Neo Industrial Plc STOCK EXCHANGE RELEASE 4 August 2011 at 14:00
NEO INDUSTRIAL'S INTERIM REPORT 1 JANUARY – 30 JUNE 2011
Comparable figures ( ) refer to last year's corresponding period unless otherwise stated.
SUMMARY FOR THE FIRST HALF 2011
- The Group’s net sales were EUR 67.9 (39.1) million.
- Operating result EUR -9.2 (-4.0) million, mainly due to the launch of the viscose business.
- Cable business net sales grew by 35 %, EUR 52.9 (39.1) million.
- Cable business reduced its operating loss; EUR -0.9 (-3.4) million.
- Viscose Fibers business net sales were EUR 15.0 million.
- Viscose Fibers result was negative, EUR 7.8 million.
- The Single Family Housing segment’s net sales were EUR 50.2 (46.6) million, the result still at a loss.
SUMMARY FOR THE SECOND QUARTER 2011
- The Group’s net sales were EUR 36.3 (22.5) million.
- Operating result EUR -2.0 (-1.7) million.
- Cable business net sales EUR 28.4 (22.5) million.
- Cable business operating result EUR -0.5 (-1.4) million.
- The cable market in all Nordic countries was active, sales grew also in the Baltics.
- Viscose Fibers business net sales EUR 7.9 million.
- Viscose business loss was reduced by technology innovation to EUR -1.2 million.
- Single Family Housing business net sales was EUR 27.7 (32.5) million.
- Finndomo decided to divest its Swedish operations.
Managing Director Markku E. Rentto:
- For our businesses, the second quarter of 2011 was better than the first one. Both Cable and Viscose businesses increased their net sales and profitability improved in both. The Cable market is thriving, with cable business operational activities already profitable in the second quarter.
The Viscose business continues an eventful journey. The second quarter started with a maintenance shutdown due to dissolving pulp availability problems. The Avilon factory started up again 21 April 2011 at full capacity, but the overheated market situation caused a longer and still ongoing shutdown in July.
In addition to production however, Avilon activities also include research and development activities. In the spring, Avilon announced a technological innovation, which not only solves the factory’s raw material supply, is also important for new business. License sales are already being negotiated. In line with its strategy, Avilon is becoming a technological pioneer in its field.
Sales for the Single Family Housing business, our associated company Finndomo, fell in the second quarter typical for the time of year and comparable to previous years. Finndomo's Board has decided to divest the company’s Swedish operations, and related arrangements are underway. In the future, Finndomo can fully concentrate on its operations in Finland, the Baltic countries and Russia. We expect Finndomo's profitability to improve towards the end of the year.
KEY FIGURES
| 4-6/2011 | 4-6/2010 | 1–6 /2011 | 1–6 /2010 | |
| Turnover, EUR million, of which | 36.3 | 22.5 | 67.9 | 39.1 |
| - Cable business | 28.4 | 22.5 | 52.9 | 39.1 |
| - Viscose Fibers | 7.9 | 0.0 | 15.0 | 0.0 |
| - Other operations and eliminations | 0.0 | 0.0 | 0.0 | 0.0 |
| Operating result, EUR million, of which | -2.0 | -1.7 | -9.2 | -4.0 |
| - Cable business | -0.5 | -1.4 | -0.9 | -3.4 |
| - Viscose Fibers | -1.2 | 0.0 | -7.8 | 0.0 |
| - Other operations | -0,3 | -0,3 | -0,5 | -0.6 |
| Profit or loss for the period, EUR million | -4.2 | -1.3 | -11.7 | -3.6 |
| Earnings per share, EUR | -0.66 | -0.24 | -1.92 | -0.60 |
| Return on invested capital,% (ROI) | -15.4 | -4.0 | ||
| Equity ratio, % | 23.4 | 44.0 |
FINANCIAL RESULT, BALANCE SHEET AND FINANCING
Neo Industrial Group's net sales for January-June 2011 were EUR 67.9 (39.1) million. Net income for the period remained negative, EUR -9.2 (-4.0) million. The main reason for the negative result was the establishment of the Viscose Fibers business. Avilon’s launching costs included the delay of start up from December 2010 to the middle of January 2011, as well as difficulties in raw material availability and the associated reduction of capacity utilization at the end of the first quarter and the maintenance shutdown early April.
The Viscose Fibers business net sales for January-June 2011 were EUR 15.0 million. The business activity’s loss was EUR 7.8 million.
The Cable business net sales during the period rose significantly from the previous year to EUR 52.9 (39.1) million, but the result was a loss of EUR 0.9 (-3.4) million.
Net sales of the Single Family Housing business (EUR 50.2 million January-June 2011) are not included in the Group's net sales figure but are described in the business review. The segment has been reported from May 2010, so comparative figures for 2010 are not reported in 2011. Neo Industrial’s Single Family Housing business share of the Finndomo group result is recorded in the Consolidated Income Statement under the item “Share of the result of associates”.
