Interim Report
21.4.2009
- The Tulikivi Group’s sales were EUR 11.0 million (EUR 14.6 million, 01-03/2008). - The Group’s result before taxes was a loss of EUR -3.0 (-0.6) million after EUR 1 million in non-recurring expenses incurred from the centralisation and profitability programme. Earnings per share amounted to EUR -0,06 (-0,01). - Cash flow from operating activities before investments was EUR - 1.0 (0.8) million. - Order books were at EUR 6.6 million (EUR 4.9 million 31 Dec) on 31 March. - Net sales for the period are expected to fall well below that of last year and the result after non-recurring items is expected to be in the red.
Managing Director's comments: "Net sales for the first quarter were notably lower than a year before, especially in Finland, Russia and the Baltic countries. A decrease in private home building and the general uncertainty among consumers had a strong impact on demand. Fireplace sales to Central-Europe, where sales focus on renovation, performed well considering the challenging environment. Despite the challenging demand situation, we have continued to develop our domestic distribution network and services and started logistics operations in Russia. These measures will increase net sales from the level of early 2009 in the markets in question. The programme to centralise Group functions and improve profitability is making progress. Structural changes made in addition to personnel reductions will also result in substantial cost savings, which will improve the Group's relative profitability in the latter part of the year.
In the upcoming months demand for fireplaces will be higher in Central Europe than in Finland and its neighbouring regions. However, in order for demand to recover consumer confidence must improve substantially on the current level. As a whole, however, demand for fireplaces will be higher during the coming months than it was in the first quarter.
Segment reporting Since the beginning of 2009, the Group's operating segments have been the Fireplaces Business and the Natural Stone Products Business. The Fireplaces Business includes the soapstone Tulikivi and the ceramic Kermansavi fireplaces, their accessories, utility ceramics and fireplace lining stones. The Natural Stone Products Business includes interior decoration stone products for households and stone deliveries to construction sites. Expenses not allocated to a Segment are included under Other items, which also includes financial costs and taxes.
Net sales and result The net sales of the Tulikivi Group were EUR 11.0 million (EUR 14.6 million in January – March 2008). The net sales of the Fireplaces Business was EUR 9.6 (12.6) million and of the Natural Stone Business EUR 1.4 (2.0) million. The decrease in the net sales of the Fireplaces Business was the result of declining Finnish sales of fireplaces and lining stone.
Exports accounted for EUR 5.6 (6.5) million, or 50.6 (44.8) per cent, of total sales. The largest countries for exports were France, Belgium and Germany. Finnish sales were EUR 5.4 (8.1) million.
The Group posted a loss of EUR -2.7 (-0.3) million at the operating profit level. In accordance with the Group’s segment reporting, the Fireplaces Business had an operating loss of EUR - 1.9 (0.4) million, and the Natural Stone Products Business an operating loss of EUR -0.1 (0.2) million, while the other items´ expenses were EUR -0.7 (-0.9) million.
Consolidated loss before taxes was EUR -3.0 (-0.6) million and net losses were EUR -2.4 million (-0.4) million. Earnings per share were EUR -0,06 (-0,01). The Group launched a programme to centralise functions and improve profitability. The codetermination negotiations concluded in March led to 79 redundancies and 41 layoffs until further notice. A restructuring provision of EUR 1.0 million was entered for these measures for the review period, most of which was recorded under the Fireplaces Business' expenses. The restructuring will also result in approximately EUR 0.2 in further non-recurring expenses, which will be recorded in future periods.
Financing and investments We are prepared for the change in operating environment and the Group has a solid financial position. Cash flow from operating activities before investments was EUR -1.0 (0.8) million. The management's view is that the Group's available financing will be sufficient in the near future. Equity ratio was 37.4 per cent (42.3 per cent at March 31, 2008). The ratio of interest-bearing net debt to equity, or gearing, was 69.4 (65.7) per cent. Current ratio was 1.6 (1.6). Financial income for the period was EUR 0.1 (0.0.) million and financial expenses EUR 0.4 (0.3) million. The equity per share amounted to EUR 0.64 (0.73).
