Kotkamills Group Oyj: KOTKAMILLS INTERIM REPORT FOR JANUARY - SEPTEMBER 2016 Kotkamills Group Oyj STOCK EXCHANGE RELEASE 30 November 2016, at 7 pm (CET + 1)
This is a summary of the January - September 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 entering into new Consumer Boards business different quarters (e.g. Q3/2016 versus Q3/2015) are not fully comparable.
July-September 2016 (7-9/2015) The revenue of continuing operations was MEUR 60,0 (47,3). The operating profit of continuing operations of EUR -6,0 million (EUR 4,2 million) was effected by the start-up costs of Consumer Boards production.
January-September 2016 (1-9/2015) The revenue of continuing operations of EUR 160,5 million (EUR 96,4 million) 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 EUR -14,3 million (EUR 33,5 million) was clearly lower due to start-up costs of Consumer Boards business and in Q1 2015 recognized gain, i.e. negative goodwill, of EUR 30,5 million on the acquisition of Kotkamills Oy.
Events in July-September 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. The conversion project of paper machine 2 to board machine was finalized and the new consumer board machine BM2 of Kotkamills Oy started production in July. The shareholders of the Company unanimously resolved to offer by direct issue both New A and B series shares. 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 approximately EUR 13,4 million. The terms of the shareholder loans are in material respects equivalent to the terms of the existing shareholder loans. As a result of the share issue and the utilisation of the new shareholder loans, the Company obtained financing in the aggregate amount of approximately EUR 15,0 million. 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). This transaction is expected to reach its full effect by the end of Q1 2017. Together with in May 2016 informed contract Kotkamills Oy will obtain aggregate financing of approximately EUR 40 million by sale of trade receivables. The last deliveries of the magazine paper were done during the third quarter in 2016. Demand of Industrial Products segment's products continued to stay at a good level and delivery volumes improved compared to the previous quarter. The first deliveries of Consumer Boards took place in the third quarter in 2016.
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 1-9/2015 includes only business activities of 4-9/15 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) | 7-9/2016 | 7-9/2015 | 1-9/2016 | 1-9/2015 | 1-12/2015 | | Continuing operations | | | | | | | Revenue, EUR million | 60,0 | 47,3 | 160,5 | 96,4 | 146,4 | | EBITDA, EUR million | -3,0 | 5,5 | -8,4 | 36,1 | 46,0 | | Operating profit, EUR million | -6,0 | 4,2 | -14,3 | 33,5 | 40,9 | | Operating profit/ Revenue (%) | -10,1 | 8,8 | -8,9 | 34,8 | 27,9 | | | | | | | | | Group Total | | | | | | | Return on equity (%) | -58,7 | 2,3 | -106,7 | 117,3 | 122,4 | | Equity ratio (%) | 4,2 | 12,8 | 4,2 | 12,8 | 13,1 | | Equity ratio, adjusted (%)* | 39,7 | 45,2 | 39,7 | 45,2 | 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 October, 2016 the Company informed that it has taken steps to improve liquidity, performance and profitability of its wholly owned subsidiary Kotkamills Oy by optimising and developing existing operations. As part of such efforts, the Company initiated a strategic review process concerning Kotkamills Oy's wholly owned subsidiary L.P. Pacific Films ("LPPF"), a Malaysian limited liability company, for the purposes of evaluating strategic options with respect to LPPF, including a potential disposal. LPPF operates an impregnating plant in Pasir Gudang, Malaysia, focusing on Imprex® films and core stock. The operations of LPPF are part of the Group's Industrial Products segment. For the financial year ended 31 December 2015, the turnover of LPPF was EUR 13.9 million (MYR 60.3 million). Under the terms and conditions of the Company's EUR 105,000,000 Senior Secured Callable Bonds 2015/2020 (ISIN: FI4000148705), a disposal of shares in LPPF would require a consent from the bondholders in accordance with the terms and conditions of the bonds. At the same time a written procedure was initiated for the purpose of obtaining such consent for the event that the Company would, as a result of the ongoing strategic review process, decide on a disposal of the shares in LPPF. On November 15, 2016, the Company informed that it has been informed by Nordic Trustee Oy, acting as the Trustee under the bonds, that the bondholders have given the requested consent for a disposal of shares in LPPF in accordance with the terms and conditions of the bonds. On November 18, 2016, the Company informed that LPPF's sole shareholder Kotkamills Oy has on 18 November 2016 signed and completed a share purchase agreement concerning the sale and purchase of all issued and outstanding shares in LPPF to Surfactor Germany GmbH. The ownership to LPPF's shares has been transferred to Surfactor Germany GmbH with immediate effect. The enterprise value (on a debt and cash free basis) of LPPF is EUR 25 million. The purchase price is subject to a closing accounts adjustment, which is not expected to be material. The purchase price is paid to Kotkamills Oy in cash. The disposal improves the Kotkamills Group's cash position and operating profit, but the Company does not expect it to have significant impact on the Company's balance sheet.
Outlook for 2016 The revenue of the fourth quarter is estimated to be lower than in the third quarter due to seasonal lower demand. The profit for the fourth 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 fourth quarter. Markets of the other continuing operations' businesses are expected to be 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 and weakened euro 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 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.
www.kotkamills.com
Disclaimer
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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