Kotkamills Group Oyj
STOCK EXCHANGE RELEASE
30 November 2017, at 8:00 pm (CET + 1)
This is a summary of the January - September 2017 interim report. The complete report is attached to this release and is also available at www.kotkamills.com/fi/kotkamillsgroup/keyfinancials
KOTKAMILLS INTERIM REPORT
July - September 2017 (7-9/2016)
The revenue of continuing operations of EUR 72,5 (EUR 60,0) million improved by EUR 12,5 million mainly due to increased Consumer Boards sales.
Despite of the result weakening effect of the maintenance shutdown in August (2016 in May) the Group EBITDA of EUR 2,7 million (EUR -3,0 million) improved from the same period a year ago.
The operating profit of continuing operations was EUR -5,2 million (EUR -6,0 million) due to further improved but still a negative impact of the commercial ramp-up of Consumer Boards business and one-time impairment costs of intangible assets EUR -3,9 million related to the announced termination of Tainionkoski PM7 leasing agreement at the end of 2018.
The good financial performance of Industrial Products segment with operating profit of EUR 4,6 million (EUR 8,9 million) continued also in Q3/2017 but the overall effect of the maintenance shutdown in August (2016 in May) decreased the operating profit compared to the previous year.
January - September 2017 (1-9/2016)
The revenue of continuing operations of EUR 208,4 million (EUR 160,5 million) improved by EUR 47,9 million from the same period a year ago mainly due to increased Consumer Boards sales.
The operating profit of continuing operations was EUR -11,0 million (EUR -14,3 million) due to improved but still a negative impact from the commercial ramp-up of Consumer Boards business and one-time impairment costs of intangible assets of EUR -3,9 million.
Events in July - September 2017
In July the Company informed that Stora Enso Oyj has notified Kotkamills Oy that the leasing agreement concerning Tainionkoski PM7 will be terminated in accordance with its terms to expire at the end of 2018. The operations are part of the Group's Industrial Products segment.
In July the Company informed that its wholly owned subsidiary Kotkamills Oy ("Kotkamills") intends to transfer three of its existing business lines, namely the Imprex®, Absorbex® and Wood business lines, into wholly owned subsidiaries of Kotkamills ("the Reorganisation"). Kotkamills' fourth existing business line, Consumer Boards, producing bleached CTMP base high-quality Nordic Folding Boxboard and recyclable barrier board products, will remain in Kotkamills Oy.
In September the Company informed that the Reorganisation was implemented and the Imprex®, Absorbex® and Wood business lines have been transferred to Kotkamills Oy's wholly owned subsidiaries Kotkamills Imprex Oy, Kotkamills Absorbex Oy and Kotkamills Wood Oy respectively, effective as of 1 September 2017.
The delivery volumes of Industrial Products segment decreased compared to the previous quarter due to maintenance shutdown in August. The demand continued to stay at a good level.
Despite of the maintenance shutdown in August the delivery volumes of Consumer Boards increased over 30% compared to the previous quarter and commercial ramp-up of Consumer Boards products continued in the third quarter.
|Revenue, EUR million||72,5||60,0||208,4||160,5||219,1|
|EBITDA, EUR million||2,7||-3,0||5,1||-8,4||9,5|
|Operating profit, EUR million||-5,2||-6,0||-11,0||-14,3||-0,4|
|Operating profit/ Revenue (%)||-7,1||-10,1||-5,3||-8,9||-0,2|
|Return on equity (%)||-38,1||-58,7||-103,4||-106,7||-53,2|
|Equity ratio (%)||2,3||4,2||2,3||4,2||7,8|
|Equity ratio, adjusted (%)*||53,0||46,4||53,0||46,4||50,1|
|*Equity includes shareholder loans and the junior term loan|
The Group monitors capital using an equity ratio and an adjusted equity ratio based on the financial covenants, which is total equity added with shareholder loans and the junior term loan and divided by total assets. The Group's policy is to keep the adjusted equity ratio above 30%. There have been no breaches of the financial covenants of equity ratio in the current period.
