THE 3rd QUARTER AND NINE MONTHS IN SHORT
Consolidated net sales of the 9M of 2016 were 13.6 mil. euros, representing an 6,4% decrease compared to the same period in 2015 (14.6 mil. euros in 9M 2015). Consolidated EBITDA amounted to 207 thousand euros (EBITDA 811 thousand euros in 9M 2015). Reducing the stock volumes of own produced goods negatively influenced the EBITDA of 9M 2016 through changes in inventories in the amount of 576 thousand euros (In 9M 2015 the increase in stock had a positive effect to EBITDA in the amount of 354 thousand euros).
The turnover of Skano Fibreboard OÜ for 9M 2016 was 9.1 mil. euros (9M 2015 9.5 mil. euros), out of which Pärnu factory (including Isotex) sales was 5.3 mi. euros (9M 2015 5.5 mil. euros) and Püssi factory sales was 3.8 mil. euros (9M 2015 4.0 mil. euros). The operating loss of 9M 2016 was 104 (9M 2015 operating profit 315 thousand euros). The operating profit from Pärnu factory was 55 thousand euros (9M 2015 423 thousand euros) and Püssi factory has made an operating loss in the amount of 159 thousand euros (9M 2015 operating loss 108 thousand euros).
Sales mainly decreased in our core markets. As our main foreign markets Russia and Finland are still very weak due to the general economic situation we have been continuously expanding the list of our target markets and made significant efforts in product development.
Sales of Suomen Tuulielijona OY in 9M 2016 decreased 13% compared to last year, which amounted to 3.7 mil. euros (4.3 mil euros in 9M 2015). Suomen Tuulileijona OY is the wholesaler of Skano fibreboard products in Finland.
The turnover of Skano Furniture Factory OÜ decreased in 9M 2016 by 12.2% and amounted to 3.2 mil. euros (9M 2015 3.6 mil. euros). The operating loss in 9M 2016 was 325 thousand euros and in 9M 2015 the operating loss was 235 thousand euros. The operating loss was affected by lower sales and decrease of inventory through changes in inventory of finished goods. In 9M 2016 sales to Finland decreased by 14.7% due to very weak demand as compared to the same period in 2015. In addition to seeking new sales possibilities in the current markets the company has made considerable effort to enter into new markets and to lower the production costs.
The priority of the management of the company is continuously to ensure the sales quantity of the produced goods from both factories in order to maximize production efficiency and efforts are taken in this direction on an on-going basis.
The turnover of Skano Furniture OÜ retail chain decreased 14.8% as compared to the same period last year and amounted to 1.6 mil. euros (9M 2015 1.9 mil. euros). Retail sales decreased in all markets. The sales of Skano Furniture Factory OÜ own furniture still forms a considerable part of the retail sales.
INCOME STATEMENT
Consolidated net sales in 9M 2016 was 13.6 mil. euros (14.6 mil. euros in same period of 2015) representing an 6.4% decrease compared to 9M 2015. Consolidated operating loss amounted to 423 thousand euros (operating profit 183 thousand euros in same period 2015). The consolidated operating margin was -3.1% (1.3% in 9M 2015).
Consolidated net loss for 9M 2016 amounted to 667 thousand euros (compared to net loss 46 thousand euros in 9M 2015), and the net margin was -4.9% (-0.3% in H1 2015).
POSITION OF FINANCIAL STATEMENT
As of 30.09.2016 the total assets of Skano Group AS amounted to 13.1 mil. euros (30.09.2015: 14.3 mil. euros). The liabilities of the company accounted for 67.4% (30.09.2015: 63.8%) thereof, i.e. 8.8 mil. euros (30.06.2015: 9.1 mil. euros).
Receivables and prepayments amounted 1.8 mil. euros what is 0.1 mil. euros more than in 9M 2015 (30.06.2015: 1.7 mil. euros). Inventories have decreased for the amount of 0.6 mil euros with 12 months, amounting to 2.8 mil. euros on 30.09.2016. (30.09.2015: 3.4 mil. euros). Property, plant and intangibles amounted to 8.2 mil. euros as of 30.09.2016 (8,5 mil. euros as of 30.09.2015).
Short-term loans have decreased by 0.3 mil. euros and amounted to 1.6 mil. euros in 30.09.2016 which was a result of usage of bank overdraft and factoring and restructuring of the loan between short- and long-term payment schedule (30.09.2015: 1.9 mil. euros). Supplier payables, tax liabilities, other payables, including payables to employees, and provisions amounted to 2.7 mil. euros (30.09.2015: 2.9 mil. euros).
