Unaudited financial results of Nordic Fibreboard AS for the third quarter of 2020

Nordic Fibreboard AS
·13-min read

Management report


Consolidated net sales for Q3 2020 were € 2.51 million from continuing operations (Q3 2019: € 3.34 million from continuing operations). The sales revenue of the Group`s main business segment, fibreboard, for Q3 2020 were € 2.48 million (Q3 2019: € 3.06 million). The main reason for this drop in sales was due to the closure of the Püssi factory in March 2020, which came about as a result of the loss of orders from customers within the display board industry caused by the COVID-19 pandemic. Furniture retail sales revenue for Q3 2020 were € 0 thousand, the decrease in sales (compared to Q3 2019: € 265 thousand) was due to the Group exiting the furniture retail segment earlier this year, with some remaining stock sales taking place during Q1 and Q2 2020. Rental and property development sales, includes the resale of utilities, in Q3 2020 were € 36 thousand (Q3 2019: € 32 thousand). Revenue from rental and property development increased due to more tenants being secured for the premises in Suur-Jõe 48, Pärnu.

Group EBITDA for Q3 2020 was positive € 366 thousand from continuing operations (Q3 2019: € 120 thousand from continuing operations), of which the fibreboard division EBITDA was positive € 370 thousand (Q3 2019: positive € 152 thousand). After depreciation and interest, group net profit for Q3 2020 was € 183 thousand from continuing operations (Q3 2019 net loss of € 671 thousand from continuing operations). The main reason for the loss in the Q3 2019 was the extraordinary loss of € 540 thousand received from the sale of the subsidiary Skano Furniture Factory OÜ.

The Group`s consolidated EBITDA has improved compared to the same period last year, the main reason being the much improved performance of the fibreboard division. The closure of the Püssi fibreboard factory enabled us to switch the Püssi factory construction sector orders to our Pärnu factory, and we started a 4th shift in Pärnu in April 2020 as a result thereof. The Pärnu factory is now running all the time, except for a one-shift maintenance stop every month. This has led to increased machine utilisation, and gross margin for Nordic Fibreboard Ltd OÜ has therefore increased substantially, being 29% in Q3 2020 (from being 18% in Q3 2019).

Divisional review

Revenue by business segments

€ thousand

€ thousand

Q3 2020

Q3 2019

9M 2020

9M 2019

Continued operations

Fibreboards production and sales

2,477

3,064

7,994

8,970

Furniture retail

0

265

55

1,126

Real Estate Management

36

32

148

48

Group transactions

0

(17)

0

(37)

TOTAL from continued operations

2,512

3,344

8,197

10,108

Discontinued operations

0

262

0

1,215

TOTAL

2,512

3,606

8,197

11,323

Profit by business segments

€ thousand

€ thousand

Q3 2020

Q3 2019

9M 2020

9M 2019

EBITDA by business units:

Fibreboards production and sales

370

152

458

188

Furniture retail

(0)

(95)

(39)

(134)

Real Estate Management

1

14

(2)

30

Group transactions

(5)

49

(13)

100

TOTAL EBITDA

366

120

403

184

Depreciation

135

176

422

492

TOTAL OPERATING PROFIT/ LOSS

231

(57)

(19)

(308)

Net financial costs

49

615

139

744

NET PROFIT/ LOSS

183

(671)

(158)

(1,052)

Discontinued operations

0

(29)

0

(271)

TOTAL

183

(700)

(158)

(1,324)

NORDIC FIBREBOARD Ltd: Fibreboard sales

Fibreboard sales in Q3 2020 were € 2.48 million, which are 19% lower than in the same period last year (2019: € 3.06 million). We sold our products to customers in 19 countries during Q3 2020. The main reason for the drop in sales was the loss of display board customers, boards for this sector was produced in the Püssi factory, which we closed in March 2020. However, sales to our customers within the construction sector in our main northern European markets have been stable. Finland, our largest market accounted for 27% of total fibreboard sales this year (up from being 26% of total sales in 9M in 2019).In the Q3 2020 compared to the Q3 2019, we recorded sales growth in the next large markets for us, these being Denmark and Estonia, while we recorded sales decline in markets further afield mainly due to the negative effect in many such markets caused by the corona virus.