The Group’s investments in production, quarrying and development were EUR 0.5 (0.7) million. Research and development costs were EUR 0.4 (0.4) million or 3.3 (3.1) per cent of net sales. EUR 0.1 (0.1) million of this amount was capitalized in the balance sheet. A product development project in which the fireplace range was converted to use the whirlbox technique was completed. As a result, all model ranges of Tulikivi Corporation now display the CE marking.
Personnel The Group employed an average of 399 (550) people during the reporting period. Salaries and bonuses during the review period totalled EUR 4.2 (4.2) million, to which the restructuring provision contributed EUR 0.5 million.
The Tulikivi Group has an incentive plan that includes a share- based incentive plan for the managing director and key personnel and an incentive pay scheme for all personnel. The share-based incentive system was introduced in 2008 and had three earning periods, which were the calendar years 2008, 2009 and 2010. The maximum reward is 360 000 Tulikivi Corporation A shares and a cash payment corresponding to the value of the shares. The realized reward from the plan for the earning period 2008 was 9 800 A shares. The maximum share reward for 2009 is 175 000 A shares and a cash payment corresponding to the value of the shares. A maximum of 40 000 A shares of this can go to the managing director. The share reward is based on the improvement of the Group's result and cash flow. The incentive pay scheme is based on the improvement of the Group’s result and productivity, and the managing director and key persons also have personal targets in addition to this.
Resolutions of the Annual General Meeting Dividends Tulikivi Corporation´s Annual General Meeting, held on 31 March 2009, resolved to pay a dividend of EUR 0.0280 on Series A shares and EUR 0.0263 on Series K shares. The dividend was paid out on April 14, 2009.
Board of Directors, Managing Director and auditors Tulikivi Corporation’s Annual General Meeting elected to the Board of Directors of the parent company and domestic business subsidiaries: Bishop Ambrosius, Juhani Erma, Eero Makkonen, Markku Rönkkö, Maarit Toivanen-Koivisto, Heikki Vauhkonen and Matti Virtaala. The Board of Directors elected Matti Virtaala as Chairman from amongst its members. The auditor is KPMG Oy Ab, Authorized Public Accountants.
Authorisation to repurchase the company’s own shares The Annual General Meeting authorised the Board to acquire the company’s own shares as proposed by the Board.
Authorisation to decide on share issues and on transfer of the company’s own shares in the possession of the company and the right to issue special rights which give entitlement to shares as defined in Chapter 10, Article 1, of the Companies Act
The Annual General Meeting authorised the Board of Directors to decide on issuing new shares and the transfer of the company’s own shares in the possession of the company as proposed by the Board. The authorization also includes the right to issue special rights, as defined in Chapter 10, Article 1, of the Companies Act, which entitle to subscribe for shares against payment or by setting off the receivable.
Share repurchase At the beginning of the period Tulikivi Corporation hold 74 000 of its own A series shares.During the period 60 000 A shares were purchased at the repurchase value of EUR 43 875. The average purchase price per share was EUR 0.73. The purchase price was the exchange rate at the moment of the purchase, which varied between EUR 0.68 and EUR 0.83 during the purchase periods. The repurchased shares account for 0.20 per cent of all shares and 0.0 per cent of votes carried by all shares. The number of the shares in the company´s possession at the end of the period was 134 000 A shares which corresponds to 0.4 per cent of the company´s share capital and 0.1 per cent of all voting rights.
The repurchase of own shares had no material impact on the on shareholdings and voting rights in the company.
The shares are repurchased for use as consideration in corporate acquisitions or other structural arrangements or to implement the share-based incentive system, to pay a share-based incentive or otherwise to be transferred or cancelled.
Risks and uncertainties A rapid decline in private house construction and remodelling and fluctuation of exchange rates will weaken the demand for fireplaces. The decrease of consumer prices of energy may also affect the demand for fireplace products. The risks the Group will face in the near future relate to the decline in demand for fireplaces products as well as to the success of cost savings attained with the profitability programme.
