HONKARAKENNE OYJ INTERIM REPORT 8 May 2013 at 3:00 p.m.
HONKARAKENNE OYJ’S INTERIM REPORT, 1 JANUARY – 31 MARCH 2013
SUMMARY
Net sales in the first quarter were slightly higher than in the previous year. The Group’s result was better than over the same period of the previous year. Profitability improved due to started efficiency-boosting measures related to the consolidation of operations. The Group’s result before taxes after the first quarter was a loss, as expected, due to seasonal variations.
January – March 2013
- Honkarakenne Group’s consolidated net sales for the first quarter of the year amounted to MEUR 7.3 (MEUR 7.0 in 2012). Net sales were slightly higher than in the previous year, increase of 4 %.
- Operating loss was MEUR -1.5 (MEUR -2.3). Operating loss before non-recurring items was MEUR -1.5 (MEUR -2.3).
- Profit/loss before taxes was MEUR -1.3 (MEUR -2.1).
- Earnings per share amounted to EUR -0.21 (EUR -0.31).
Honkarakenne reiterates its previous outlook: in year 2013 Honkarakenne expects its net sales to be at same level than in previous year and the result before non-recurring items and taxes to be close to zero.
| KEY INDICATORS |
1-3/ 2013 |
1-3/ 2012 |
1-12/ 2012 |
Change % |
| Net sales, MEUR | 7.3 | 7.0 | 46.2 | 4 |
| Operating profit/loss, MEUR | -1.5 | -2.3 | -4.3 | |
| Operating profit before non-recurring items, MEUR | -1.5 | -2.3 | -0.8 | |
| Profit/loss before taxes, MEUR | -1.3 | -2.1 | -4.4 | |
| Average number of personnel | 245 | 260 | 257 | |
| Personnel in person-years, average | 175 | 175 | 198 | |
| Earnings/share (EPS), EUR | -0.21 | -0.31 | -0.90 | |
| Equity ratio, % | 45 | 50 | 47 | |
| Return on equity, % | -8 | -9 | -28 | |
| Shareholders' equity/share, EUR | 2.46 | 3.37 | 2.69 | |
| Gearing, % | 42 | 43 | 11 |
Mikko Kilpeläinen, President and CEO of Honkarakenne Oyj, in connection with the interim report:
“The Group’s net sales were not at a satisfactory level, in spite of growth of 4 % compared with the corresponding period of the previous year. The Group’s order book was stronger than in the previous year, amounting to MEUR 18.9, a year-on-year improvement of 15 %. As expected, the Group’s result before taxes after the first quarter was a loss due to seasonal variations.
In the early months of the year, we made a decision to consolidate production and main operations such as planning in Karstula. The related measures are ongoing. Operations at the Alajärvi plant will end this year. By means of this consolidation, we seek significant improvement in operational efficiency and improved flow of information.
In Finland & Baltics, we continued to focus on the detached house market in Finland. In the holiday home segment, sales of a collection designed for the S Group began under the Mainio brand in Finland.
A new Russian manager was appointed to head up Russia & CIS. We appointed a Russian manager with a view to improving our local knowledge in order to develop our understanding of customers and business operations in this market area. In the CIS countries, we focused on market development in Kazakhstan and Ukraine.”
NET SALES
Honkarakenne Group’s net sales for the first quarter of 2013 rose by 4 per cent to MEUR 7.3 (7.0).
Geographical distribution of net sales:
| DEVELOPMENT OF SALES | ||||
|
Distribution of net sales, % |
1-3/2013 | 1-3/2012 | ||
| Finland & Baltics | 53 % | 47 % | ||
| Russia & CIS | 26 % | 14 % | ||
| Global Markets | 21 % | 38 % | ||
| Total | 100 % | 100 % | ||
| Net sales, MEUR | 1-3/2013 | 1-3/2012 | Change % | 1-12/2012 |
| Finland & Baltics | 3.9 | 3.3 | 18 % | 19.0 |
| Russia & CIS | 1.9 | 1.0 | 90 % | 14.7 |
| Global Markets | 1.5 | 2.7 | -44 % | 12.5 |
| Total | 7.3 | 7.0 | 4 % | 46.2 |
Finland & Baltics includes the following countries: Finland, Latvia, Lithuania and Estonia. It also includes process waste sales for recycling.