By adding a 4th shift in our Pärnu production, and thus achieving full machine utilisation, has led to a strong increase in Fibreboard’s gross margin from being 18% in Q3 2019 to now reaching 29% in Q3 2020. Overhead costs for Q3 2020 was down 16% compared to Q3 2019, and EBITDA for Q3 2020 was thus positive € 370 thousand (15% of sales in Q3 2020), compared to Q3 2019 EBITDA positive € 152 thousand.

FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS

€ thousand

€ thousand

Q3 2020

Q3 2019

9M 2020

9M 2019

European Union

2,003

2,291

6,693

6,620

Russia

360

417

934

1,169

Asia

62

157

140

400

Middle East

10

34

55

160

Africa

8

122

96

421

Other

32

43

77

200

TOTAL

2,477

3,064

7,994

8,970

SKANO FURNITURE: retail sales

There was no retail sales revenue of furniture in the Q3 2020 (2019 Q3 € 265 thousand). However, this business has been closed down, as earlier informed, and the sales recorded in 9 months 2020 was from some remaining stock.

RETAIL SALES BY COUNTRIES

€ thousand

€ thousand

Number of stores

Q3 2020

Q3 2019

9M 2020

9M 2019

30.09.2020

30.09.2019

Estonia

0

162

55

783

0

3

Latvia*

0

40

0

125

0

0

Lithuania*

0

63

0

218

0

0

TOTAL

0

265

55

1,126

0

3

* Latvian and Lithuanian stores were closed on 30.09.2019

PÄRNU RIVERSIDE DEVELOPMENT: real estate management

Rental income, including the resale of utilities, was € 36 thousand in Q3 2020 (2019 Q3 € 32 thousand). The company’s expenses consist of operating expenses and expenses related to the ongoing detail plan project, which resulted in positive EBITDA of € 1 thousand for Q3 2020 (2019 Q3 positive € 14 thousand). Real Estate Management net profit in Q3 2020 were € 1 thousand (2019 Q3: loss € 8 thousand).

The reason for the change in EBITDA and net profit/loss is the change in the accounting policies for investment properties adopted at the end of 2019, where instead of the measured cost, investment properties were recognized in the balance sheet at fair value.

OUTLOOK

Nordic Fibreboard Ltd

The order book from our traditional customers in our largest markets in northern Europe remains strong, although it is very difficult to predict what will happen in the future due to the continuing uncertainty surrounding the COVID-19 pandemic.

Nordic Fibreboard Ltd recorded net loss in October 2020 of € 27 thousand, such loss was mainly the result of the factory’s planned 2 week stoppages in early October. The production workers did not take their annual 2 week holiday during summer due to large order backlog we had at that time, instead it was moved to the early part of October. Thus, Pärnu factory’s output in October was reduced as a result thereof, which impacted sales negatively, and thus resulted in the aforementioned net loss of € 27 thousand.

Next planned production holiday will take place in latter part of December which will also affect negatively compared to the results achieved during Q3 when there were no production holiday.

Pärnu Riverside Development

We will continue to manage and develop the property on Suur-Jõe Street 48, Pärnu.

PEOPLE

On the 30th of September 2020, the Group employed 99 people (compared to 128 people as of 30.09.2019 from continuing operations). The average number of personnel in Q3 2020 was 94 (Q3 2019: 123 from continuing operations). The reason for the decline in the number of employees compared to the same quarter last year is the closure of a factory in Püssi in March this year.