According to the Group’s long-term risk assessment, its strategic risks concern, but are not limited to, the Group’s raw material reserves, legislative amendments and the market position. Operational risks are related to products, distribution channels and processes. For more information, see the 2008 Annual Report.
Future outlook Housing construction is at a low level in many market-areas, which, in addition to the uncertain economic situation, has an impact on the demand for fireplaces and natural stone products. Demand for fireplaces is expected to be higher in relative terms in Central Europe than in Finland and its neighbouring regions. The inflow of orders is not expected to improve significantly in the next few months. The centralisation and productivity improvement programme being implemented by the company will improve profitability in the latter half of the year. However, net sales for the current year are estimated to fall well below that of last year and the result before taxes after non-recurring items is expected to be in the red.
The order books at the end of the review period amounted to EUR 6.6 (9.2 on 31 March 2008 and 4.9 on 31 Dec 2008).
The strategic objectives set for the Tulikivi Group are: annual organic growth of 5 per cent in the long term, return on investment of over 20 per cent and the improvement of relative profitability by two percentage points per year. Sales growth, return on investment and the improvement of profitability will fall short of these objectives during the current year, mainly due to the decline in demand.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME MEUR 01-03/ 01-03/ Change, 01-12/ 2009 2008 % 2008
Sales 11.0 14.6 -24.7 66.5 Other operating income 0.1 0.1 0.7 Increase/decrease in inventories in finished goods and in work in progress -0.5 -0.3 -0.6 Production for own use 0.1 0.1 0.8
Raw materials and consumables 2.1 2.8 12.5 External services 1.5 2.0 10.0 Personnel expenses 5.4 5.4 23.1 Depreciation 1.3 1.4 5.7 Other operating expenses 3.1 3.2 12.9
Operating profit/loss -2.7 -0.3 3.2 Percentage of sales -24.7 -1.7 4.9 Finance income 0.1 0.0 0.2 Finance expense -0.4 -0.3 -1.4 Share of the profit of associated company 0.0 0.0 0.0
Profit/loss before tax -3.0 -0.6 2.1 Percentage of sales -27.7 -4.0 3.1 Direct taxes 0.6 0.2 -0.6
Profit/loss for the period -2.4 -0.4 1.4
Other comprehensive income Interest rate swaps 0.0 -0.1 Translation differences 0.0 0.0 0.0
Total comprehensive Income for the period -2.4 -0.4 1.3
Earnings per share attributable to the equity holders of the parent company, EUR basic and diluted -0.06 -0.01 0.04
CONSOLIDATED BALANCE SHEET MEUR 03/2009 03/2008 12/2008 ASSETS Non-current assets Property, plant and equipment Land 1.0 1.1 1.0 Buildings 7.9 8.5 8.0 Machinery and equipment 9.8 12.1 10.3 Other tangible assets 1.2 1.3 1.2 Intangible assets Goodwill 4.3 4.3 4.3 Other intangible assets 11.1 11.0 11.2 Investment properties 0.2 0.2 0.2 Available-for-sale investments 0.1 0.1 0.1 Receivables Deferred tax assets 1.5 1.1 0.9 Total non-current assets 37.1 39.7 37.2
Current assets Inventories 11.2 12.3 11.5 Trade receivables 4.6 5.4 5.3 Current income tax receivables 0.2 0.5 Other receivables 1.0 0.9 0.4 Cash and cash equivalents 9.6 5.2 11.7 Total current assets 26.6 24.3 28.9 Total assets 63.7 64.0 66.1