At the end of the period under review, the balance sheet total stood at EUR 128.8 (107.1) million. Neo Industrial’s liquidity situation has been tight due to the Viscose Fibers business productions start-up and the multiplicity of the related financing arrangements, as well as sharp price increases of raw materials in the Cable business.
Reka Cables’ working capital is financed with a revolving bank credit of EUR 6.0 million and factoring credit of 9.5 million. EUR 0.2 million of the bank credit was unused on 30 June 2011. Of the factoring facility, EUR 1.4 million was unused. Avilon has revolving bank credit of EUR 2.2 million which was fully utilized and a EUR 6.0 million factoring credit, of which EUR 3.3 million was not used as of 30 June 2011.
This unaudited report has been prepared in accordance with IAS 34 requirements for interim reports. The same principles have been followed as in the financial statement for 2010. During the review period, the Group adopted new accounting principles for handling Avilon Ltd's emission rights. Emission rights received are recognized as intangible assets and deferred income. The handling of emission rights is described further in the interim report accounting policies section.
MAJOR EVENTS DURING THE REVIEW PERIOD
Cable business
Net sales for January-June 2011 were EUR 52.9 (39.1) million, a growth of 35%. Operating loss decreased to EUR –0.9 (-3.4) million. The second quarter loss (EUR -0.5 million) reflects the insurance compensation (EUR 1.9 million) from the 2010 Riihimäki machinery breakdown, which was EUR 0.2 million less than predicted, amortized in both the first and second quarters. The business’ operational activities were profitable in the second quarter.
Cable business sales grew significantly in the second quarter. Cable market demand was lively throughout the Nordic and Baltic countries. Sales in Finland to wholesalers, contractors and utilities increased. Reka Cables increased its domestic market share slightly. At the end of the period, the company's quotation base was good and the order backlog towards the holiday season is typically lower than the end of March.
The Russian market situation for medium voltage cables during the second quarter was still rather weak, and the competitive situation continued to be tight. Sales of special cables although increased. Cable business units in Russia provided a positive operating result during the review period.
Raw material price increases and fluctuations still challenge Reka Cables. All metal commodity prices were declining in the spring, but began to rise again in June. Also availability of raw materials remained challenging in some places. Reka Cables strives to manage the situation with safeguards and good working capital management. All of the Reka Cables’ units in Finland increased volumes from the previous year.
Net sales (January- June) of associate company, telecommunications and fiber optic cables manufacturer, Nestor Cables Ltd was EUR 11.9 (10.1) million. Net sales rose nearly 20% compared to last year, in particular the optical fiber cable market recovered. The second quarter results were positive, but the entire result for the period was still negative.
Viscose Fibers
Net sales of the Viscose Fibers business was, January-June, EUR 15.0 million. The business result was a EUR 7.8 million loss due to production start-up costs. Start-up expenses included the Avilon factory start-up, transition of the start from December 2010 to mid-January 2011, difficulties in the availability of dissolving pulp and the resultant reduced capacity utilization at the end of the first quarter and maintenance shutdown in early April.
The Avilon factory was down for the first three weeks of April for maintenance and shortage of dissolving pulp. During the outage Avilon developed and installed production technology that significantly reduces raw material costs. The operating loss was reduced significantly in the second quarter thanks to the new technology. May was Avilon’s first profitable month.
Suspended production due to the dissolving pulp shortage recommenced after a maintenance shutdown as one production line started up at full capacity on 21 April 2011. Avilon solved the raw material supply problem with its own technological innovation and is thus no longer dependent on the dissolving pulp main raw material. The new technology is a revolutionary innovation in the field of fiber. It is becoming a strategic new business for the company and is now commercialized through licensing. Neo Industrial announced the innovation on 19 May 2011.
Viscose fiber demand in the first quarter exceeded supply, but in the second quarter a fall in viscose fiber prices followed market overheating.
For Avilon specialty products, fire retardant fiber, the demand was rather weak in the second quarter due to the low level of residential construction in the U.S, the main market area. Fire retardant fiber applications are however diversifying, and its use will grow with the development safety standards, which creates a strong interest in Avilon products. Avilon has rapidly achieved credibility for fire retardant fiber in the United States.
During the review period, Avilon’s emission rights were sold in entirety. The measure had no immediate effect on earnings.
Single Family Housing
In the Single Family House segment, Finndomo's net sales for January-June was EUR 50.2 (46.6) million. Net sales declined in April-June from the previous year and amounted to EUR 27.7 (32.5) million, which does not include the share of operations in Sweden during June. The result was a loss in both quarters primarily because of the Swedish business unit viability. In the beginning of the year, domestic sales were lower in the whole sector than the previous year, which was reflected also Finndomo's order book.