For nine months of 2020, wages and salaries with taxes amounted to € 1.6 million from continuing operations (nine months 2019: € 1.9 million from continuing operations). Payments made to management board members of all group companies including all subsidiaries with relevant taxes were € 158 thousand during 9M 2020 and € 148 thousand during 9M 2019.

FINANCIAL HIGHLIGHTS

€ thousand

Income statement

Q3 2020

Q3 2019

9M 2020

9M 2019

Revenue

2,512

3,344

8,197

10,108

EBITDA

366

120

403

184

EBITDA margin

15%

4%

5%

2%

Operating profit

231

(57)

(19)

(308)

Operating margin

9%

(2%)

(0%)

(3%)

Net profit

183

(671)

(158)

(1,052)

Net margin

7%

(20%)

(2%)

(10%)

Discontinued operations

0

(29)

0

(271)

TOTAL NET PROFIT

183

(700)

(158)

(1,324)

Statement of financial position

30.09.2020

31.12.2019

30.09.2019

31.12.2018

Total assets

7,753

9,045

9,418

10,307

Return on assets

(2%)

(12%)

(11%)

(3%)

Equity

1,414

1,542

1,606

2,901

Return on equity

(11%)

(73%)

(66%)

(12%)

Debt-to-equity ratio

82%

83%

83%

72%

Share

30.09.2020

31.12.2019

30.09.2019

31.12.2018

Last Price*

0.40

0.41

0.41

0.36

Earnings per share

(0.04)

(0.31)

(0.23)

(0.20)

Price-earnings ratio

(11.48)

(1.32)

(1.74)

(1.81)

Book value of a share

0.31

0.34

0.36

0.64

Market to book ratio

1.28

1.20

1.14

0.56

Market capitalization, € thousand

1,809

1,845

1,845

1,620

Number of shares, piece

4,499,061

4,499,061

4,499,061

4,499,061

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 = Last price / Earnings per share
Book value of a share = Equity / Total shares
Market to book ratio = Last price / Book value of a share
Market capitalization = Last price * Total shares
*http://www.nasdaqbaltic.com/

Consolidated statement of financial positions

€ thousand

30.09.2020

31.12.2019

30.09.2019

Cash and cash equivalents (Note 2)

4

7

44

Receivables and prepayments (Note 3)

1,008

1,394

1,781

Inventories (Note 4)

410

894

1,068

Total current assets

1,423

2,296

2,893

Investment property (Note 5)

1,126

1,121

816

Available-for-sale financial assets (Note 8)

418

397

378

Property, plant and equipment (Note 6)

4,777

5,212

5,306

Intangible assets (Note 7)

10

19

24

Total non-current assets

6,331

6,749

6,525

TOTAL ASSETS

7,753

9,045

9,418

Borrowings (Notes 9)

4,436

4,547

531

Payables and prepayments (Notes 10)

1,674

2,665

2,789

Short-term provisions (Note 11)

4

20

5

Total current liabilities

6,114

7,232

3,325

Long-term borrowings (Notes 9)

47

92

4,277

Long-term provisions (Note 11)

179

179

210

Total non-current liabilities

226

271

4,486

Total liabilities

6,340

7,503

7,811

Share capital (at nominal value) (Note 12)

450

2,699

2,699

Share premium

0

364

364

Statutory reserve capital

0

288

288

Other reserves

114

84

75

Retained earnings (loss)

850

(1,894)

(1,819)

Total equity

1,414

1,542

1,606

TOTAL LIABILITIES AND EQUITY

7,753

9,045

9,418

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements

Consolidated statement of profit or loss and other comprehensive income

€ thousand

Q3 2020

Q3 2019

9M 2020

9M 2019

Continued operations

Revenue (Note 14)

2,512

3,344

8,197

10,108

Cost of goods sold (Note 15)

1,892

2,764

6,508

8,610

Gross profit

620

581

1,689

1,498

Distribution costs (Note 16)

282

460

1,015

1,317

Administrative expenses (Note 17)

