter of the accounting year amounted to 51.0 mil. kroons/3.3 mil. euros (51.4 mil. kroons/3.3 mil. euros in 2006) and the net profit amounted to 0.9 mil. kroons/60 thousand euros (3.5 mil. kroons/226 thousand euros in 2006). The results of the third quarter of the company compared to the third quarter of 2006 have remained more modest both in the Furniture Division and the Building Materials Division. The main factors upon the formation of the result were the following: the sales of the furniture factory in the Furniture Division were smaller than planned in the summer period (effect on the result approx. 0.5 mil. kroons/32 thousand euros), preparations made for the expansion in retail sale and the start of stores created in Lithuania and Ukraine takes time (effect on the result 0.8 mil. kroons/51 thousand euros) and marketing expenditures in the Building Materials Division have increased (effect on the result approx. 0.8 mil. kroons/51 thousand euros). Moreover, the sales of the basic line production of the Building Materials Division were smaller as the summer stock could not have been produced sufficiently in advance. The turnover of the Furniture Division in the third quarter of 2007 amounted to 27.0 mil. kroons/1.7 mil. euros (27.0 mil. kroons/1.7 mil. euros during the same period in 2006) and the loss amounted to 0.4 mil. kroons/27 thousand euros (profit 1.7 mil. kroons/106 thousand euros in 2006). The turnover of the Building Materials Division in the third quarter of 2007 amounted to 24.0 mil. kroons/1.5 mil. euros (24.4 mil. kroons/1.6 mil. euros during the same period in 2006) and the profit amounted to 2.5 mil. kroons/157 thousand euros (3.6 mil. kroons/231 thousand euros in 2006). The profit of the Divisions does not reflect the general administrative costs of the corporation in the amount of 0.4 mil. kroons/23 thousand euros and the financial expenses of 0.7 mil. kroons/47 thousand euros (the general administrative costs 1.2 mil. kroons/75 thousand euros and the financial expenses of 0.6 mil. kroons/36 thousand euros in 2006) that have been recorded in the report of business segments as unallocated expenses. Forecast and development The company has made a strategic decision to focus on the profitable production of two basic product lines, namely Björkkvist and Villinki in order to improve the efficiency. Already today, the aforementioned product lines make more than 90% of the production of Viisnurk Furniture Division. Above all, the management board foresees that there are some reserves concerning the improvement of quality due to specialization and minimizing the time lost due to re-adjustments made for different product lines. The market has shown an increasing demand for both product lines and because of their classical design, there is little risk that the demand would decrease due to trends. The Management Board predicts the increase of furniture production mainly due to the increase of demand in its retail trade. According to the strategy of developing the retail sale of the furniture division, an international retail chain of furniture stores in our neighbouring markets operating under the trademark Skano shall be created. The plan is to open one new store in Ukraine in the 4th quarter. Moreover, the plan is to exchange the present location of the store in Riga for a more favourable location in the 4th quarter of 2007. According to the plans, Skano shall operate no less than eight stores in the Baltics and Ukraine by the end of 2007. Upon creating the retail unit, AS Viisnurk entered the business area of the retail of furniture and furnishing goods that is operated by a private limited company Skano, registered on September 1, 2003. AS Viisnurk holds 100% of the shares of OÜ Skano. New Isotex line in Building Material Division works in one shift. The main goal is to sell all production capacity in 2009. Also it means bigger marketing costs in 2008. On April 9, 2007 Pärnu City Government decided to initiate the detailed plan of Rääma street real estate development area. Presently, an architectural competition is in progress, the aim of which is to find the best solution for housing. Three architect's offices participated in the competition and two of them are competing in the second round. The architectural competition encompassed the entire registered immovable of Rääma 31, the first part of which is formed by the present real estate development region with the area of ca 2 ha. The prerequisite for the development of the second part would be the termination of the work of the Building Materials Division on the given territory. According to the works that made it to the second round, the building volume in case of Kavakava OÜ would be 40,000 m² (including 14,000 m² in the first part) and in case of Architect's Office Luhse & Tuhal, the building volume would be 60,000 m² (including 21,000 m² in the first part). Divisional review: -------------------------------------------------------------------------------- | Th EEK | Net sales | Profit | -------------------------------------------------------------------------------- | | 9 m 2007 | 9 m 2006 | 9 m 2007 | 9 m 2006 | -------------------------------------------------------------------------------- | Furniture Division | 94,820 | 91,799 | 2,941 | 3,073 | -------------------------------------------------------------------------------- | Incl. retail (Skano) | 13,702 | 7,432 | (1,208) | 925 | -------------------------------------------------------------------------------- | Building Materials | 85,685 | 68,387 | 12,596 | 8,579 | | Division | | | | | -------------------------------------------------------------------------------- | TOTAL | 180,505 | 160,186 | 15,537 | 11,652 | -------------------------------------------------------------------------------- | Unallocated expenses | | | (1,699) | (1,408) | -------------------------------------------------------------------------------- | OPERATING PROFIT | | | 13,838 | 10,244 | -------------------------------------------------------------------------------- | Net financial costs | | | (1,963) | (1,857) | -------------------------------------------------------------------------------- | PROFIT BEFORE TAXES | | | 11,875 | 8,387 | -------------------------------------------------------------------------------- | Prepaid income tax | | | (475) | (438) | -------------------------------------------------------------------------------- | NET PROFIT | | | 11,400 | 7,949 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Th EUR | Net sales | Profit | -------------------------------------------------------------------------------- | | 9 m 2007 | 9 m 2006 | 9 m 2007 | 9 m 2006 | -------------------------------------------------------------------------------- | Furniture Division | 6,060 | 5,867 | 188 | 196 | -------------------------------------------------------------------------------- | Incl. retail (Skano) | 876 | 475 | (77) | 59 | -------------------------------------------------------------------------------- | Building Materials | 5,476 | 4,371 | 805 | 549 | | Division | | | | | -------------------------------------------------------------------------------- | TOTAL | 11,536 | 10,238 | 993 | 745 | -------------------------------------------------------------------------------- | Unallocated expenses | | | (109) | (90) | -------------------------------------------------------------------------------- | OPERATING PROFIT | | | 884 | 655 | -------------------------------------------------------------------------------- | Net financial costs | | | (125) | (119) | -------------------------------------------------------------------------------- | PROFIT BEFORE TAXES | | | 759 | 536 | -------------------------------------------------------------------------------- | Prepaid income tax | | | (30) | (28) | -------------------------------------------------------------------------------- | NET PROFIT | | | 729 | 508 | -------------------------------------------------------------------------------- Furniture Division The nine-month net sales of AS Viisnurk Furniture Division were 94.8 mil. kroons/6.1 mil. euros (2006: 91.8 mil. kroons/5.9 mil. euros) and the economic result 2.9 mil. kroons/188 thousand euros (2006: 3.1 mil kroons/196 thousand euros) as a profit. As compared to the previous year the turnover of the division has increased by 3.0 mil. kroons/193 thousand euros. Furniture Production The Furniture Division's nine-month sales in the company's basic target markets in Finland and Russia have proceeded according to the plans and as compared to 2006 the sales have increased considerably. Nevertheless, the sales in the 3rd quarter have been smaller than planned. The following increase in sales is basically the result of the increase in retail sale. Among potential markets the division sees an opportunity to increase sales in Eastern and Central Europe. Furniture Retail - Skano Concerning the retail trade of the Furniture Division, the company continued its strategic activities in the 3rd quarter of 2007 in order to expand the retail trade to the neighbouring markets. The expansion of retail business includes opening new stores offering home furniture and furnishing goods in various Eastern European markets. Moreover, the company is searching for possibilities to enter the market of Central Europe. The retail sale of the Furniture Division shows a rising tendency. Within nine months this year the retail sale has increased by 84% as compared to the same period last year. At the same time, the sales of the stores opened before 30.09.2007 have increased 67% during the first nine months compared to the same period in 2006. One store was opened in Kharkiv (Ukraine) in August. Compared to the first 9 months of the previous year, the expansion costs of retail business have been 4 million kroons/0.26 million euros. The aforementioned amount includes the administrative costs of retail business and the losses of the stores opened in Lithuania and Ukraine. Building Materials Division The nine-month net sales of the Building Materials Division amounted to 85.7 mil. kroons/5.5 mil. euros and profit to 12.6 mil. kroons/0.8mil. euros. In the same period of the last year, the turnover of the division totalled 68.4 mil. kroons/4.4 mil. euros and the net profit 8.6 mil. kroons/0.5 mil. euros. As compared to the previous year the turnover of the division has increased by 17.3 mil. kroons/1.1 mil. euros and the profit by 4.0 mil. kroons/0.3 mil. euros. Building Boards The results of the first nine months of 2007 have most been influenced by the sale success of Isoplaat wind protection boards in Northern Europe. The demand for wind protection boards is increasing in the domestic market as well. In other neighbouring markets, especially in Latvia and Russia, the sale of floor boards has increased. Wind protection boards were the product group with the largest share in the sale of building boards. Interior Finishing Boards Sales volumes and results of Isotex interior finishing boards have increased due to the new range of products and changes in the image of the trademark. The new logo and image were launched in the 4th quarter of the previous year in order to mark the broader product range. In March ceiling panels with new patterns were introduced in Finland and Estonia helping to strengthen our leading positions in the above markets even more. In October, the selection of wall panels with textile cover increased by 3 new covers which make the entire product selection more attractive and help to differentiate clearly in tough competition. Ceiling panels comprised 78% (80% in 2006) and wall panels 22% (20% in 2006) of