Finndomo’s Board has decided to divest the company’s Swedish operations, and related arrangements are underway. It is possible that there will be later realized liabilities from the Swedish company, the size of which will be specified in the next interim report.
In the future, the Finndomo group will include the parent company of Finndomo (Sonkajärvi and Hartola house factories), and its subsidiaries: Finndomo Rakennus Oy (project construction), Finndomo Ikkunat Oy (Haukipudas window factory), Lagerholm Finnsauna Ltd (indoor sauna and a garden cottage factory in Ruotsinpyhtää), Finndomo Invest Oy and OOO Finndomo Rus (sales office in St. Petersburg) and Suomen Kotiasunnot Oy (this company is not functioning during the current fiscal year).
Finndomo's shareholders' equity was strengthened during the review period by additional investments from the principal shareholders and other measures to a total of EUR 32.7 million. Neo Industrial’s additional investment was converted into an equity investment during the review period. The owners’ equity stakes, in addition to the Company's invested unrestricted equity fund, increased by EUR 25.0 million. The effect of this procedure for Neo Industrial’s EUR 7.6 million, takes into account the interim balance sheet and statement of changes in shareholders' equity. The Swedish operations detachment results in an income statement impact to share of associates' profit of EUR -1.5 million, which is based on the Swedish operations’ fair value allocation at the time of the Finndomo acquisition in 2010 and the reduction in balance sheet values.
Detached house deliveries started in Finndomo's regional construction project in Pakila during the review period. The company will deliver 16 homes to the Pakila area, and has more than 300 family house projects in regional low rise developments under construction or planned in Finland.
MAJOR EVENTS AFTER THE REVIEW PERIOD
Neo Industrial changed its category in the Global Industry Classification Standard at the Nasdaq OMX Helsinki as of 1 July 2011. The company's new sector is the stock exchange's Small Cap/Industrials industry, which represents the company's current activities better than the previous financial industrial classification. Neo Industrial announced the change in the classification on 29 June 2011.
The Viscose Fibers business, Avilon Ltd, temporarily shut down production at the end of July due to viscose fiber's poor market situation. Neo Industrial announced this on 12 July 2011.
In July, Reka Cables carried out an IFRS voluntary arrangement whereby part of the company's accounts receivable and the associated funding will no longer appear in the Neo Industrial's balance sheet. The arrangement does not reduce the Reka Cables factoring credit.
Avilon started its technology business at the end of July. The technology that converts paper grade pulp into suitable raw material for viscose manufacture, announced in May, has raised strong interest in the market. Avilon is currently negotiating license sales with potential buyers. Neo Industrial announced this on 2 August 2011.
INVESTMENTS
The Group's investments during the period totaled EUR 3.9 (0.8) million, of which EUR 0.1 million was allocated to the Cable business and EUR 3.8 million to the Viscose Fibers business. The Group's long-term leases of real estate are taken into account according to IFRS under the provisions of fixed assets. Neo Industrial also made a slightly less than EUR 3 million additional investment in Finndomo during the review period, which was converted into an equity investment during the second quarter.
SHARES AND SHARE CAPITAL
Neo Industrial Plc’s share capital is divided into A and B shares. The total share capital including all shares stood at EUR 24,082,000 on 30 June 2011 and the number of shares was 6,020,360. The number of shares includes 92,727 B shares owned by Neo Industrial. The holding represents 1.5% of the company’s share capital and 1.1% of the votes. The company held no A shares. Neo Industrial Corporation B-shares (NEO1V) are listed on the NASDAQ OMX Helsinki Stock Exchange's Main List.
| Company shares | 30.6.2011 | 30.6.2010 |
| Company share capital (EUR) | 24,082,000 | 24,082,000 |
| A shares (20 votes/share) | 139,600 | 139,600 |
| B shares (1 vote/share) | 5,880,760 | 5,880,760 |
| Total | 6,020,360 | 6,020,360 |
| B shares held by the company | 91,727 | 87,517 |
A total of 222 336 (222 167) of the company's Class B shares traded on the NASDAQ OMX Helsinki in January-June, which corresponded to 3.7% (3.7%) of the total number of shares. The share price on 30 June 2011 was EUR 8.05 (5.91) per share, and the period average exchange rate January-June was EUR 7.48 (6.85), the lowest quotation was EUR 5.51 (5.91) and the highest EUR 9.43 (8.20). The company's market capitalization was valued at EUR 47.3 (37.6) million on 30 June 2011.
REPURCHASE AND ASSIGNMENT OF OWN SHARES
During the period, Neo Industrial did not exercise the authorizations of the general meetings (10 June 2009 and 9 June 2010) to repurchase shares and the Annual General Meeting on 30 March 2011 approved a new authorization.
The Group decided to release its own shares to the market through a trading program. The first 1, 000 shares traded at EUR 8.0 on 23 June 2011, after which the Neo Industrial holdings of own shares amounted to 91 727 shares.