Long-term loans have increased by 0.15 mil euros and amounted to 4.2 mil. euros in 30.09.2016 (31.09.2015: 4.0 mil. euros). The increase was caused by restructuring of the loan between short- and long-term payment schedule.
Current and non-current liabilities have decreased by 0.3 mil. euros to 8.8 mil. euros (30.09.2015: 9.1 mil. euros).
DIVISIONAL REVIEW:
NET SALES BY BUSINESS SEGMENTS
| th EUR | % of net sales | |||
| 9M 2016 | 9M 2015 | 9M 2016 | 9M 2015 | |
| Skano Fibreboard OÜ | 9,407 | 9,767 | 69.0% | 67.1% |
| Skano Furniture Factory OÜ | 3,181 | 3,622 | 23.3% | 24.9% |
| Skano Furniture OÜ retail | 1,610 | 1,889 | 11.8% | 13.0% |
| Suomen Tuulileijona OY | 3,725 | 4,283 | 27.3% | 29.4% |
| Elimination | (4,294) | (4,997) | (31.5%) | (34.3%) |
| TOTAL | 13,629 | 14,564 | 100.0% | 100.0% |
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| 9M 2016 | 9M 2015 | 9M 2016 | 9M 2015 | |
| Finland | 5,087 | 5,762 | 37.3% | 39.6% |
| Estonia | 2,395 | 2,468 | 17.6% | 16.9% |
| Russia | 2,145 | 2,433 | 15.7% | 16.7% |
| Great Britain | 890 | 864 | 6.5% | 5.9% |
| Latvia | 539 | 575 | 4.0% | 3.9% |
| Portugal | 538 | 75 | 3.9% | 0.5% |
| Sweden | 463 | 454 | 3.4% | 3.1% |
| Ukraine | 276 | 293 | 2.0% | 2.0% |
| Lithuania | 274 | 320 | 2.0% | 2.2% |
| SAR | 230 | 440 | 1.7% | 3.0% |
| Germany | 164 | 120 | 1.2% | 0.8% |
| Denmark | 112 | 138 | 0.8% | 0.9% |
| Other countries | 516 | 622 | 3.8% | 4.3% |
| TOTAL | 13,629 | 14,564 | 100.0% | 100.0% |
Regarding the markets. turnover has increased in Great Britain and in new market Portugal. The decrease in turnover was mainly because of lower sales in Russia and Finland.
PROFIT BY BUSINESS SEGMENTS
| th EUR | 9M 2016 | 9M 2015 |
| Skano Furniture factory | (325) | (235) |
| Skano Furniture retail | (180) | (154) |
| Skano Fibreboard | (7) | 364 |
| Suomen Tuulileijona OY | 31 | 39 |
| Elimination | 58 | 169 |
| TOTAL | (423) | 183 |
| Net financial costs | (240) | (226) |
| Income tax | (4) | (3) |
| NET PROFIT | (667) | (46) |
SKANO FIBREBOARD
The net sales of Skano Fibreboard in 9M 2016 amounted to 9.6 mil. euros and operating loss to 7 thousand euros. In the same period 2015. the turnover of Skano Fibreboard totalled to 9.9 mil. euros and the operating profit from main activities 364 thousand euros.
The decrease in sales in 9M 2016 compare to last year was mainly because of decrease of sales in Finland and Russia. what was 58.0% from total sales in 9M 2015 and has decreased to 52.8% in 9M 2016. Sales increased most in Great Britain and Portugal.
NET SALES BY GEOGRAPHICAL SEGMENTS
| th EUR | % of net sales | |||
| 9M 2016 | 9M 2015 | 9M 2016 | 9M 2015 | |
| Finland (incl. Suomen Tuulileijona OY | 3,958 | 4,431 | 41.3% | 44.6% |
| Estonia | 1,320 | 1,362 | 13.8% | 13.7% |
| Russia | 1,104 | 1,302 | 11.5% | 13.1% |
| Great Britain | 869 | 827 | 9.1% | 8.3% |
| Portugal | 538 | 75 | 5.6% | 0.8% |
| Sweden | 463 | 454 | 4.8% | 4.6% |
| Latvia | 262 | 219 | 2.7% | 2.2% |
| SAR | 230 | 440 | 2.4% | 4.4% |
| Lithuania | 124 | 73 | 1.3% | 0.7% |
| Denmark | 112 | 138 | 1.2% | 1.4% |
| Germany | 111 | 120 | 1.2% | 1.2% |
| Other countries | 498 | 487 | 5.2% | 4.9% |
| TOTAL | 9,589 | 9,928 | 100.0% | 100.0% |
| th EUR | Net sales | Operating Profit | ||
| 9M 2016 | 9M 2015 | 9M 2016 | 9M 2015 | |
| Pärnu Fibreborad factory | 3,960 | 3,952 | 100 | 425 |
| Püssi Fibreboard factory | 3,818 | 3,986 | (159) | (108) |
| Pärnu interior boards factory (Isotex) | 1,304 | 1,519 | (45) | (2) |
| TOTAL | 9,082 | 9,457 | (104) | 315 |
The net sales of the Pärnu fibreboard factory together with interior boards factory in 9M 2016 was 5.3 mil. euros, what is 3.8 % less that in 9M 2015 amounted in 5.5 mil. euros.