126

156

430

410

Other operating income (Note 19)

22

2

24

24

Other operating expenses (Note 19)

3

23

287

103

Operating profit (loss)

231

(57)

(19)

(308)

Finance income (Note 20)

4

0

41

0

Finance costs (Note 20)

53

614

179

744

Loss before income tax

183

(671)

(158)

(1,052)

Corporate income tax

0

0

0

0

Net profit (loss) for the financial period from continuing operations

183

(671)

(158)

(1,052)

Net profit (loss) for the period from discontinuing operations

0

(29)

0

(271)

Net profit (loss) for the financial period

183

(700)

(158)

(1,324)

Basic earnings per share (Note 13)

0.04

(0.16)

(0.04)

(0.29)

Diluted earnings per share (Note 13)

0.04

(0.16)

(0.04)

(0.29)

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements.

Consolidated statement of cash flows

€ thousand

9M 2020

9M 2019

Cash flows from operating activities

Operating profit (loss)

(19)

(308)

Adjustments:

Depreciation charge (Notes 5;6;7)

424

492

Profit/loss from disposal of fixed assets (Note 19)

(21)

0

Write down of fixed assets (Note 6)

0

(747)

Currency translation differences

(1)

0

Profit/loss from disposal of available-for-sale financial assets (Notes 8)

(21)

44

Non-monetary transactions: reserve for share option (Note 12)

29

29

Change in trade and other receivables (Note 3)

387

(1,038)

Change in inventories (Note 4)

484

406

Change in trade and other payables (Note 10)

(991)

741

Discontinued operations

0

933

Cash generated from operations

271

552

Interest payments (Note 20)

(155)

(167)

Net other financial income and expense

(1)

(50)

Net cash generated from operating activities

115

335

Cash flows from investing activities

Purchase of property, plant and equipment and intangible assets (Notes 6;7)

(58)

(87)

Disposal of property, plant and equipment and intangible assets (Note 6;7)

24

0

Purchase of investment property

(5)

(20)

Net cash used in investing activities

(39)

(107)

Cash flows from financing activities

Repayment of loans received (Note 9)

(4)

(223)

Loans received from related parties (Note 9)

475

223

Repayment of loans received from related parties (Note 9)

(495)

(193)

Finance lease payments (Note 9)

(50)

(67)

Change in overdraft (Note 9)

(5)

22

Net cash (used in)/from financing activities

(79)

(238)

NET CHANGE IN CASH

(3)

(10)

OPENING BALANCE OF CASH (Note 2)

7

54

CLOSING BALANCE OF CASH (Note 2)

4

44

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

€ thousand

Share capital

Share premium

Statutory reserve capital

Other reserves

Retained earnings

Total

Balance at 31.12.2018

2,699

364

288

45

(496)

2,901

Share options 9M 2019

0

0

0

29

0

29

Net profit/loss for 9M 2019

0

0

0

0

(1,324)

(1,324)

Other comprehensive income for 9M 2019

0

0

0

0

0

0

Total comprehensive profit/loss for 9M 2019

0

0

0

0

(1,324)

(1,324)

Balance at 30.09.2019

2,699

364

288

75

(1,819)

1,606

Balance at 31.12.2019

2,699

364

288

84

(1,894)

1,542

Share options 9M 2020

0

0

0

29

0

29

Retained earnings

(2,250)

(364)

(288)

0

2,902

0

Net profit/loss for 9M 2020

0

0

0

0

(158)

(158)

Other comprehensive income for 9M 2020

0

0

0

0

0

0

Total comprehensive profit/loss for 9M 2020

0

0

0

0

(158)

(158)

Balance at 30.09.2020

450

0

0

114

850

1,414

*The notes to the financial statements presented on pages 15 to 32 are an integral part of these consolidated financial statements.

TORFINN LOSVIK
Chairman of the board
Phone: +372 56 99 0988
torfinn.losvik@nordicfibreboard.com

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