Kotkamills Group Oyj: INTERIM REPORT FOR JANUARY-DECEMBER 2016
Kotkamills Group Oyj
STOCK EXCHANGE RELEASE
28 February 2017, at 6.30 pm (CET + 1)
This is a summary of the January - December 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. Q4/2016 versus Q4/2015) are not fully comparable.
October - December 2016 (10-12/2015)
The revenue of continuing operations of EUR 58,6 (EUR 49,9) million improved by EUR 8,7 million mainly due to increased Consumer Boards sales.
The operating profit of continuing operations was EUR 13,8 (EUR 7,4) million mainly due to profit of disposal of the shares of L.P. Pacific Films ("LPPF"), a Malaysian limited liability company and the subsidiary of Kotkamills Oy, (EUR 18,9 million) and a negative impact from the ramp-up of Consumer Boards operations.
January - December 2016 (1-12/2015)
The revenue of continuing operations of EUR 219,1 (EUR 146,4) million increased clearly because year 2015 does not include business activities of continuing operations of Q1/2015 (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 -0,4 (EUR 40,9) 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 October - December 2016
In November the Company sold the shares of LPPF to Surfactor Germany GmbH. The enterprise value (on a debt and cash free basis) of LPPF was EUR 25 million. The purchase price was subject to a closing accounts adjustment, which was not material. The purchase price was paid to Kotkamills Oy in cash. The disposal improved the Kotkamills Group's cash position, operating profit and equity, but it did not have significant impact on Group's assets and liabilities.
In December the Company continued to take steps to improve liquidity, performance and profitability of Kotkamills Oy by optimising and developing existing operations. As part of such efforts, Kotkamills Group Oyj initiated a strategic review process concerning the Imprex Business for the purposes of evaluating strategic options with respect to the Imprex Business, including a potential disposal.
The potential disposal of Imprex Business would require a consent from the bondholders in accordance with the terms and conditions of the bonds. A written procedure was initiated for the purpose of obtaining such consent for the event that Kotkamills Group Oyj would, as a result of the ongoing strategic review process, decide on a disposal of the Imprex Business.
The delivery volumes of Industrial Products segment decreased slightly compared to the previous quarter due to seasonal variation but the demand still continued to stay at a good level.
The commercial ramp-up of Consumer Boards products continued in the fourth quarter.
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 1-12/2015 includes only business activities of 4-12/15 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) || 10-12/2016 || 10-12/2015 || 1-12/2016 || 1-12/2015 || |
| Continuing operations || || || || || |
| Revenue, EUR million || 58,6 || 49,9 || 219,1 || 146,4 || |
| EBITDA, EUR million || 17,9 || 9,9 || 9,5 || 46,0 || |
| Operating profit, EUR million || 13,8 || 7,4 || -0,4 || 40,9 || |
| Operating profit/ Revenue (%) || 23,6 || 14,7 || -0,2 || 27,9 || |
| || || || || || |
| Group Total || || || || || |
| Return on equity (%) || 58,3 || 9,3 || -53,2 || 122,4 || |
| Equity ratio (%) || 7,8 || 13,1 || 7,8 || 13,1 || |
| Equity ratio, adjusted (%)* || 50,1 || 44,3 || 50,1 || 44,3 || |
| || || || || || |
| *Equity includes shareholder loans and the junior term loan || || || || || |
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 loans and the junior term 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 January 2017 the Company was informed by Nordic Trustee Oy, acting as the Trustee under the bonds, that the bondholders have given the requested consent (as revised on 23 December 2016) for a disposal of the Imprex Business in accordance with the terms and conditions of the bonds.
In February 2017 the shareholders of the Company unanimously resolved to offer by a directed issue a maximum of 1,875,417 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, a maximum of 63,125 series B shares held by the company for subscription to certain key employees of the Kotkamills Group and a maximum of 203,885 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.
Pursuant to the terms of the share issue of the New A Shares, the holders of series A shares were in connection with their participation in the share issue required to grant shareholder loans to the company up to the aggregate amount of EUR 17,920,698. The terms of the shareholder loans are in material respects equivalent to the terms of the existing shareholder loans.
The purpose of the share issue and the utilisation of the shareholder loans was to ensure full utilization of the commercial ramp-up of the new board machine.
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 20,0 million.
Outlook for 2017
The revenue of the first quarter in 2017 is estimated to be higher than in the fourth quarter 2016 due to increase in the delivery volumes. The profit of continuing operations for the first quarter of 2017 is estimated to improve from the previous quarter (excluding the profit of disposal of LPPF) although the commercial ramp-up of Consumer Boards business is estimated to have a negative effect on the profit of the first quarter.
Markets of the other continuing operations' businesses are expected to be at the same level as in the last year, but ongoing economic situation in Europe and geopolitical risks may have weakening impact on demand.
Present euro exchange rate is 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, email@example.com
Nasdaq Helsinki Ltd
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.
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.