ANNUAL GENERAL MEETING AND CORPORATE GOVERNANCE
The company's Annual General Meeting was held in Helsinki on 30 March 2011.
The AGM confirmed the number of Board members is six (6) and re-appointed the following members to the Board of Directors: Matti Lainema (Chairman), Pekka Soini (Deputy Chairman), and as members, Ilpo Helander, Risto Kyhälä, Taisto Riski and Raimo Valo.
Decisions from the AGM were announced in a separate release on 30 March 2011.
Neo Industrial’s audit committee members are Ilpo Helander, Taisto Riski and Pekka Soini. The company's new, 30 March 2011 constituted audit committee members are Taisto Riski, Pekka Soini and Raimo Valo.
The company's Managing Director is Markku E. Rentto
GROUP STRUCTURE AND SHAREHOLDERS
Neo Industrial Plc is the parent company of the group, which includes the Neo Industrial wholly owned subsidiaries Novalis Plc, Alnus Ltd, as well as Carbatec Ltd. and its subsidiaries and associated companies. Carbatec Ltd is Avilon Ltd's parent company. The domicile of Neo Industrial is Hyvinkää.
On 30 June 2011, Neo Industrial had 12 325 shareholders. The company's largest shareholder, Reka Ltd, held 50.76% of shares and 65.77% of votes. Neo Industrial Plc is thus part of the Reka Group. Reka Ltd is domiciled in Hyvinkää.
At the end of June 2011, the combined holding of the ten largest shareholders was 60.9% of the shares and 72.8% of the votes. Members of the Board, CEO and CFO directly owned and controlled a total of 2 953 817 Neo Industrial B series shares on 30 June 2011.PERSONNEL
During the review period, the Group employed an average number of 606 (518) persons. At the end of June, the number of personnel was 616 (516).
RISKS AND UNCERTAINTY FACTORS
Neo Industrials financial risks are currency, interest rate, commodity, liquidity, credit and investment market risks. Financial risks and 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 the portfolio companies.
The Group's liquidity situation is tight. Previously promised funding, connected to the decision on Avilon’s acquisition and start-up, did not materialize within the agreed timetable. In addition, it has not been possible to take up part of Avilon Ltd's financing solution because the related loan guarantee by the municipality is still pending appeal. The market price of the Viscose Fiber business's main raw material, dissolving pulp, rose almost vertically at the end of 2010 and remained at a high level during the review period. During the second quarter, Avilon significantly reduced the raw material risk associated with dissolving pulp with its own technological innovation. The Cable business liquidity is particularly tight due to copper price increases.
The Cable business's most significant risks are related to market development as well as raw material prices and currency fluctuations. Elevated metals prices and strong volume growth will increase the need for working capital required for operational activities. This, together with strong seasonal fluctuations brings pressure to liquidity management.
Neo Industrial believes in the Russian cable market growth and development, and has invested substantially in Russia's business potential. Investments include the risk that Russia's growth does not materialize as expected. The Group continues to benefit from the internal audit made in 2009 by the Audit Committee of risks of the Russian business.
Viscose Fibers is a new business that is subject to the risks associated with any business start-up. The main risks of the sector are market and competitor development, currency fluctuations and raw material price fluctuations and availability. These considerations also make demands on liquidity management.
For the Single Family Housing business, the main risks of the industry are demand and competitor development, production capacity and utilization level, raw material price fluctuations and success of the restructuring.
NEAR-TERM OUTLOOK
The global economy currently causes significant uncertainty, which may affect all of Neo Industrials’ business areas.
Viscose Fiber manufacturing business was launched at the beginning of the year and the bulk of the production startup investments were made in 2010 and the first quarter of 2011. Avilon’s technological innovation had a positive effect on profitability already in the second quarter. The business’ near-term demand and pricing situation, however, is quite unpredictable. The second half earnings will be affected by the market and the current shutdown duration in addition to the business progress of the new technology.
The Cable industry market conditions and profitability improved at the end of 2010. Additionally, significant, non-recurring expenses caused by production reorganization have been completed during the review period. Cable business operating profit is estimated to rise in 2011 to be positive.
The end of the year market situation for the Single Family Housing business is likely to be weaker than forecast at the start of the year. For Finndomo's Finnish operations, operating margins were positive already in the second half of 2010, and Finndomo’s Board has decided to divest the Swedish operations, a drain on the profitability. This gives Finndomo the conditions for a more profitable end of year.
As net sales grew strongly in the beginning of the year, liquidity was critical and continues to require special attention throughout the year. To ensure liquidity and to allow strong growth, measures will be taken to boost inventory turnover and free up capital assets in addition to financing and payment term negotiations.
Helsinki 4 August 2011
Neo Industrial Plc
Board of Directors
For additional information:
Markku E. Rentto, Managing Director , tel. +358 20 720 9191
Sari Tulander, Financial Director, tel. +358 20 720 9192
www.neoindustrial.fi
Neo Industrial Plc'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 B shares are listed on the NASDAQ OMX HelsinkiStock Exchange.