Events after reporting date
On October 12th, 2017 The Company informed that it's fully owned subsidiary Kotkamills Oy has signed a share purchase agreement concerning the sale and purchase of all issued and outstanding shares in Kotkamills Imprex Oy to Dongwha Enterprise Co. Kotkamills Imprex Oy is part of Group's Industrial Products segment.
On October 31st, 2017 The Company informed that it's fully owned subsidiary Kotkamills Oy has completed the disposal of Kotkamills Imprex Oy.
The enterprise value (on a debt and cash free basis) of Kotkamills Imprex Oy was EUR 27 million. The purchase price is subject to a customary closing accounts adjustment. The purchase price was paid to Kotkamills Oy in cash.
In accordance with the terms and conditions of the consent for the disposal of the Imprex Business granted by the holders of Kotkamills Group Oyj's EUR 105,000,000 Senior Secured Callable Bonds 2015/2020 (ISIN: FI4000148705) (the "Bonds") on 16 January 2017, 50 per cent of the net disposal proceeds received by Kotkamills Oy from the sale of Kotkamills Imprex Oy shall be applied in partial repayment on outstanding Bonds. On that basis, the amount to be repaid for each Bond is EUR 11,732.00. The Record Date (as defined in the terms and conditions of the Bonds) for the repayment was 6 November 2017 and the repayment of EUR 12,5 million (including accrued interest) was disbursed to the bondholders on 7 November 2017. The repayment will decrease non-current liabilities by EUR 12,3 million in Q4/2017.
The disposal will improve Kotkamills group's Q4/2017 operating profit approximately by EUR 20 million.
On November 24th, 2017 The Company's fully owned subsidiary Kotkamills Oy reached a settlement in the contractual dispute related to potential compensation claim by a supplier related to performed construction work and pending arbitration was withdrawn. The settlement does not have a material impact on Kotkamills Oy's operating profit or balance sheet.
Outlook for 2017
The revenue of the fourth quarter in 2017 is estimated to be clearly higher than in the third quarter 2017 due to further increasing Consumer Boards delivery volumes. The profit of continuing operations (excluding one-time profit of disposal Kotkamills Imprex Oy shares in October 2017) for the fourth quarter of 2017 is estimated to be at the same level compared to the previous quarter due to seasonal slightly lower demand particularly in Industrial Products segment, estimated increases in raw material and energy prices and diluting effect of the continuing commercial ramp-up of Consumer Boards business.
The demand of all business segments is expected to stay at the good level, but changes in global economic situation and geopolitical risks may have weakening impact on demand.
Currency exchange rate changes and possible increases in raw material and energy prices could adversely impact the Group's profit development.
Kotkamills Group Oyj
Board of Directors
For additional information, please contact:
CFO Petri Hirvonen, tel.+358 40 571 0834, firstname.lastname@example.org
Nasdaq Helsinki Ltd
Kotkamills Group in brief
Kotkamills is a responsible partner that delivers renewable products and performance to its customers' processes via product innovations created from wood, a renewable raw material. One of the key brands of the company include Absorbex® an innovative laminating paper product for the laminate, plywood and construction industries. Moreover, Kotkamills offers ecological, technically sound and visually attractive wood products for demanding joinery and construction. In summer 2016, Kotkamills started up a new board machine producing AEGLE(TM) Folding Boxboard and ISLA(TM) Food Service Boards, including the capability to add barriers on-machine. All Consumer Board material solutions are fully recyclable and repulpable.
Kotkamills has two production sites in Finland, located in Kotka and Imatra. The majority shareholder of Kotkamills is MB Funds, a Finnish private equity firm.
The information contained in this release shall not constitute an offer to sell or the solicitation of an offer to buy securities of Kotkamills Group Oyj in any jurisdiction.