The turnover of Püssi fibreboard factory in 9M 2016 amounted to 3.8 mil. euros decreasing 5.0% compared to the same period in 2015 (turnover 4.0 mil. euros in 9M 2015).
SKANO FURNITURE
FURNITURE PRODUCTION
The net sales of the Skano Furniture Factory in 9M 2016 amounted to 3.2 mil. euros and operating loss to 325 thousand euros. In the same period last year, the turnover of the factory amounted to 3.6 mil. euros and the operating loss to 235 thousand euros. The sales decrease was mainly due to sales decrease in Finland. The operating loss was affected by decrease in inventories through changes in finished goods inventories.
FURNITURE FACTORY SALES BY COUNTRIES
| th EUR | % of net sales | |||
| 9M 2016 | 9M 2015 | 9M 2016 | 9M 2015 | |
| Finland | 1,129 | 1,323 | 35.5% | 36.5% |
| Russia | 1,039 | 1,131 | 32.7% | 31.2% |
| Other countries | 262 | 293 | 8.2% | 8.1% |
| Subsidiaries | 751 | 875 | 23.6% | 24.2% |
| TOTAL | 3,181 | 3,622 | 100.0% | 100.0% |
FURNITURE RETAIL SALES
Skano Group AS retail business is operated by a private limited daughter company Skano Furniture OÜ and its subsidiaries in Latvia, Lithuania and Ukraine. As of 30.09.2016 Skano has totally 10 stores in Tallinn (3), Tartu, Pärnu, Riga, Vilnius, Kiev (2) and Kharkiv. In October 2016 the shop in Tallinn Rocca al Mare was closed and the shop in Pärnu Road was enlarged. Also one shop in Kiev was closed in October 2016.
RETAIL SALES BY COUNTRIES
| th EUR | % of net sales | Number of stores | ||||
| 9M 2016 | 9M 2015 | 9M 2016 | 9M 2015 | 9M 2016 | 9M 2015 | |
| Estonia* | 998 | 1,081 | 62.0% | 57.2% | 5 | 5 |
| Latvia | 277 | 356 | 17.2% | 18.8% | 1 | 1 |
| Ukraine** | 185 | 205 | 11.5% | 10.9% | 3 | 4 |
| Lithuania | 150 | 247 | 9.3% | 13.1% | 1 | 1 |
| TOTAL | 1,610 | 1,889 | 100.0% | 100.0% | 10 | 11 |
* In October 2016 the shop in Tallinn Rocca al Mare center was closed and the amount of shops in Estonia remained 4.
** In October 2016 the shop in Kiev Arax center was closed and the 2 shops remain in Ukraine.
Retail sale amounted to 1.6 mil. euros in 9M 2016 and operating loss 180 thousand euros (sales 1.9 mil. euros and operating loss 154 thousand euros in 9M 2015). Operating loss contains also a loss from a drop of currency exchange rate of hryvnia in the amount of 77 thousand euros (in 9M 2015: exchange rate loss 187 thousand euros).
FORECAST AND DEVELOPMENT
SKANO FIBREBOARD. Skano Fibreboard sales in 4Q 2016 will be similar compared to sales of the same period last year. Sales in our core markets are lower due to weak demand which we expect to compensate with sales in new markets. On the other hand we see already better results in efficiency even with lower production volumes compared to last year as a result of the recent production improvement plan. Also the cost control gives better results.
In July 2016 we received Sintef Certification, which has no opened the doors to sell our wind barrier boards on the Norwegian market.
SKANO FURNITURE FACTORY. In 4Q 2016 the sales of the furniture factory will show a small decrease compare to 4Q 2015. The management is concentrating on cost savings what will give the positive start to the next year.
SKANO FURNITURE RETAIL SALES. We expect steady sales in the Baltics. Ukraine results are affected by the political and economic instability.