Russia & CIS includes the following countries: Russia, Azerbaijan, Kazakhstan, Ukraine and other CIS countries.
Global Markets includes countries other than the abovementioned.
The Group’s order book stood at MEUR 18.9 at the end of March. In the corresponding period of the previous year, it was MEUR 16.4.
DEVELOPMENT OF PROFIT AND PROFITABILITY
Operating profit in January-March was MEUR -1.5 (MEUR -2.3) and profit before taxes was MEUR -1.3 (MEUR -2.1).
The operating result changed primarily due to the implementation of efficiency-boosting measures
FINANCING AND INVESTMENTS
In the course of the period under review, the financial position of the Group remained satisfactory. The equity ratio stood at 45 % (50 %) and net financial liabilities at MEUR 5.1 (MEUR 7.0). MEUR 2.1 (3.3) of the financial liabilities carries a 30 % equity ratio covenant term. Group liquid assets totalled MEUR 1.6 (MEUR 2.0). The Group also has a MEUR 8.0 (MEUR 8.0) bank overdraft facility, MEUR 1.5 (MEUR 1.6) of which was had been drawn on at the end of the report period. Gearing stood at 42 % (43 %).
The Group’s capital expenditure totalled MEUR 0.1 (MEUR 0.3).
MARKET DEVELOPMENT
According to a report commissioned by RTS Oy, Finnish log house production is expected to contract by 5 % this year. The figure includes production for Finland and for overseas export.
PRODUCTS AND MARKETING
Finland & Baltics launched the 2013 house collections for the residential and holiday home markets. Sales of a house collection designed for the S Group began under the Mainio brand in Finland.
Russia & CIS sought to improve its market and customer knowledge by appointing a Russian sales manager. In the CIS countries, we focused on market development in Kazakhstan and Ukraine.
Global Markets held a major marketing event in Paris, France.
RESEARCH AND DEVELOPMENT
In research and development, we developed the energy-efficiency of buildings and processes related to facilitating construction.
In the January-March period, the Group’s R&D expenditure totalled MEUR 0.1 (MEUR 0.1), representing 1.2 % of net sales (1.4 %). The Group did not capitalise any development expenditure during the report period.
STAFF AND MANAGEMENT
During the first quarter, the Group employed a total of 175 (175) people on average in terms of person-years.
The Group had an average of 245 (260) employees during the first quarter, a year-on-year decrease of 15.
In January, the company concluded negotiations under the act on co-operation. As a result, a decision was taken to consolidate production in Karstula and to make 68 employees redundant. It was also agreed that the company’s personnel in Finland can be temporarily laid off for a maximum of 90 days until the end of September 2013.
On 30 January 2013, Petr Morinov, Bachelor of Science, was appointed as the company’s Vice President Sales for Business Area Russia & CIS and a member of the Executive Group.
On 29 April 2013, Tanja Rytkönen-Romppanen, 41, was appointed as Vice President, Design and a member of the Executive Group. The Vice President Design will be in charge of Design, Group Marketing and R&D. Vice President Sanna Wester does not continue working for the company.
HONKARAKENNE OYJ’S 2013 ANNUAL GENERAL MEETING, BOARD OF DIRECTORS, AND AUDITORS
The Annual General Meeting (AGM) of Honkarakenne Oyj was held at the company’s headquarters in Tuusula on 5 April 2013. The AGM confirmed the financial statements of the parent company and Group, and discharged from liability the board members and CEO for 2012. The AGM decided that no dividends be paid for the 2012 financial year. The AGM decided that a repayment of capital totalling EUR 0.08 per share be paid from the Fund for invested unrestricted equity.
Anders Adlercreutz, Lasse Kurkilahti, Mauri Saarelainen, Marko Saarelainen and Teijo Pankko were re-elected to the Board of Directors. The Board’s constituent meeting appointed Lasse Kurkilahti the Chairman of the Board. Mauri Saarelainen will serve as the Deputy Chairman. Board of Directors decided not to set up any committees.
