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Interim report, 1 January - 31 March 2013

Stock Exchange Release: 04/24/2013

Interim report, 1 January - 31 March 2013

- The Tulikivi Group’s net sales were EUR 9.2 million (EUR 10.7 million in Q1/2012).
- The Group’s operating result was EUR -1.7 (-1.4) million. Earnings per share amounted to EUR -0.04 (-0.03).
- Cash flow from operating activities before investments was EUR -2.5 (-3.5) million.
- Order books were at EUR 6.0 million on 31 March 2013 (EUR 7.8 million on 31 March 2012).
- Future outlook: The demand for Tulikivi products is dependent on consumer confidence. New products will allow us to increase our market share; however, no significant growth is anticipated for net sales in 2013. Operating profit is expected to improve with improved operating efficiency.
Summary of the interim report 1-3/2013. The full interim report is attached to this release.


Key financial ratios

  1-3/13 1-3/12 Change % 1-12/12
         
Sales, MEUR 9.2 10.7 -14.0 51.2
Operating profit/loss, MEUR -1.7 -1.4 -21.4 0.1
Profit before tax, MEUR -2.0 -1.6 -25.0 -0.8
Total comprehensive income for the period, MEUR -1.6 -1.2 -33.3 0.6
Earnings per share/EURO -0.04 -0.03   -0.02
Net cash flow from operating activities, MEUR -2.5 -3.5   0.1
Equity ratio, % 32.0 31.8   35.2
Net indebtness ratio, % 142.2 126.7   112.9
Return on investments, % -16.5 -12.3   0.3


Comments by Jouni Pitko, Managing Director:

Net sales in the Fireplaces Business grew in Russia but in Central Europe they were somewhat lower than a year earlier. Due to weak domestic demand in the winter, net sales in the first quarter declined from the comparison period in the Fireplaces and the Interior Stone Businesses.

Order books improved on the situation at the beginning of the year. The fireplace sales campaign in Central Europe was held at a different time, and this resulted in a decline in order books on the previous year.

Measures to improve profitability were continued at the beginning of the year by reorganising sales operations in Finland and adjusting production capacity.
Measures to cut costs will be continued and sales operations will further intensified. Production processes will be developed to improve efficiency. In exports, growth will be sought by renewing and expanding the distribution network. Tulikivi Corporation’s strategy will be simplified to better correspond to the changed markets in Finland and abroad. Changes to our strategy will be announced in the third quarter.

Interim Report

Net sales and result

The Group’s net sales were EUR 9.2 million (Jan–March/2012: EUR 10.7 million). The net sales of the Fireplaces Business were EUR 8.3 (9.6) million and of the Natural Stone Business EUR 0.9 (1.1) million.

Net sales in Finland accounted for EUR 4.5 (5.6) million, i.e. 49.3 (52.3) per cent, of total net sales. Exports amounted to EUR 4.7 (5.1) million in net sales. The principal export countries were France, Belgium Germany, Russia and Sweden.

The consolidated operating result was EUR -1.7 (-1.4) million. The operating result for the review period was adversely affected by the restructuring provision of EUR 0.1 million recognised for adjustment measures. In the segment reporting, the operating result for the Fireplaces Business was EUR -1.6 (-1.2) million, and for the Interior Stone Business EUR -0.1 (-0.2) million.

The consolidated result before taxes was EUR -2.0 (-1.6) million, and the net result EUR -1.5 (-1.2) million. Earnings per share amounted to EUR -0.04 (-0.03).

Financing and investments

Cash flow from operating activities before investments was EUR -2.5 (-3.5) million. Working capital increased by EUR 1.5 million in the period and came to EUR 11.4 million (31 March 2012: EUR 9.7 million). The growth in working capital was a result of an increase in inventories at the Suomussalmi plant and the concentration of trade receivables in Finland to customers, with longer payment terms. Interest-bearing debt was EUR 25.6 (26.4) million. Financial income was EUR 0.0 (0.0) million and financial expenses EUR 0.3 (0.2) million. The equity ratio was 32.0 (31.8) per cent. The ratio of interest-bearing net debt to equity, or gearing, was 142.2 (126.7) per cent. The current ratio was 1.6 (1.7). Equity per share was EUR 0.45 (0.47).

At the end of the reporting period, the Group’s cash and other liquid assets were EUR 2.0 (4.1) million. The total of undrawn credit facilities and unused credit limits amounted to EUR 0.5 (1.6) million.

The Group’s interest-bearing debt includes covenants which are tied to the Group’s equity. The covenant conditions were met at the close of the reporting period. In addition, the Group has a covenant, concerning the second and fourth quarter, on the relation of net debt to EBITDA.

The Group’s investments in production, quarrying and development were EUR 0.6 (0.8) million. Research and development costs were EUR 0.4 (0.5) million, i.e. 4.4 (4.7) per cent of net sales. EUR 0.1 (0.2) million of this figure, after deduction of subsidies, was capitalised in the balance sheet. Product development focused on the efficient production and commercialisation of the new modular Aalto and Kide hybrid fireplaces which are members of the Hiisi product family.

Near-term risks and uncertainties

A substantial decline in euro zone consumer confidence is the Group’s most significant risk. If access to consumer credit weakens, it will reduce new construction and renovation, which could have an impact on the demand for fireplaces.

