Kotkamills Group Oyj: KOTKAMILLS INTERIM REPORT FOR JANUARY - JUNE 2016 Kotkamills Group Oyj STOCK EXCHANGE RELEASE 31 August 2016, at 7 pm (CET + 1) This is a summary of the January - June 2016 interim report. The complete report is attached to this release and is also available at www.kotkamills.com/fi/kotkamillsgroup/keyfinancials KOTKAMILLS INTERIM REPORT Due to new group structure since March 2015, stopping magazine paper production in January 2016 and preparations of entering into new Consumer Boards business different quarters (like Q2/2016 versus Q2/2015) are not fully comparable. April-June 2016 (4-6/2015) The revenue of continuing operations was MEUR 49,5 (49,1). The operating profit of continuing operations of MEUR -6,1 (0,6) was effected by annual maintenance shutdown (in 2015 maintenance shutdown in August) and fixed costs of Consumer Boards. January-June 2016 (1-6/2015) The revenue of continuing operations of MEUR 100,5 (49,1) increased clearly because Q1/2015 does not include business activities of continuing operations (Kotkamills Group Oyj became the parent company on 24 March 2015, when the Company acquired the entire share capital of Kotkamills Oy). The operating profit of continuing operations of MEUR -8,2 (29,4) was clearly lower due to maintenance shutdown in May (2015 in August), increased fixed costs of Consumer Boards and in Q1 2015 recognized gain, i.e. negative goodwill, of MEUR 30,5 on the acquisition of Kotkamills Oy. Events in April-June 2016 The conversion project of paper machine 2 to board machine continued in the second quarter. The delivery of the magazine paper will continue until the third quarter in 2016. Demand of Industrial Products segment's products continued to stay at a good level. Consumer Boards had no deliveries during the reporting period. Company's subsidiary Kotkamills Oy signed a contract of approximately MEUR 20 with a Nordic financial institution concerning sale of trade receivables of the company to the financial institution (on an ongoing, non-recourse basis on customary market terms). Company estimated that the total costs of the Board Machine project to be ca. 170 MEUR instead of the earlier estimation of 155 MEUR. The difference is mainly coming from civil and piping works and the slightly delayed start-up date. Key figures The business of Magazine Papers was classified as a discontinued operation in January 2016 and thus the net result of the business of Magazine Papers is presented in the statement of profit or loss under "Profit (loss) from discontinued operations" separately from continuing operations for all periods presented. The Kotkamills Group Oyj became the parent company on 24 March 2015, when the Company acquired the entire share capital of Kotkamills Oy, thus H1/2015 includes only business activities of Q2/15 of continuing operations. The Group recognized a gain, i.e. negative goodwill, of EUR 30,5 million on the acquisition of Kotkamills Oy. The gain has been recognized in the other operating income in Q1 2015. | (IFRS) | 4-6/2016 | 4-6/2015 | 1-6/2016 | 1-6/2015 | 1-12/2015 | | Continuing operations | | | | | | | Revenue, EUR million | 49,5 | 49,1 | 100,5 | 49,1 | 146,4 | | EBITDA, EUR million | -4,7 | 1,9 | -5,4 | 30,7 | 46,0 | | Operating profit, EUR million | -6,1 | 0,6 | -8,2 | 29,4 | 40,9 | | Operating profit/ Revenue (%) | -12,3 | 1,2 | -8,2 | 59,7 | 27,9 | | | | | | | | | Group Total | | | | | | | Return on equity (%) | -37,1 | -4,3 | -57,2 | 117,4 | 122,4 | | Equity ratio (%) | 7,8 | 12,5 | 7,8 | 12,5 | 13,1 | | Equity ratio, adjusted (%)* | 41,8 | 44,7 | 41,8 | 44,7 | 44,3 | | | | | | | | | *Equity includes shareholder loans | | | | | |
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 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 In July 2016 the Company utilized the EUR 20 million junior loan facility to complete the board machine conversion project. The summary of the material terms of the equity hybrid loan is presented in the listing prospectus available in the company website (www.kotkamills.com/fi/kotkamillsgroup/keyfinancials). On July 22, 2016, the Company informed, that the new consumer board machine BM2 of Kotkamills Oy, the subsidiary of Kotkamills Group Oyj, has started production in Kotka, Finland. At the end of July 2016 the Company informed, that the shareholders of Kotkamills Group Oyj have unanimously resolved to offer by a directed issue a maximum of 1,406,277 new series A shares of the company for subscription to the holders of series A shares pro rata to their holding of series A shares and a maximum of 153,128 new series B shares of the company for subscription to the holders of series B shares pro rata to their holding of series B shares. The New Shares represent in aggregate approximately 15.59 per cent of the existing shares in the company. The subscription price for each New Share is EUR 1.00 and the aggregate subscription price for the New Shares is EUR 1,559,405. Pursuant to the terms of the share issue of the New A Shares, the holders of series A shares are in connection with their participation in the share issue required to grant shareholder loans to the company up to the aggregate amount of EUR 13,437,470. The terms of such shareholder loans would in material respects be equivalent to the terms of the existing shareholder loans. The purpose of the share issue and the utilisation of the shareholder loans is to strengthen the company's cash position at the time of the start of the new board machine to fully utilise increased sales potential resulting from the start. In August the Company informed, that the holders of series A shares subscribed the maximum amount of 1,406,277 New A Shares offered for subscription on the directed issue of the company and the holders of series B shares subscribed 131,252 of the total 153,128 New B Shares offered for subscription on the directed issue of the company. The subscribed New Shares represent in aggregate approximately 13.33 per cent of the total number of the shares in the company. The subscription price for each New Share is EUR 1.00 and the aggregate subscription price for the New Shares is EUR 1,537,529. Pursuant to the terms of the share issue of the New A Shares, the holders of series A shares granted in connection with their participation in the share issue shareholder loans to the company in the aggregate amount of EUR 13,437,470. As a result of the share issue and the utilisation of the new shareholder loans, Kotkamills Group Oyj will obtain financing in the aggregate amount of EUR 14,974,999. Outlook for 2016 The revenue and the profit for the third quarter of 2016 is estimated to improve from the previous quarter although the start-up costs of the new board machine and Consumer Boards business are estimated to have negative effect on the profit of the third quarter. Markets of the other continuing operations' businesses are expected to be at least at the same level as in the last year, but ongoing uncertain economic situation in Europe and geopolitical risks may have weakening impact on demand. Present energy price levels are expected to support the Group's performance, but possible increases in raw material 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, petri.hirvonen@kotkamills.com DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media
www.kotkamills.com 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. The key brands of the company include Absorbex® and Imprex®, both innovative laminating paper products 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 Boards material solutions are fully recyclable and repulpable. Kotkamills has two production sites in Finland, located in Kotka and Imatra, and a subsidiary L.P. Pacific Films for Imprex® production in Malaysia. The majority shareholder of Kotkamills is MB Funds, a Finnish private equity firm.
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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.
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