PricewaterhouseCoopers Oy, member of the Finnish Institute of Authorised Public Accountants, was appointed as auditor of the company, with Maria Grönroos, APA, as chief auditor.
HONKARAKENNE OYJ’S OWN SHARES AND AUTHORISATIONS OF THE BOARD OF DIRECTORS
Honkarakenne has not acquired its own shares during the report period. At the end of the report period, the Group held 364,385 of its Honkarakenne B shares with a total purchase price of EUR 1,381,750.23. These shares represent 7.05 % of the company's capital stock and 3.35 % of all votes. The purchase cost has been deducted from shareholders' equity in the consolidated financial statements.
On 5 April 2013, the AGM decided that the Board of Directors will be authorised to acquire a maximum of 400,000 of the company’s own B shares with assets included in the company’s unrestricted equity. In addition, the AGM authorised the Board to decide on a rights issue or bonus issue and on granting special rights to shares referred to in Section 1 of Chapter 10 of the Limited Liability Companies Act in one or more instalments. By virtue of the authorisation, the Board may issue a maximum total of 400,000 new shares and/or relinquish old B shares held by the company, including those shares that can be issued by virtue of special rights. Both authorisations will be valid until 25 March 2014.
CORPORATE GOVERNANCE
Honkarakenne Oyj follows the Limited Liability Companies Act and the Finnish Corporate Governance Code, 1 October 2010, for listed companies issued by the Finnish Securities Market Association. The company's website, www.honka.com, provides more information on the corporate governance systems.
FUTURE OUTLOOK
The market situation remains uncertain. General macroeconomic uncertainty factors, such as the situation in the eurozone, are being reflected in customers’ unwillingness to make decisions on construction projects. There is an estimation of 2.4 % increase in GDP in Russia, but even in Russia the estimation of increase in GDP was lowered from previous increase of 3.6 %. Sales figures are still impacted by the longer sales periods and the scarcity of longer-term orders.
At the end of March, the Group’s order book amounted to MEUR 18.9, up 15 % on the corresponding period of the previous year, when it was MEUR 16.4. The order book refers to orders whose delivery date falls within the next 24 months. Some orders may include a financing or building permit condition.
FORTHCOMING RISKS AND UNCERTAINTIES
Although the Group’s order book is better than in the previous year, there is still the risk that the Group will not be able to accelerate its sales in line with its targets.
The Group has one significant concentration of credit risks in sales receivables, concerning the open sales receivables of one importer. No provision for doubtful debt has been made for this. A payment plan has been made with this importer. The importer has complied with this plan and will continue making payments until 2015.
The valuation of amounts in the balance sheet is based on current assessment by the management. If these assessments are changed, this may result in changes to the Group's result.
REPORTING
This report contains statements that relate to the future, and these statements are based on hypotheses that the company’s management hold currently as well as on the decisions and plans that are currently in place. Although the management believes that the hypotheses relating to the future are well-founded, there is no guarantee that the said hypotheses will prove to be correct.
This interim report release has been drafted in line with IFRS recognition and valuation principles. However, not all of the requirements of IAS 34 have been complied with in its drafting. The interim report should be read together with the 2012 financial statements. The figures have not been examined by the auditor.
OUTLOOK FOR 2013
Honkarakenne reiterates its previous outlook: in year 2013 Honkarakenne expects its net sales to be at same level than in previous year and the result before non-recurring items and taxes to be close to zero.
HONKARAKENNE OYJ
Board of Directors
Further information:
Mikko Kilpeläinen, President and CEO, tel. +358 50 542 5884, mikko.kilpelainen@honka.com or
Mikko Jaskari, CFO, tel. +358 400 535 337, mikko.jaskari@honka.com.
This and previous releases are available for viewing on the company’s website at www.honka.com. The next 2013 interim reports will be published on 8 August 2013 and 31 October 2013.