Neo Industrial’s segments are Cable (Reka Cables, Expokabel, Nestor Cables), Viscose Fibers (Avilon) and Single Family Housing (Finndomo).
CONSOLIDATED INCOME STATEMENT (IFRS)
| EUR 1,000 | 1/4-30/6/2011 | 1/4-30/6/2010 | 1/1-30/6/2011 | 1/1-30/6/2010 |
| Turnover | 36 266 | 22 482 | 67 881 | 39 085 |
| Change in inventories of finished products and production in progress | -1 024 | -1 619 | 4 070 | -2 351 |
| Production for own use | 1 | -9 | 16 | 28 |
| Materials and services | -26 939 | -15 132 | -60 872 | -25 795 |
| Personnel expenses | -5 175 | -3 543 | -10 494 | -6 706 |
| Depreciation and impairment | -1 650 | -754 | -2 924 | -1 969 |
| Other operating income and expenses | -3 436 | -3 156 | -6 845 | -6 281 |
| -38 222 | -24 213 | -77 049 | -43 074 | |
| Operating profit or loss | -1 957 | -1 732 | -9 168 | -3 989 |
| Financial income | 72 | 872 | 251 | 1 279 |
| Financial expenses | -1 023 | -1 206 | -1 874 | -1 501 |
| Share of the result of associates | -1 893 | -259 | -3 562 | -259 |
| Profit or loss before taxes | -4 802 | -2 325 | -14 353 | -4 470 |
| Taxes | 635 | 977 | 2 692 | 879 |
| Profit or loss for the period | -4 167 | -1 348 | -11 661 | -3 592 |
| Profit or loss attributable to | ||||
| Equity holders of the parent | -3 953 | -1 426 | -11 485 | -3 606 |
| Minority interests | -213 | 78 | -177 | 14 |
| -4 167 | -1 348 | -11 661 | -3 592 | |
| Earnings per share attributable to the shareholders of the parent (EUR) | ||||
| before and after dilution, EUR | -0,66 | -0,24 | -1,92 | -0,60 |
| Number of shares | 5 929 483 | 5 932 843 | 5 929 483 | 5 932 843 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| EUR 1,000 | 1/4-30/6/2011 | 1/4-30/6/2010 | 1/1-30/6/2011 | 1/1-30/6/2010 |
| Profit or loss | -4 167 | -1 348 | -11 661 | -3 592 |
| Other comprehensive items | ||||
| Translation differences related to foreign units | -80 | 328 | 83 | 2 079 |
| Total | -80 | 328 | 83 | 2 079 |
| Total comprehensive income | -4 247 | -1 019 | -11 578 | -1 513 |
| Total comprehensive income attributable to | ||||
| Equity holders of the parent | -4 033 | -1 199 | -11 402 | -1 629 |
| Minority interest | -213 | 180 | -177 | 115 |
| -4 247 | -1 019 | -11 578 | -1 513 | |
| Equity / share | 5,01 | 6,84 |
CONSOLIDATED BALANCE SHEET (IFRS)
| EUR 1,000 | 30/6/2011 | 31/12/2010 |
| ASSETS | ||
| Non-current assets | ||
| Goodwill | 3 483 | 3 624 |
| Other intangible assets | 11 020 | 7 765 |
| Tangible assets | 41 754 | 43 719 |
| Holdings in associates | 11 664 | 4 668 |
| Receivables | 41 | 1 |
| Derivative contracts | 66 | |
| Deferred tax assets | 5 809 | 3 040 |
| Total non-current assets | 73 771 | 62 883 |
| Current assets | ||
| Inventories | 23 340 | 17 529 |
| Sales receivables and other receivables | 26 756 | 19 880 |
| Tax receivables from the profit | 5 | 17 |
| Derivative contracts | 579 | 1 174 |
| Other financial assets | 3 139 | 2 894 |
| Cash and cash equivalents | 1 220 | 2 734 |
| Total current assets | 55 038 | 44 229 |
| Total Assets | 128 809 | 107 112 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||
| Shareholder's equity | ||
| Share capital | 24 082 | 24 082 |
| Premium fund | 66 | 66 |
| Reserve fund | 1 221 | 1 221 |
| Own shares | -591 | -599 |
| Translation differences | -1 156 | -1 239 |
| Retained profit | -22 795 | -11 492 |
| Other unrestricted equity | 28 902 | 21 327 |
| Equity attributable to shareholders of the parent | 29 729 | 33 366 |
| Minority interest | 475 | 573 |
| Total shareholders´ equity | 30 204 | 33 939 |
| Non-current liabilities | ||
| Deferred tax liabilities | 4 118 | 4 047 |
| Provisions | 882 | 839 |
| Interest-bearing liabilities | 26 963 | 25 905 |
| Non-interest-bearing liabilities | 1 530 | 1 584 |
| Current liabilities | ||
| Tax liabilities from the profit | 4 | 24 |
| Short-term interest-bearing liabilities | 29 151 | 16 314 |
| Accounts payable and other liabilities | 35 958 | 24 459 |
| Total liabilities | 98 606 | 73 172 |
| Shareholders’ equity and liabilities | 128 809 | 107 112 |
| EUR 1,000 | A | B | C | D | E | F | G | H | I | J |
| Shareholders’ equity 31/12/2009 | 24 082 | 66 | 1 221 | -382 | -2 013 | 21 327 | -308 | 43 993 | 1 445 | 45 437 |