FINANCIAL HIGHLIGHTS
| th EUR | 9M 2016 | 9M 2015 | 9M 2014 |
| Income statement | |||
| Revenue | 13,629 | 14,564 | 15,668 |
| EBITDA | 206 | 811 | 696 |
| EBITDA margin | 1.5% | 5.6% | 4.4% |
| Operating profit | (423) | 183 | 29 |
| Operating margin | (3.1%) | 1.3% | 0.2% |
| Net profit | (667) | (46) | (179) |
| Net margin | (4.9%) | (0.3%) | (1.1%) |
| Balance sheet (30.09) | |||
| Total assets | 13,074 | 14,291 | 15,503 |
| Return on assets | (5.1%) | (0.3%) | (1.2%) |
| Equity | 4,259 | 5,180 | 6,586 |
| Return on equity | (15.6%) | (0.9%) | (2.7%) |
| Debt-to-equity ratio | 67.4% | 63.8% | 57.5% |
| Share (30.09) | |||
| Closing price | 0.493 | 0.700 | 0.930 |
| Earnings per share | (0.15) | (0.01) | (0.04) |
| Price-earnings ratio | (3.29) | (70.00) | (23.25) |
| Book value of a share | 0.95 | 1.15 | 1.46 |
| Market to book ratio | 0.52 | 0.61 | 0.64 |
| Market capitalization | 2,218 | 3,149 | 4,184 |
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 = Closing price / Earnings per share
Book value of a share = Equity / Total shares
Market to book ratio = Closing price / Book value of a share
Market capitalization = Closing price * Total shares
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| th EUR | 30.09.2016 | 31.12.2015 | 30.09.2015 |
| Cash and bank | 248 | 292 | 624 |
| Receivables and prepayments | 1,790 | 997 | 1,735 |
| Inventories | 2,839 | 3,426 | 3,439 |
| Total current assets | 4,877 | 4,715 | 5,798 |
| Investment property | 405 | 406 | 406 |
| Tangible fixed assets | 7,720 | 8,120 | 8,064 |
| Intangible fixed assets | 72 | 21 | 23 |
| Total fixed assets | 8,197 | 8,547 | 8,493 |
| TOTAL ASSETS | 13,074 | 13,262 | 14,291 |
| Debt obligations | 1,649 | 1,253 | 1,908 |
| Payables and prepayments | 2,770 | 2,684 | 2,942 |
| Short-term provisions | 5 | 15 | 4 |
| Total current liabilities | 4,424 | 3,952 | 4,854 |
| Non-current debt obligations | 4,163 | 4,163 | 4,013 |
| Non-current provisions | 228 | 228 | 244 |
| Total non-current liabilities | 4,391 | 4,391 | 4,257 |
| Total liabilities | 8,815 | 8,343 | 9,111 |
| Share capital at nominal value | 2,699 | 2,699 | 2,699 |
| Issue premium | 364 | 364 | 364 |
| Statutory capital reserve | 288 | 288 | 288 |
| Other reserves | 6 | 7 | 2 |
| Currency translation | 17 | 7 | (90) |
| Retained profits | 1,552 | 1,965 | 1,961 |
| Net profit (loss) for the year | (667) | (411) | (46) |
| Total equity | 4,259 | 4,919 | 5,180 |
| TOTAL LIABILITIES AND EQUITY | 13,074 | 13,262 | 14,291 |
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
| th EUR | 3Q 2016 | 3Q 2015 | 9 m 2016 | 9 m 2015 | |
| RETURN ON SALES | 4,652 | 4,803 | 13,629 | 14,564 | |
| Cost of production sold | (3,636) | (3,753) | (11,075) | (11,327) | |
| Gross profit | 1,016 | 1,050 | 2,554 | 3,237 | |
| Marketing expenses | (712) | (768) | (2,350) | (2,395) | |
| General administrative expenses | (159) | (168) | (459) | (521) | |
| Other income | 3 | 63 | 71 | 329 | |
| Other expenses | (116) | (98) | (239) | (467) | |
| Operating profit (loss) | 32 | 79 | (423) | 183 | |
| Financial income and financial expenses | (74) | (74) | (240) | (226) | |
| Profit (loss) before taxes | (42) | 5 | (663) | (43) | |
| Prepaid income tax | (1) | - | (4) | (3) | |
| NET PROFIT (LOSS) FOR THE PERIOD | (43) | 5 | (667) | (46) | |
| Basic earnings per share | (0.01) | (0.00) | (0.15) | (0.01) | |
| Diluted earnings per share | (0.01) | (0.00) | (0.15) | (0.01) | |
| Other comprehensive income: | |||||
| Currency translation differences | 8 | 39 | 10 | (74) | |
| TOTAL COMPREHENSIVE INCOME | (35) | 44 | (657) | (120) | |
The planned time of publishing of interim report of the fourth quarter of 2016 is week 9 in 2017 (27-28th of February 2017)
Lauri Treimann
Member of the Management Board
+372 51 12 602