DISTRIBUTION
NASDAQ OMX Helsinki
Key media
Financial Supervisory Authority
www.honka.com
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME |
|||
| unaudited |
1-3 /2013 |
1-3 /2012 |
1-12 /2012 |
| MEUR | |||
| Net sales | 7.3 | 7.0 | 46.2 |
| Other operating income | 0.2 | 0.4 | 0.8 |
| Change in inventories of finished and unfinished goods | 1.2 | 0.8 | -0.2 |
| Production for own use | 0.0 | 0.0 | 0.0 |
| Materials and services | -5.2 | -5.3 | -25.2 |
| Employee benefit expenses | -2.4 | -2.6 | -12.4 |
| Depreciations and amortisation | -0.6 | -0.8 | -3.0 |
| Impairment | -0.0 | -0.0 | -1.8 |
| Other operating expenses | -1.9 | -2.0 | -8.7 |
| Operating profit/loss | -1.5 | -2.3 | -4.3 |
| Financial income | 0.2 | 0.3 | 0.6 |
| Financial expenses | -0.0 | -0.1 | -0.7 |
| Share of result of associated companies | 0.0 | 0.0 | -0.0 |
| Profit/loss before taxes | -1.3 | -2.1 | -4.4 |
| Income taxes | 0.3 | 0.6 | 0.1 |
| Profit/loss for the period | -1.0 | -1.5 | -4.3 |
| Other comprehensive income: | |||
| Translation differences | -0.1 | -0.2 | -0.2 |
|
Total comprehensive income for the period |
-1.1 | -1.7 | -4.6 |
| Comprehensive income attributable to: | |||
| Equity holders of the parent | -1.1 | -1.7 | -4.6 |
| Non-controlling interest | -0.0 | -0.0 | 0.0 |
| -1.1 | -1.7 | -4.6 | |
|
Earnings/share (EPS) calculated on the profit attributable to equity holders of the parent, EUR |
|||
| Basic | -0.21 | -0.31 | -0.90 |
| Diluted | -0.21 | -0.31 | -0.90 |
|
CONSOLIDATED BALANCE SHEET unaudited |
| MEUR | 31.3.2013 | 31.3.2012 | 31.12.2012 |
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 14.0 | 18.1 | 14.6 |
| Goodwill | 0.1 | 0.1 | 0.1 |
| Other intangible assets | 0.6 | 0.7 | 0.6 |
| Investments in associated companies | 0.3 | 0.3 | 0.3 |
| Available-for-sale financial assets | 0.1 | 0.1 | 0.1 |
| Receivables | 0.3 | 0.3 | 0.3 |
| Deferred tax assets | 1.4 | 1.6 | 1.1 |
| 16.8 | 21.3 | 17.0 | |
| Current assets | |||
| Inventories | 7.6 | 7.6 | 6.5 |
| Trade and other receivables | 7.4 | 7.4 | 5.9 |
| Cash and cash equivalents | 1.6 | 2.0 | 4.8 |
| 16.6 | 17.1 | 17.2 | |
| Total assets | 33.4 | 38.4 | 34.2 |
| Equity and liabilities | 31.3.2013 | 31.3.2012 | 31.12.2012 |
|
Equity attributable to equity holders of the parent company |
|||
| Share capital | 9.9 | 9.9 | 9.9 |
| Share premium account | 0.5 | 0.5 | 0.5 |
| Reserve fund | 0.0 | 5.3 | 0.0 |
| Fund for invested unrestricted equity | 6.8 | 1.9 | 6.8 |
| Own shares | -1.4 | -1.4 | -1.4 |
| Translation differences | 0.1 | 0.3 | 0.2 |
| Retained earnings | -4.2 | -0.3 | -3.2 |
| 11.8 | 16.2 | 12.9 | |
| Non-controlling interests | 0.2 | 0.2 | 0.2 |
| Total equity | 12.0 | 16.4 | 13.1 |
| Non-current liabilities | |||
| Deferred tax liabilities | 0.0 | 0.1 | 0.0 |
| Provisions | 0.5 | 0.3 | 0.5 |
| Financial liabilities | 4.1 | 6.8 | 3.9 |
| 4.7 | 7.2 | 4.4 | |
| Current liabilities | |||