| Translation differences | 2 079 | 2 079 | 2 079 | |||||||
| Result for the period | -3 707 | -3 707 | 115 | -3 592 | ||||||
| Dividends paid | -1 483 | -1 483 | -1 483 | |||||||
| Acquired own shares | -188 | -188 | -188 | |||||||
| Minority interest | -84 | -84 | 84 | |||||||
| Shareholders’ equity 30/6/2010 | 24 082 | 66 | 1 221 | -569 | 66 | 21 327 | -5 582 | 40 610 | 1 644 | 42 254 |
| EUR 1,000 | A | B | C | D | E | F | G | H | I | J |
| Shareholders’ equity 31/12/2010 | 24 082 | 66 | 1 221 | -599 | -1 239 | 21 327 | -11 491 | 33 366 | 573 | 33 939 |
| Translation differences | ||||||||||
| Result for the period | 83 | -11 485 | -11 402 | -177 | -11 579 | |||||
| Dividends paid | ||||||||||
| Acquired own shares | 8 | 8 | 8 | |||||||
| Minority interest | 182 | 182 | 78 | 260 | ||||||
| Share of associated company changes | 7 575 | 7 575 | 7 575 | |||||||
| Shareholders’ equity 30/6/2011 | 24 082 | 66 | 1 221 | -591 | -1 156 | 28 902 | -22 795 | 29 729 | 475 | 30 204 |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (IFRS)
Letter code explanations:
A Share capital
B Premium fund
C Reserve fund
D Own shares
E Translation differences
F Other unrestricted equity
G Retained profit
H Total
I Minority interest
J Shareholders’ equity
Associated company Finndomo's equity was confirmed. The majority owners’ equity stakes, in addition to the Company's invested unrestricted equity fund, increased by EUR 25.0 million. Of this, Neo Industrial's share of 30.3% totalled 7.6 million.
STATEMENT OF CASH FLOWS, IFRS
| EUR 1,000 | 1/1.-30/6/2011 | 1/1.-30/6/2010 |
| Cash flows from operating activities | ||
| Payments received from operating activities | 66 163 | 32 308 |
| Payments paid on operating activities | -75 532 | -33 389 |
| Paid interests and other financial expenses | -1 125 | -644 |
| Interests received and other financial incomes | 225 | 873 |
| Direct taxes paid | -31 | -3 |
| Net cash provided by operating activities | -10 300 | -855 |
| Cash flows from investing activities | ||
| Subsidiaries and new business acquisition | -6 000 | |
| Investments in tangible fixed assets | -626 | -777 |
| Investments in intangible assets | -6 360 | -4 |
| Withdrawals from other financial funds | 6 926 | |
| Loans granted | -250 | |
| Loan repayments | 1 858 | 0 |
| Net cash flow provided by investing activities | -5 128 | -104 |
| Cash flows from financing activities | ||
| Acquisition of own shares | -187 | |
| Sale of own shares | 8 | |
| Increase in loans | 15 527 | 5 079 |
| Decrease in loans | -1 117 | -867 |
| Payments of finance lease activities | -516 | -372 |
| Dividends paid | -1 483 | |
| Net cash flow provided by financing activities | 13 902 | 2 170 |
| Change in cash and cash equivalents | -1 525 | 1 210 |
| Cash and cash equivalents at beginning of the period | 2 734 | 3 000 |
| Exchange rate differences | 11 | 154 |
| Change in cash and cash equivalents at the end of the period | 1 220 | 4 364 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
This report has been drawn up in accordance with IAS 34 requirements for interim reports.
ACCOUNTING POLICIES
The interim report applies the same principles as in the financial statement for 2010.
In the first quarter of 2011, the Group introduced a new accounting principle regarding Avilon Ltd's emission rights. Emission rights received are recognized as intangible assets and deferred income. Emission rights are valued at current fair or otherwise probable value. If the emission rights market value drops significantly below the book value and the decline is considered permanent, it is recognized as an impairment loss, which the Group does not intend to use internally. Deferred revenue is recognized in other operating income during the period for which the corresponding rights are granted. Actual emissions are corresponding expenses in the income statement under other operating expenses and appear in the balance sheet reserves. Emission rights and related provisions are derecognised when they are submitted to cover obligations or sold. Any gains or losses are recognized in the income statement.
