Neo Industrial 1-9/2019: Turnover weakened, cash flow strengthened from the previous year
October 22 2019 - 2:00AM
Neo Industrial 1-9/2019: Turnover weakened, cash flow strengthened
from the previous year
NEO INDUSTRIAL
PLC
BUSINESS
REVIEW
22 OCTOBER 2019 at 9:00 AMNeo Industrial 1-9/2019: Turnover
weakened, cash flow strengthened from the previous
yearJanuary-September 2019Neo Industrial group’s turnover
was EUR 72.9 million (78.3 million)- The operating result was EUR
-0.5 (1.2) million.- IAS 19 adjusted operating result excluding
non-recurring items was EUR1.1 (1.5) million.- The operating result
of the Cable Segment was EUR 0.6 (1.7) million.- The operating
result of the Cable Segment excluding non-recurring items was EUR
1.5 (1.7) million.- The Group's result for the period was EUR -1.7
(-0.2) million- The cash flow from operating activities was
positive EUR 3.3 (0.2) million.The business review is unaudited.Neo
Industrial Plc’s subsidiary Reka Cables Ltd is one of two companies
to win the public acquisition of substantial contract for
underground power cables. Total value of Reka Cable's share will be
approximately EUR 20 million and the deliveries will be made during
2020-2021.Underground power cables are used when building grids
that are not vulnerable to weather conditions.
In August Jukka Poutanen was appointed as Neo Industrial Plc and
its subsidiary Reka Cables Ltd Managing Director starting August
12, 2019. Neo Industrial Plc sold its shares of Riihimäen
Kaapelitehdas Ltd to Riihimäen Tilat ja Kehitys Ltd in August.
Selling price is EUR 2.0 million. At the Group level, the
arrangement had no impact on result.Sale of shares was part of
total arrangement where Riihimäen Tilat ja Kehitys Ltd bought
altogether 68.05 % and Neo Industrial Plc’s subsidiary Reka Cables
Ltd 20.2 % shares of Riihimäen Kaapelitehdas Ltd. Third owner is
Reka´s Pension fund, whose ownership decreased to be under 12 %
after arrangement.In the end of June 2019 cable segment bought one
of the premises that is used in Keuruu plant.During the review
period the Group has made financial arrangements. Real estate
related acquisitions have been financed through long-term
financing.MANAGING DIRECTOR JUKKA POUTANEN:During
the review period the Group reorganized the ownerships of Cable
Segment's production facilities in Keuruu and Riihimäki. It seems
more tempting in longer term to buy such assets than handle them
according to IFRS 16. Real estate related acquisitions have been
financed through long-term financing.Nestor Cables Ltd.'s equity
turned positive and the EUR 0.1 million profit share is therefore
included in the Group figures below the operating result. Reka
Cables Ltd.'s turnover and operating result were lower than in the
comparison period. Domestic sales decreased. Particularly part of
the underground power cable projects has been postponed to next
year. Export sales increased as planned but could not compensate
for the domestic decrease. During the review period, a plan was
made to develop and significantly grow both the domestic and export
sales organization.
KEY FIGURES
|
1-9/2019 |
1-9/2018 |
1-12/2018 |
Turnover, EUR
million |
72.9 |
78.3 |
103.8 |
Operating result,
EUR million |
-0.5 |
1.2 |
1.0 |
IAS19 adjusted
operating result excluding non-recurring items, EUR million |
1.1 |
1.5 |
2.2 |
Result for the
period, EUR million |
-1.7 |
-0.2 |
-0.5 |
Earnings per
share, EUR |
-0.29 |
-0.04 |
-0.09 |
Net cash provided
by operating activities, EUR million |
3.3 |
0.2 |
-1.3 |
SEGMENTSNeo Industrial's business segment is
Cable Industry.CABLE SEGMENTThe Cable segment’s
turnover between 1.1.–30.9.2019 was EUR 72.9 million (EUR 78.3
million during the comparison period of 1.1.–30.9.2018). Its
operating profit was EUR 0.6 million (EUR 1.7 million) including
non-recurring items EUR 0.9 million. Thus the operating result
excluding non-recurring items was EUR 1.5 million (EUR 1.7
million). Reka Cables Ltd's domestic sales volumes declined from
the previous year due to the postponement of underground cable
projects to 2020. Export sales volumes increased as planned.Neo
Industrial has stated that with some premises and other non-current
assets it seems more tempting in longer term to buy such assets
than handle them according to IFRS 16. As a first step Neo
Industrial´s cable segment bought end June one of the premises that
is used in Keuruu plant.The arrangement at the end of August 2019
was the opening of the cable industry towards Riihimäki plant. Reka
Cables acquired a 20.2% holding in Riihimäen Kaapelitehdas Oy. Reka