| Trade and other payables | 13.2 | 12.6 | 12.6 |
| Current tax liabilities | 0.0 | 0.0 | 0.0 |
| Provisions | 0.9 | 0.0 | 1.6 |
| Current financial liabilities | 2.6 | 2.2 | 2.4 |
| 16.7 | 14.8 | 16.7 | |
| Total liabilities | 29.9 | 22.0 | 21.1 |
| Total equity and liabilities | 33.4 | 38.4 | 34.2 |
|
STATEMENT OF CHANGES IN EQUITY
abridged |
|||||||||||
| 1000 eur | Equity attributable to equity holders of the parent | ||||||||||
| a) | b) | c) | d) | e) | f) | g) | Total | h) | Total equity | ||
| Total equity 1.1.2012 | 9898 | 520 | 5316 | 1896 | 462 | -1382 | 1152 | 17861 |
242 |
18103 | |
| Profit/loss for the period | -1489 | -1489 | -4 | -1493 | |||||||
| Translation difference | -168 | -168 | -168 | ||||||||
| Purchase of non-controlling interests | -35 | -35 | |||||||||
| Total equity 31.3.2012 | 9898 | 520 | 5316 | 1896 | 295 | -1382 | -341 | 16202 | 203 | 16405 | |
| a) | b) | c) | d) | e) | f) | g) | Total | h) | Total equity | ||
| Total equity 1.1.2013 | 9898 | 520 | 0 | 6828 | 224 | -1382 | -3178 | 12909 | 209 | 13117 | |
| Profit/loss for the period | -1011 | -1011 | 1 | -1010 | |||||||
| Translation difference | -96 | -96 | -96 | ||||||||
| Total equity 31.3.2013 | 9898 | 520 | 0 | 6828 | 128 | -1382 | -4189 | 11802 | 211 | 12012 | |
a) Share capital
b) Share premium account
c) Reserve fund
d) Fund for invested unrestricted equity
e) Translation difference
f) Own shares
g) Retained earnings
h) Non-controlling interests
|
CONSOLIDATED STATEMENT OF CASH FLOWS abridged unaudited |
1.1.- 31.3.2013 |
1.1.- 31.3.2012 |
1.1.- 31.12.2012 |
| MEUR | |||
| Cash flow from operating activities | -3.5 | -0.4 | 5.5 |
| Cash flow from investing activities, net | -0.1 | -0.3 | -0.1 |
| Total cash flows from financing activities: | 0.4 | 0.1 | -3.1 |
| Repayment of capital | -0.4 | ||
| Proceeds from borrowings | 1.6 | 2.8 | 2.1 |
| Repayment of borrowings | -1.1 | -2.6 | -4.6 |
| Other financial items | -0.1 | -0.1 | -0.2 |
| Change in cash and cash equivalents | -3.2 | -0.6 | 2.2 |
| Cash and cash equivalents at the beginning of period | 4.8 | 2.6 | 2.6 |
| Cash and cash equivalents at the close of period | 1.6 | 2.0 | 4.8 |
NOTES TO THE REPORT
Accounting principles
This interim report release has been drafted in line with IFRS recognition and valuation principles. However, not all of the requirements of IAS 34 have been complied with in its drafting. The interim report should be read together with the 2012 financial statements. The new revised standards or interpretations effective as of 1 January 2013 have no bearing on the figures presented for the report period. The figures have not been examined by the auditor.
Honka Management Oy, which is owned by the senior management of Honkarakenne Oyj and was established in 2010, is included in the consolidated financial statements due to the terms and conditions of the shareholder agreement concluded between it and Honkarakenne Oyj.