SEGMENT REPORTING
| 30/6/2011 | Cable | Viscose Fibers | Single Family Housing | Eliminations and other operations | Group total |
| EUR 1,000 | |||||
| Turnover | 52 903 | 14 997 | 67 900 | ||
| Segment's operating profit | -910 | -7 762 | -8 672 | ||
| Unallocated items | -497 | -497 | |||
| Operating profit | -910 | -7 762 | -497 | -9 168 | |
| Share of the result of associates | -3 562 | -3 562 | |||
| Unallocated items | 1 069 | 1 069 | |||
| Profit or loss for the period | -11 661 | ||||
| Assets | |||||
| Segment's assets | 80 510 | 27 315 | 11 664 | 119 489 | |
| Unallocated items | 9 320 | 9 320 | |||
| Total assets | 80 510 | 27 315 | 11 664 | 9 320 | 128 809 |
| Liabilities | |||||
| Segment's liabilities | 58 266 | 36 116 | 94 381 | ||
| Unallocated items | 4 223 | 4 223 | |||
| Total liabilities | 58 266 | 36 116 | 4 223 | 98 605 | |
| Assets - liabilities | 22 245 | -8 800 | 11 664 | 5 096 | 30 205 |
| Investments | 112 | 3 794 | 3 024 | 6 930 | |
| Depreciations | -2 328 | -586 | -10 | -2 924 | |
| 30/6/2010 | Cable | Viscose Fibers | Single Family Housing | Eliminations and other operations | Group total |
| EUR 1,000 | |||||
| Turnover | 39 085 | 39 085 | |||
| Segment's operating profit | -3 434 | -3 434 | |||
| Unallocated items | -555 | -555 | |||
| Operating profit | -3 434 | -555 | -3 989 | ||
| Share of the result of associates | -259 | -259 | |||
| Unallocated items | 656 | 656 | |||
| Profit or loss for the period | -3 592 | ||||
| Assets | |||||
| Segment's assets | 81 097 | 5 741 | 86 838 | ||
| Unallocated items | 9 189 | 9 189 | |||
| Total assets | 81 097 | 5 741 | 9 189 | 96 027 | |
| Liabilities | |||||
| Segment's liabilities | 53 776 | 53 776 | |||
| Unallocated items | -3 | -3 | |||
| Total liabilities | 53 776 | -3 | 53 773 | ||
| Assets - liabilities | 27 321 | 5 741 | 9 192 | 42 254 | |
| Investments | 839 | 839 | |||
| Depreciations | -1 969 | -1 969 |
| Cable business turnover per product group | 1-6/2011 | 1-6/2010 |
| LV energy | 18,2 | 13,7 |
| Power cable | 34,7 | 25,4 |
| Total | 52,9 | 39,1 |
| Cable business turnover per sales area | 1-6/2011 | 1-6/2010 |
| EU-countries | 43,9 | 31,4 |
| Non-EU-countries | 9,0 | 7,7 |
| Total | 52,9 | 39,1 |
The cable division's three largest customers are Onninen, Rexel and Sonepar, which each accounted for more than 10% of net sales.
| Viscose Fiber business turnover per sales area | 1-6/2011 | 1-6/2010 |
| EU-countries | 3,4 | 0,0 |
| Non-EU-countries | 11,6 | 0,0 |
| Total | 15,0 | 0,0 |
ASSOCIATES ACQUIRED
Finndomo
In April 2010, Neo Industrial invested in a 30% share of prefabricated single family house manufacturer Finndomo Ltd.
Below is the purchase price allocation calculation.