EQUITY AND LIABILITIES Equity Share capital 6.3 6.3 6.3 Share premium fund 7.4 7.4 7.4 Treasury shares -0.1 -0.1 Translation difference 0.0 -0.1 0.0 Revaluation reserve -0.1 -0.1 Retained earnings 10.3 13.5 13.7 Total equity 23.8 27.1 27.2 Non-current liabilities Deferred income tax liabilities 2.0 2.2 2.1 Provisions 0.9 0.9 0.9 Interest-bearing debt 20.8 18.4 21.6 Other debt 0.0 0.3 Total non-current liabilities 23.7 21.8 24.6 Current liabilities Trade and other payables 9.8 10.3 9.1 Current income tax liabilities 0.1 0.1 Current provisions 1.0 0.3 Short-term interest-bearing debt 5.3 4.5 5.1 Total current liabilities 16.2 15.1 14.3 Total liabilities 39.9 36.9 38.9 Total equity and liabilities 63.7 64.0 66.1
CONSOLIDATED CASH FLOW STATEMENT 01-03/ 01-03/ 01-12/ MEUR 2009 2008 2008
Cash flows from operating activities Profit for the period -2.4 -0.4 1.4 Adjustments: Non-cash transactions 1.3 1.3 5.8 Interest expenses and interest income and taxes -0.3 0.2 1.8 Change in working capital 0.7 0.3 0.2 Interest paid and received and taxes paid -0.3 -0.6 -1.6 Net cash flow from operating activities -1.0 0.8 7.6
Cash flows from investing activities Investment in property, plant and equipment and intangible assets -0.4 -0.8 -3.3 Grants received for investments and sales of property, plant and equipment 0.1 0.2 Net cash flow from investing activities -0.4 -0.7 -3.1
Cash flows from financing activities Proceeds from non-current and current borrowings 2.0 10.0 Repayment of non-current and current borrowings -0.6 -0.7 -4.9 Dividends paid treasury shares -0.1 -1.7 Net cash flow from financing activities -0.7 1.3 3.4
Change in cash and cash equivalents -2.1 1.4 7.9
Cash and cash equivalents at beginning of period 11.7 3.8 3.8 Cash and cash equivalents at end of period 9.6 5.2 11.7
STATEMENT OF CHANGES IN EQUITY MEUR Share Share Trans- Revalu- Trea- Re- Total capital premium lation ation sury tained fund diff. re- share earn- serve ings Equity Jan. 1, 2009 6.3 7.4 0.0 -0.1 -0.1 13.7 27.2 Dividends paid and treasury shares 0.0 -1.0 -1.0 Total comprehensive income for the period -2.4 -2.4 Equity March 31, 2009 6.3 7.4 0.0 -0.1 -0.1 10.3 23.8
Equity Jan. 1, 2008 6.3 7.4 -0.1 0.0 0.0 14.0 27.6 Total comprehensive income for the period -0.4 -0.4 Equity March 1, 2008 6.3 7.4 -0.1 0.0 0.0 13.5 27.1
BUSINESS SEGMENTS Q1/ Q1/ 1-12 MEUR 2009 2008 2008 Operating segments Sales 11.0 14.6 66.5 Fireplaces 9.6 12.6 58.5 Natural stone products 1.4 2.0 8.0 Other items - - -
Operating profit/loss -2.7 -0.3 3.2 Fireplaces -1.9 0.5 6.1 Natural stone products -0.1 0.1 0.3 Other items -0.7 -0.9 -3.2
BUSINESS SEGMENTS QUARTERLY Q1/ Q4/ Q3/ Q2/ Q1/ 2009 2008 2008 2008 2008 Operating segments Sales 11.0 18.3 16.6 17.0 14.6 Fireplaces 9.6 16.4 14.9 14.6 12.6 Natural stone products 1.4 1.9 1.7 2.4 2.0 Other items - - - - -
Operating profit/loss -2.7 1.3 1.3 0.9 -0.3 Fireplaces -1.9 2.1 1.9 1.7 0.4 Natural stone products -0.1 -0.1 0.1 0.1 0.2 Other items -0.7 -0.7 -0.7 -0.9 -0.9
ASSETS AND LIABILITIES BY SEGMENT 03/09 Fire- Natural Other Total places Stone items Products Assets by segment 47.7 4.8 11.2 63.7 Liabilities by Segment 9.1 0.7 30.1 39.9 Investments 0.4 0.0 0.1 0.5 Depreciation and amortisation expenses 1.1 0.1 0.1 1.3
KEY FINANCIAL RATIOS AND SHARE RATIOS 03/09 03/08 1-12/08