Cables plans to increase its ownership in the coming years. Reka
Cables Ltd was one of two companies to win the public acquisition
of substantial contract for underground power cables in July. Total
value of Reka Cable's share will be approximately EUR 20 million
and the deliveries will be made during 2020 - 2021. In the Cable
Segment the key raw materials are metals (copper and aluminum) and
plastics. In the beginning of 2019, the price of copper was EUR
5,251 per ton and aluminum EUR 1,632 per ton. At the end of
September 2019, the price of copper was EUR 5,250 and aluminum EUR
1,562. The daily price of copper was at its highest in April at EUR
5,787 and at its lowest in August at EUR 5,051 during the reporting
period. The price of aluminum was at its peak in March at EUR 1,694
and lowest in June at EUR 1,523. Neo Industrial uses partial
commodity hedging with aid of commodity derivatives for metal
purchases. The fair value of open hedges 30.9.2019 was EUR -0.0
(EUR 0.1) million. Turnover for Nestor Cables Ltd, an associated
company, in January-September 2019 was EUR 26.3 (EUR 29.1) million.
The operating result was positive but lower than year before. The
company’s value on the consolidated balance sheet turned positive
and the result of EUR 0.1 million has been included in the Group
figures.FINANCIAL POSITION At the end of September
2019 interest bearing liabilities excluding lease liabilities were
EUR 13.4 (6.6) million. Of these liabilities EUR 8.0 (4.1) were
non-current liabilities. The EUR 3.0 million limit loan of the
company was in full use at the end of the September. In addition to
the limit loan and sales receivable related factoring the other
current interest bearing liabilities were EUR 1.7 (2.5) million.
The liquidity situation of the company is good. Investments during
1.1.–30.9.2019 were EUR 7.2 million (EUR 1.7 million) and focused
on real estates, material- and energy efficiency as well as
improving productivity.PERSONNELIn 1.1.–30.9.2019
the average amount of employees was 247 (262). At the end of the
review period 30 September 2019, the Group employed 246 (263)
persons.RISKS AND UNCERTAINTY FACTORSNeo
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
aluminum) 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.The Group has carried out and is carrying out the
simplifications of the Group structure with mergers. Tax authority
has questioned the tax neutrality of the subsidiary merge carried
out in 2015. Neo Industrial has filed for changes in its tax
assessment notice. Neo Industrial has the opinion that the merge is
universal succession and therefore tax neutral. The difference of
opinion of the Neo Industrial and tax authority is EUR 1.2
million.MAJOR EVENTS AFTER THE REVIEW PERIOD
Reka Cables has taken immediate steps to increase sales force.16
October Neo Industrial Plc released profit warning lowering its
estimate for near-term outlook. NEAR-TERM
OUTLOOK
For the financial year 2019, Neo Industrial's operating result
without items affecting comparability is expected to clearly
decrease from the year 2018.The nature of Neo Industrial's business
involves major fluctuations between quarters and may differ from
year to year.Hyvinkää, 22 October 2019
Neo Industrial PlcBoard of DirectorsFurther information:Jukka
Poutanen, Managing Director, tel. +35840 833 9007Markku E. Rentto,
Chairman of the Board, tel. +358 40 500 1858
All comments in this report that do not refer to actual facts
are future estimates. Such estimates include expectations
concerning market trends, growth and profitability as well as
statements including the words "believe", "assume" or "will be" or
a similar expression. Since these estimates are based on current
plans and estimates, they involve risks and uncertainty factors
that may cause the actual results to differ substantially from
current statements.Among other things, such factors include 1)
operating conditions, such as continued success in production and
the ensuing efficiency benefits, availability and cost of
production inputs, demand for new products and changes in
circumstances affecting the acquisition of capital under acceptable
conditions; 2) sector-specific circumstances, 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 and
competitors’ possible new products; and 3) the general economic
situation, such as economic growth in the Group’s main market areas
and change in exchange rates and interest rates.Figures in brackets
refer to the same period a year earlier, unless otherwise
stated.
www.neoindustrial.fi
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.