| EUR 1,000 |
Share of acquirees book value |
Fair value and recalculation adjustments |
Fair value |
| Net assets acquired | |||
| Intangible assets | 104 | 4,787 | 4,891 |
| Tangible assets | 8,032 | 1,099 | 9,131 |
| Inventories | 8,157 | 0 | 8,157 |
| Deferred tax receivables | 732 | 3,878 | 4,610 |
| Current receivables | 3,986 | 0 | 3,986 |
| Cash in hand and at bank | 803 | 0 | 803 |
| Available for sale assets | 19 | 1,416 | 1,435 |
| Provisions | -10 | 0 | -10 |
| Current liabilities | -12,397 | 0 | -12,397 |
| Non-current liabilities | -18,204 | 0 | -18,204 |
| Deferred tax liabilities | -162 | -1,905 | -2,067 |
| Total net assets acquired | 337 | ||
| Share of the net assets of associates | 337 | ||
| Goodwill | 5,663 | ||
| Total cost of acquisition | 6,000 |
CHANGES IN NON-CURRENT ASSETS
| EUR 1,000 | 01-06/2011 | 01-12/2010 |
| Book value at the beginning of the period | 43 719 | 32 978 |
| Investment | 491 | 15 448 |
| Decrease | 0 | -944 |
| Depreciations | -2 547 | -4 224 |
| Translation differences | 91 | 461 |
| Book value at the end of the period | 41 754 | 43 719 |
PLEDGED ASSETS AND CONTINGENT LIABILITIES
| EUR 1,000 | 30.6.2011 | 31.12.2010 |
| Debts with corporate mortgages | ||
| Loans from financial institutions | 10 294 | 10 520 |
| Granted corporate mortgages | 21 820 | 21 820 |
| Debts with securities or guarantees | ||
| Loans from financial institutions | 13 533 | 13 533 |
| Liabilities to others | 5 400 | 5 400 |
| Book value of pledged securities | 25 712 | 25 712 |
| Granted guarantees | 18 933 | 18 933 |
| Other collateral | ||
| Guarantees and commitments | 4 808 | 3 173 |
| Security deposits | 3 139 | 2 894 |
| Mortgages | 3 000 | 3 000 |
COMMITMENTS
Factoring of credit secured by the respective receivables, which on 30/6/2011 was EUR 16.9 (6.0) million. Factoring credit 30/6/2011 was EUR 10.8 (3.6) million.
INVESTMENT COMMITMENTS
Investment commitments for tangible fixed assets on 30/06/2011 amounted to EUR 0.8 (1.3) million.
DERIVATIVES
| EUR 1,000 | Positive current values | Negative current values |
Current net value 30.6.2011 |
Current net value 31.12.2010 |
Nominal values 30.6.2011 | Nominal values 31.12.2010 |
| Currency derivatives | ||||||
| Forward exchange agreements | -3 | -3 | -26 | 1 510 | 1 545 | |
| Raw material options | ||||||
| Metal derivatives | 579 | 579 | 1 240 | 5 476 | 4 366 | |
| Total derivatives | 579 | -3 | ||||
| Long-term derivatives deducted | ||||||
| Short-term share | 579 | -3 | ||||
RELATED PARTY EVENTS
Neo Industrial Plc and therefore Neo Industrial Group belongs to Reka Group. Reka Ltd had a 50.76% holding of shares and 65.77% of votes.
RELATED PARTY TRANSACTIONS
Related party transactions with Reka group
| EUR 1,000 | 1-6/2011 | 1-6/2010 |
| Sales | 19 | 12 |
| Dividends | -764 | |
| Other purchases | -860 | -688 |
| Sales receivables and other receivables at end of the period | 1 460 | 1 167 |
| Finance leases (activated on the balance sheet) | -15 180 | -8 113 |
| Other liabilities at end of the period | -1 | -128 |
Other related party transactions
| EUR 1,000 | 1-6/2011 | 1-6/2010 |
| Interest revenues | 72 | 56 |
| Loan receivables | 150 | 2 000 |
| Sales receivables and other receivables at end of the period | 21 | 8 |
The Managing Director of Neo Industrial has significant controlling power in SAV Rahoitus Plc.
Other related parties consist of companies that have connection through owner having significant controlling power. Transactions with other related parties consist of transactions with SAV Rahoitus Plc. Loan receivables consist of short-term corporate loans, which have been made in 2009 after comparing different possibilities to invest cash funds with better revenues than what could be got with temporal bank deposits. Loans have collaterals.
CALCULATION OF KEY FIGURES
| Return on investment (ROI) % | = | Profit before taxes + interest and other financial expenses | x 100 |
| [Balance sheet total – obligatory provisions and non-interest bearing liabilities] (average) | |||
| Equity ratio, % | = | Shareholders’ equity + minority interest minus deferred tax liabilities | x 100 |
| Balance sheet total – advances received | |||
| Earnings/share (EPS), EUR | = | Profit for the period belonging to equity holders of the parent | |
| Number of shares adjusted for share issues (average) | |||
| Equity/share, EUR | = | Shareholders´ equity - minority interest minus deferred tax liabilities | |
| Number of shares adjusted for share issues at the end of the financial period |
Those statements in this report that are not actual facts are forward-looking estimates. Such estimates include expectations concerning the development of the market, growth and profitability expectations and statements containing the words "believe," "expects," "will" or similar expressions. Since these estimates are based on current plans, estimates and projections, they involve risks and uncertainties, which may lead to the actual results to materially differ from those in such statements.
Such factors include 1) operating conditions, e.g. continued success in production and consequent efficiency benefits, availability and cost of production inputs, demand for new products, changing circumstances in respect of the acquisition of capital under acceptable conditions; 2) circumstances in the sector such as the intensity of demand for products, the competition, current and future market prices for the Group's products and related pricing pressures, the financial situation of the Group's customers and competitors, competitors' possible new competing products and 3) the general economic situation such as economic growth in the Group's main geographical market areas or changes in exchange rates and interest rates.