Earnings per share, EUR -0.06 -0.01 0.04 Equity per share, EUR 0.64 0.73 0.73 Return on equity, % -37.0 -6.5 5.2 Return on investments, % -20.1 -1.8 6.8 Equity ratio, % 37.4 42.3 41.2 Net indebtness ratio, % 69.4 65.7 55.1 Current ratio 1.6 1.6 2.0 Gross investments, MEUR 0.5 0.7 2.9 Gross investments, % of sales 4.6 4.5 4.4 Research and development costs, MEUR 0.4 0.4 1.8 %/sales 3.4 3.1 2.7 Outstanding orders (31 March), MEUR 6.6 9.2 4.9 Average number of staff 399 550 526
Rate development of shares, EUR Lowest share price, EUR 0.67 1.37 0.60 Highest share price, EUR 0.85 1.88 1.88 Average share price, EUR 0.73 1.53 1.28 Closing price, EUR 0.70 1.50 0.67
Market capitalization at the end of period, 1000 EUR 25907 55716 24837 (Supposing that the market price of the K-share is the same as that of the A-share) Number of shares traded, (1000 pcs) 673 641 2455 % of total amount of A-shares 2.5 2.3 8.9 Number of shares average 37043690 37143970 37128494 Number of shares 31 March 37009970 37143970 37069970
NOTES TO THE INTERIM REPORT
This interim report has been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. In preparing of this interim report, Tulikivi has applied same accounting policies as in the 2008 financial statements, with the exception of the following new/amended standards that the group has adopted as from January 1, 2009: - IFRS 8, Operating Segments - IAS 1 Presentation of Financial Statements (revised)
and the following new/amended standards and interpretations the adoption of which has not have any material impact on the figures for the period: - Amendment to IFRS 2 Share-based Payment - IAS 23 Borrowing Costs (revised) -Amendments to IFRS 7 Financial Instruments: Discloseres – improving Disclosures about Financial Instruments - Amendments to IFRIC 9 and IAS 39: Embedded Derivatives - Amendment to IAS 28 Investments in Associates (and consequential amendments to IAS 32 Financial Instruments: Presentation and IFRS 7 Financial Instruments: Disclosures) - Amendment to IAS 36 Impairment of Assets - Amendment to IAS 38 Intangible Assets - Amendment to IAS 19 Employee Benefits - Amendment to IAS 39 Financial Instruments: Recognition and Measurement - IFRIC 16 Hedges of a Net Investment in a Foreign Operation - IFRIC 13 Customer Loyalty Programmes - Amendment to IAS 16 Property, Plant and Equipment - Amendment to IAS 29 Financial Reporting in Hyperinflationary Economies - Amendment to IAS 31 Interests in Joint Ventures - Amendment to IAS 40 Investment Property - Amendment to IAS 20 Accounting for Government Grants and Disclosures for Government Assistance - IFRIC 15 Agreements for the Construction of a Real Estate
The key figures presented in the Interim Report have been calculated using the same formulas as in the 2008 financial statements. The formulas can be found on page 67 of the Annual Report 2008.
Income taxes 01-03/0901-03/08 01-12/08
Taxes for the current and previous financial periods -0.1 0.0 -0.7 Deferred taxes 0.7 0.2 0.1 Total 0.6 0.2 -0.6
Collateral and securities given and other commitments MEUR 3/2009 3/2008 12/ 2008 Loans from credit institutions and other non-current liabilities, secured by mortgages and pledges 20.7 18.5 30.9 Mortgages and pledges given 25.1 25.5 25.1 Other mortgages and pledges given by the company on its own behalf 0.5 0.8 0.5 Derivatives Interest rate swaps; nominal value 12.8 7.4 13.0 Interest rate swaps; fair value -0.3 0.1 -0.2
The fair value of derivatives is the gain or loss for closing the contract based on market rates at the balance sheet date.