the sales of interior finishing boards. Sales of Isotex interior finishing boards comprised 35% (2006: 42%) of the total sales of the division in 2007. Interior finishing boards are being produced since 1996 and they are sold 100% under the company's own trademark Isotex. Consolidated balance sheet (pro forma) -------------------------------------------------------------------------------- | | Th EEK | Th EEK | Th EUR | Th EUR | -------------------------------------------------------------------------------- | | 30.9.2007 | 31.12.2006| 30.9.2007 | 31.12.2006 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and bank | 3,997 | 12,234 | 255 | 782 | -------------------------------------------------------------------------------- | Receivables and | 32,516 | 26,630 | 2,079 | 1,701 | | prepayments | | | | | -------------------------------------------------------------------------------- | Inventories | 46,441 | 44,970 | 2,968 | 2,874 | -------------------------------------------------------------------------------- | Total current assets | 82,954 | 83,834 | 5,302 | 5,357 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Investment property | 5,665 | 2,903 | 362 | 186 | -------------------------------------------------------------------------------- | Tangible fixed assets | 62,514 | 56,745 | 3,995 | 3,627 | -------------------------------------------------------------------------------- | Intangible fixed assets | 292 | 650 | 19 | 42 | -------------------------------------------------------------------------------- | Total fixed assets | 68,471 | 60,298 | 4,376 | 3,855 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | TOTAL ASSETS | 151,425 | 144,132 | 9,678 | 9,212 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Debt obligations | 2,147 | 19,017 | 137 | 1,215 | -------------------------------------------------------------------------------- | Payables and prepayments | 31,133 | 30,230 | 1,990 | 1,932 | -------------------------------------------------------------------------------- | Short-term provisions | 24 | 221 | 1 | 15 | -------------------------------------------------------------------------------- | Total current liabilities | 33,304 | 49,468 | 2,128 | 3,162 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current debt | 45,002 | 25,574 | 2,876 | 1,634 | | obligations | | | | | -------------------------------------------------------------------------------- | Non-current provisions | 3,047 | 3,047 | 195 | 195 | -------------------------------------------------------------------------------- | Total non-current | 48,049 | 28,621 | 3,071 | 1,829 | | liabilities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total liabilities | 81,353 | 78,089 | 5,199 | 4,991 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Share capital at nominal | 44,991 | 44,991 | 2,875 | 2,875 | | value | | | | | -------------------------------------------------------------------------------- | Issue premium | 5,799 | 7,795 | 371 | 498 | -------------------------------------------------------------------------------- | Statutory capital reserve | 4,499 | 4,499 | 288 | 288 | -------------------------------------------------------------------------------- | Currency translation | 24 | 0 | 1 | 0 | | reserve | | | | | -------------------------------------------------------------------------------- | Retained profits | 3,359 | (3,759) | 215 | (240) | -------------------------------------------------------------------------------- | Net profit for the year | 11,400 | 12,517 | 729 | 800 | -------------------------------------------------------------------------------- | Total equity | 70,072 | 66,043 | 4,479 | 4,221 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | TOTAL LIABILITIES AND | 151,425 | 144,132 | 9,678 | 9,212 | | EQUITY | | | | | -------------------------------------------------------------------------------- Consolidated income statement (pro forma) -------------------------------------------------------------------------------- | | Th EEK | Th EEK | Th EUR | Th EUR | -------------------------------------------------------------------------------- | | 9 m 2007 | 9 m 2006 | 9 m 2007 | 9 m 2006 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | RETURN ON SALES | 180,505 | 160,186 | 11,536 | 10,238 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cost of production sold | (143,348) | (134,162) | (9,162) | (8,574) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Gross profit | 37,157 | 26,024 | 2,374 | 1,664 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Marketing expenses | (21,175) | (14,404) | (1,353) | (921) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | General administrative | (1,699) | (1,408) | (109) | (90) | | expenses | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other income | 125 | 451 | 8 | 29 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other expenses | (570) | (419) | (36) | (27) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Operating profit | 13,838 | 10,244 | 884 | 655 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial income and | (1,963) | (1,857) | (125) | (119) | | financial expenses | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit before taxes | 11,875 | 8,387 | 759 | 536 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Prepaid income tax | (475) | (438) | (30) | (28) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | NET PROFIT FOR THE PERIOD | 11,400 | 7,949 | 729 | 508 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Basic earnings per share | 2.53 | 1.77 | 0.16 | 0.11 | -------------------------------------------------------------------------------- | Diluted earnings per share | 2.53 | 1.77 | 0.16 | 0.11 | -------------------------------------------------------------------------------- Einar Pähkel CFO +372 447 8331 einar.pahkel@viisnurk.ee