In the EU, construction legislation is currently being revised. New country-specific energy efficiency provisions that meet the EU’s energy efficiency policies will come into force within 2013 and could influence the competition between different forms of heating and thus the demand for fireplaces in different markets.

Maintaining the Group’s current financial position will require improvements in profitability. Weaker profitability will force Tulikivi to reinforce its financial position or reorganise its financing. A more comprehensive explanation of the Tulikivi Group’s risks can be found under note 38: Major risks and their management, in the Consolidated Financial Statements in the Annual Report for 2012.

Events following the end of the period

Resolutions of the Annual General Meeting

Dividends

Tulikivi Corporation’s Annual General Meeting, held on 16 April 2013, resolved not to distribute a dividend on the 2012 financial year.

Decision-making bodies

The following persons were elected to the Board of Directors of the parent company and domestic business subsidiaries: Nella Ginman-Tjeder, Olli Pohjanvirta, Markku Rönkkö, Pasi Saarinen, Harri Suutari and Heikki Vauhkonen. The Board elected from among its members Heikki Vauhkonen as its full-time Chairman. KPMG Oy Ab, Authorized Public Accountants, was appointed as auditor.

Jouni Pitko was appointed Managing Director on 16 April 2013. In addition to the Managing Director, the Management Group includes Michel Mercier, Export Director, Ismo Mäkeläinen, Head of Production and Purchasing, Martti Purtola, Business Director, saunas, Juha Sivonen, Sales Director, Finland, Jouko Toivanen, Business Director, lining and interior stones, Anu Vauhkonen, Corporate Communications Director, and Risto Vidgren, Financial Director.

Amending the Articles of Association

The General Meeting approved the Board’s proposals for amending the Articles of Association. A new article 3 a, following article 3, was added to the Articles of Association on converting series K shares into series A shares if so requested by a holder of the series K share and on condition that the number of shareholders owning series K shares is less than 150. In addition, an amendment was made to article 8 of the Articles of Association to the effect that the notice of meeting will be published as a stock exchange release and on the company’s website.

Authorisation to repurchase the company’s own shares

The Annual General Meeting authorised the Board of Directors to acquire shares of the company as proposed by the Board. The shares are repurchased for improving the company’s capital structure and for use as consideration in corporate acquisitions or other structural arrangements in accordance with and to the extent of the Board’s decision. Furthermore, shares may be repurchased for the purpose of implementing the share-based incentive system, to pay a share-based incentives or otherwise to be transferred or cancelled. A maximum of 2,760,397 of series consideration, however, that the amount of treasury shares may not exceed 10 per cent of the total number of the company’s shares. The authorisation is valid until the 2014 Annual General Meeting, but not longer than 18 months as of the decision of the Annual General Meeting.

The authorisation to decide on share issues and on the transfer of Tulikivi Corporation shares held by the company, and on the right to issue special rights giving entitlement to shares as defined in Chapter 10, section 1, of the Limited Liability Companies Act

The Annual General Meeting authorised the Board of Directors to decide on issuing new shares and on the transfer of Tulikivi Corporation shares held by the company in accordance with the proposal of the Board. New shares can be issued or the company’s own shares held by the company transferred as follows: a maximum of 5,520,794 Series A shares and 1,908,000 Series K shares.

The authorisation includes the right to decide on a directed rights issue, deviating from the shareholders’ right of pre-emption, provided that there is compelling financial reason for the company. The authorisation also includes the right to decide on a bonus issue to the company itself, where the number of issued shares is no more than one tenth of the total number of the company’s shares.

The authorisation also includes, as proposed by the Board, the right to issue special rights, as defined in Chapter 10, Section 1, of the Limited Liability Companies Act, which give entitlement to subscribe shares against payment or by setting off the receivable. The authorisation includes the right to pay the company’s share rewards. The Board is authorised to decide on other matters concerning share issues. The authorisation is valid until the 2014 Annual General Meeting.

Other events following the end of the financial year

Result of the codetermination negotiations of 11 March 2013

The outcome of the negotiations was that 6 people will be made redundant in domestic sales, customer service and production, and 21 people will be laid off until further notice. In addition, the company may, until 30 June 2014, implement fixed-term layoffs according to the situation regarding demand.

New Managing Director

Jouni Pitko was appointed Managing Director of Tulikivi Corporation on 16 April 2013.

Future outlook

The demand for Tulikivi products is dependent on consumer confidence.
New products will allow us to increase our market share; however, no significant growth is anticipated for net sales in 2013. Operating profit is expected to improve with improved operating efficiency.
Order books at the end of the reporting period amounted to EUR 6.0 million (31 March 2012: EUR 7.8 million).


TULIKIVI CORPORATION
Board of Directors

Heikki Vauhkonen
Chairman of the Board
Distribution: NASDAQ OMX Helsinki Ltd
Central Media
www.tulikivi.com

Additional information: Tulikivi Corporation, 83900 Juuka, tel. +358 403 063 100,
www.tulikivi.com
- Chairman of the Board of Directors Heikki Vauhkonen, +358 207 636 555
- Managing Director Jouni Pitko, +358 403 063 222

ATTACHEMENT: Interim Report 1-3/2013
 

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