Honkarakenne has one operating segment, the manufacture, sales and marketing of log houses. Geographically, the sales of the Group are divided as follows: Finland & Baltics, Russia & CIS and Global Markets. The internal reporting of the management is in line with IFRS reporting. For this reason, separate reconciliations are not presented.
| PROPERTY, PLANT AND EQUIPMENT | |
| Unaudited | Property, plant and equipment |
| MEUR | |
| Cost 1.1.2013 | 63.9 |
| Translation differences (+/-) | -0.0 |
| Increase | 0.0 |
| Disposals | -0.3 |
| Reclassifications | -0.0 |
| Cost 31.3.2013 | 63.7 |
| Accumulated depreciation 1.1.2013 | -49.4 |
| Translation differences (+/-) | 0.0 |
| Accumulated depreciation of disposals and reclassifications | 0.3 |
| Depreciation for the period | -0.6 |
| Accumulated depreciation 31.3.2013 | -49.7 |
| Carrying amount 1.1.2013 | 14.6 |
| Carrying amount 31.3.2013 | 14.0 |
Own shares
Honkarakenne Oyj has not acquired its own shares during the report period. At the end of the report period, the Group held 364,385 of its Honkarakenne B shares with a total purchase price of EUR 1,381,750.23. These shares represent 7.05 % of the company's capital stock and 3.35 % of all votes.
|
Contingent liabilities |
||
| unaudited | 31.3.2013 | 31.3.2012 |
| MEUR | ||
| For own loans | ||
| - Mortgages | 25.7 | 23.7 |
| - Other quarantees | 2.7 | 2.0 |
| For others | ||
| - Guarantees | 0.1 | 0.2 |
| Leasing liabilities | 0.2 | 0.3 |
|
Nominal values of forward exchange contracts |
2.0 | 2.4 |
| Derivative contracts | 0.4 | 0.3 |
Events with related parties
The Group’s related parties consist of subsidiaries, associated companies as well as key management and the companies in which they exercise influence. Key management comprises the Board of Directors, the CEO and the company’s Executive Group. The pricing of goods and services in related party transactions is based on market prices.
During the report period, ordinary business transactions with related parties were made as follows: the sales to the related parties were EUR 104 thousand and the purchases from the related parties were EUR 132 thousand. In 2010 and 2011, Honkarakenne Oyj granted long-term loans totalling MEUR 0.9 to Honka Management Oy, which is owned by the company’s senior management.
| Key Indicators | ||||
| 1-3 | 1-3 | 1-12 | ||
| unaudited | 2013 | 2012 | 2012 | |
| Earnings/share (EPS) | eur | -0.21 | -0.31 | -0.90 |
| Return on equity | % | -8 | -9 | -28 |
| Equity ratio | % | 45 | 50 | 47 |
| Shareholders equity/share | eur | 2.46 | 3.37 | 2.69 |
| Net debt | MEUR | 5.1 | 7.0 | 1.5 |
| Gearing | % | 42 | 43 | 11 |
| Gross investments | MEUR | 0.1 | 0.3 | 0.9 |
| % of net sales | 1.3 | 4.5 | 1.9 | |
| Order book | MEUR | 18.9 | 16.4 | 15.9 |
| Average number of personnel | Staff | 119 | 121 | 123 |
| Workers | 126 | 139 | 134 | |
| Total | 245 | 260 | 257 | |
| Personnel in person-years, average | Staff | 103 | 111 | 117 |
| Workers | 72 | 64 | 81 | |
| Total | 175 | 175 | 198 | |
| Adjusted number of shares (’000) | At year-end | 4805 | 4805 | 4805 |
| Average during period | 4805 | 4805 | 4805 |
|
Calculation of key indicators |
||
| Profit for the period attributable to equity holders of parent | ||
| Earnings/share (EPS) | --------------------------------------------- | |
| Average number of outstanding shares | ||
| Result before taxes – taxes | ||
| Return on equity % | --------------------------------------------- | x 100 |
| Total equity, average | ||
| Total equity | ||
| Equity ratio, % | --------------------------------------------- | x 100 |
| Balance sheet total - advances received | ||
| Net financial liabilities | Financial liabilities – cash and cash equivalents | |
| Financial liabilities – cash and cash equivalents | ||
| Gearing, % | ------------------------------------------- | x 100 |
| Total equity | ||
| Shareholders’ equity | ||
| Shareholders equity/share | --------------------------------------------- | |
| Number of shares outstanding at the close of period | ||