Provisions The Group’s non-current provisions are an environmental provision of EUR 0.4 million and a warranty provision of EUR 0.5 million. Current provisions include a restructuring provision of EUR 1.0 million during the review period. Non-current provisions are itemized in greater detail in notes 24 Provisions and 33. Other contingent liabilities in the consolidated financial statements in Annual Report 2008. Contingent liabilities have not changed after the end of the financial period.
Share capital Share capital by share series Number % of % of Share, of shares shares voting EUR of rights share capital K-shares(10 votes) 9 540 000 25.7 77.6 1 621 800 A-shares (1 vote) 27 603 970 74.3 22.4 4 692 675 Total March 31, 2009 37 143 970 100.0 100.0 6 314 475
There have been no changes in Tulikivi Corporation´s share capital during the period. According to the articles of association the dividend paid for Series A shares shall be 0.0017 EUR higher than the dividend paid on Series K shares. The Series A share is listed on the NASDAQOMX Helsinki Ltd. No flagging notifications were made to the company during the review period.
Board authorizations The Annual General Meeting of March 31, 2009 authorized the Board of Directors to acquire the company’s own shares. A maximum of 2,760,397 Series A shares in the company and 954,000 Series K shares in the company can be bought back. The authorization is valid until the 2010 Annual General Meeting. In addition, the Board of Directors has an authorization to decide on issuing new shares and the conveyance of own shares in the company’s possession. New shares can be issued or own shares held by the company conveyed amounting to a maximum of 5,520,794 Series A shares and 1,908,000 Series K shares. The authorization is valid until the 2010 Annual General Meeting.
At the end of the review period, the company hold 134 000 of its own A-shares.
Related party transactions The following transactions with related parties took place: 1000 e 3/2009 3/2008 12/2008 Sales of goods and services to associated companies 5 11 13
Purchases of goods and services from associated companies 44 13 173
Leases from related parties 32 30 115
Transactions with other related parties Tulikivi Corporation is a founder member of the Finnish Stone Research Foundation. The company has leased offices and storages from the property owned by the Foundation and North Karelia Educational Federation of Municipalities. The rent paid for these facilities was EUR 32 thousand (31 thousand)in the period. The rent corresponds with the market rents.
Largest shareholders on 31 March 2009 Name of shareholder Shares Proportion of total vote
Vauhkonen Reijo 4 186 827 24,2 % Vauhkonen Heikki 3 003 887 24,1 % Elo Eliisa 2 957 020 5,9 % Virtaala Matti 2 421 300 12,6 % Mutual Pension Insurance Ilmarinen 1 902 380 1,5 % Mutanen Susanna 1 643 800 7,2 % Vauhkonen Mikko 792 700 3,6 % Paatero Ilkka 718 430 0,6 % Nuutinen Tarja 674 540 3,5 % Investment Fond Phoebus 585 690 0,5 % Other shareholders 18 257 396 16,3 %
The Financial Statements have not been audited.
The companies included in the Group are the parent company Tulikivi Corporation, Kivia Oy, AWL-Marmori Oy, Tulikivi U.S. Inc. and OOO Tulikivi. Group companies include also Uuni Vertriebs GmbH and The New Alberene Stone Company, Inc., which are dormant. The parent company has a fixed place of business in Germany, Tulikivi Oyj Niederlassung Deutschland. The Group has interests in associated companies Stone Pole Oy and Leppävirran Matkailukeskus Oy.
TULIKIVI CORPORATION
Board of Directors Matti Virtaala Chairman of the Board
Distribution: NASDAQ OMX Helsinki Ltd Central Media www.tulikivi.com
Additional information: Tulikivi Corporation, 83900 Juuka, tel. +358-207-636 000, www.tulikivi.com - Chairman of the Board of Directors Matti Virtaala - Managing Director Heikki Vauhkonen