NEO INDUSTRIAL PLC FINANCIAL STATEMENT RELEASE 13.2.2018 3.30 pm
Correction to earlier published Financial statement release: Cable segment’s operating result in chart was incorrect, correct operating result is EUR 5.6 million. In the text part the operating result was correct.
NEO INDUSTRIAL PLC: OPERATING RESULT WAS GOOD AND THE BALANCE SHEET HAS STRENGHTENED SIGNIFICANTLY
January-December:
- The Neo Industrial Group’s turnover was EUR 110.9 million (101.0 million)
- The operating result was EUR 5.1 (5.9) million.
- The Cable segment´s operating result was EUR 5.6 million (6.5 million).
- The Group’s result for the period was EUR 3.0 million (3.3 million)
- ROI was 25.4 (22.6) percent
- Dividend proposal EUR 0.08 (0.04) per share, payment in two parts
KEY FIGURES
| 1-12/2017 | 1-12/2016 | Change | |
| Turnover, EUR million | 110.9 | 101.0 | 9.8 % |
| Operating result, EUR million | 5.1 | 5.9 | -14.1 % |
| Result for the period, EUR million | 3.0 | 3.3 | -7.8 % |
| Earnings per share, EUR | 0.51 | 0.55 | -6.9 % |
| ROI, % | 25.4 | 22.6 | |
| IAS 19 corrected Equity ratio, % | 30.4 | 22.1 |
MANAGING DIRECTOR RALF SOHLSTRÖM:
The turnover increased due active measures to improve the capacity utilization rate of the factories and the delivery performance as well due the good level of construction business. Company succeeded well with loading the factories during the low season in winter.
The decline in the operating profit is caused by increasing raw material prices which are always transferred with delay into the sales prices. In addition to that during the last quarter of the year the operating profit was stressed by the changes in exchange rates, especially the Norwegian and Swedish krona.
The Return on Investment was 25.4 (22.6) percent. During 2017 the IAS 19 corrected Equity ratio increased to 30.4 (22.0) percent and Gearing decreased to 61.2 (119.8) percent.
TURNOVER AND OPERATING RESULT
The Neo Industrial Group’s turnover in 2017 was EUR 110.9 million (101.0 million in 2016). Its result for the full year was EUR 3.0 million (3.3 million).
BALANCE SHEET AND FINANCING
The financial liabilities of the Group decreased during 2017. At the end of the financial year the interest bearing liabilities were EUR 9.8 (13.8) million, of which other than finance lease liabilities were EUR 6.2 (10.4) million. In the end of the financial period the balance sheet total stood at EUR 43.2 million (44.2). During the year the value of the stocks was high and money employed by stocks affected from time to time to the liquidity.
Both the Return on Investment 25.4 (22.6) percent and the IAS 19 corrected Equity ratio 30.4 (22.0) percent improved due to decline of financial liabilities and profitable result year 2017.
MAJOR EVENTS DURING THE FINANCIAL PERIOD
Neo Industrial Plc’s subsidiary Reka Cables Ltd has received substantial contracts for underground power cables of a total value of approximately EUR 20 million. The deliveries will be made during 2018 and 2019. The underground power cables are used when building grids that are not vulnerable to weather conditions.
SEGMENTS
Neo Industrial's business segment is Cable Industry.
CABLE
| H2/2017 | H2/2016 | Change | 2017 | 2016 | Change | |
| Turnover, EUR million | 52.9 | 50.8 | 4.1 % | 110.9 | 101.0 | 9.8 % |
| Operating result, EUR million | 1.8 | 2.2 | -18.6 % | 5.6 | 6.5 | -26.3 % |
The Cable segment’s turnover was EUR 110.9 million (101.0). Its operating profit was EUR 5.6 million (6.5 million).
The sales volume in the cable market of Nordic countries, the main market area of Reka Cables Ltd, was higher than year before. The sales volume in other market areas decreased from previous year.
The industry's key raw materials are copper, aluminum and plastics. At the beginning of the year the price of copper was EUR 5365 and the price of aluminum was EUR 1638. At the end of the financial year, the price of copper was EUR 5967 and the price of aluminum EUR 1869 which is 11 percent and 14 percent higher than in the beginning of the year.
At its highest point, the daily price of copper during the review period was EUR 6043 in December, and at its lowest in June, at EUR 4925. The price of aluminum has been at its highest in November, when it was EUR 1883, and its lowest in August, when it was EUR 1591.
In purchasing metals, partial price hedging is utilized through commodity derivatives.
Investments fulfilled, EUR 2.9 million (1.8 million in 2016) were mainly targeted at improving productivity. Also maintenance investments were made.
Turnover for Nestor Cables Ltd, an associated company, was EUR 29.4 million (25.0 million). The operating result was positive and higher 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.
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. Partial price fixing is used with electricity.
NEAR-TERM OUTLOOK
The construction continues to be on a good level in our main market areas. The management believes that grid constructors will continue to invest in ground cabling projects to ensure distribution reliability. For the financial year 2018, Neo Industrial's turnover is expected to increase from the previous financial year and the operating result is expected to increase clearly from the previous financial year. Large variations between different quarters are part of the business and they may differ from year to 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 1,468,661.14 including the result of the review period EUR 840,477.77. The Board proposes to the Annual General Meeting that a dividend of EUR 0.08 in total per share will be paid in two parts. EUR 0.04 per share was paid for 2016. According to the Board proposed share of dividend is not a risk to company’s liquidity.
ANNUAL GENERAL MEETING 2018
Neo Industrial Plc’s Annual General Meeting will be held in Hyvinkää on 22 March 2018 at 10.00 a.m. A separate invitation will be published on 1 March 2018.
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, 13 February 2018
Neo Industrial Plc
Board of Directors
Further information:
Ralf Sohlström, Managing Director, tel. +358 40 770 2720
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.
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