Interim Report
12.8.2010
- The Tulikivi Group’s second-quarter net sales were EUR 14.7 million (EUR 13.0 million, 4-6/2009), the operating profit was EUR 0.5 (-0.7) million and the result before taxes was EUR 0.2 (-0.9) million. - The Group’s net sales during the report period were EUR 25.4 million (EUR 24.0 million, 1-6/2009), the operating profit was EUR -1.3 (-3.4) million and the result before taxes was EUR -1.7 (- 3.9) million. - Earnings per share amounted to EUR -0.04 (-0.08) in the report period and EUR 0.00 (-0.02) in the second quarter. - Cash flow from operating activities was EUR -2.1 (-1.4) million. - Order books at the end of the period were at EUR 6.7 (6.5) million. - With the company’s recovering sales and improved cost efficiency, the full-year net sales are expected to be up from the previous year and the result for the year is expected to be in the black.
Managing Director’s comments:
“With new building recovering in the second quarter, demand has improved significantly in Finland and the neighbouring regions. Demand for lining stone products also increased. In Central Europe, consumers’ reluctance to make major investment decisions is having an impact on the sales of fireplaces.
“The Group’s net sales will grow in the autumn as a result of normal seasonal variation and the recovery in the construction sector both in Finland and neighbouring regions, and sales will also be boosted by new products launched during the first half of the year. Furthermore, higher energy taxation in Finland will motivate consumers to invest in saving energy. The company’s centralisation and productivity improvement programme will continue to improve profitability in the latter half of the year.”
Segment reporting
The Group’s operating segments are the Fireplaces Business and the Natural Stone Products Business. The Fireplaces Business includes soapstone and ceramic fireplaces sold under the Tulikivi and Kermansavi brands and their accessories, and 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 expenses and taxes. Expenses not allocated to a segment include expenses of the Group administration and expenses pertaining to financial administration. The segment reporting has been adjusted by allocating to the operating segments the data and personnel administration expenses, which were previously included in expenses not allocated to a segment. The comparison data has been changed accordingly.
Net sales and result
The Group’s net sales during the report period were EUR 25.4 million (EUR 24.0 million, 1-6/2009). The net sales of the Fireplaces Business were EUR 22.5 (21.0) million and of the Natural Stone Products Business EUR 2.9 (3.0) million.
Net sales in Finland accounted for EUR 13.3 (12.1) million, or 52.2 (50.5) per cent, of total net sales. Exports amounted to EUR 12.1 (11.9) million in net sales. The principal export countries were France, Sweden and Germany. Export growth was held back by the uncertainty affecting consumer decisions in the principal markets.
The Group’s operating profit was EUR -1.3 (-3.4) million. In accordance with the Group’s segment reporting, the operating profit for the Fireplaces Business was EUR -0.3 (-2.4) million and for the Natural Stone Products Business EUR -0.1 (-0.1) million. The expenses under ‘Other items’ were EUR -0.9 (-0.9) million. The consolidated result before taxes was EUR -1.7 (-3.9) million, and the net result was EUR -1.3 (-3.1) million. Earnings per share amounted to EUR -0.04 (-0.08).
The Group’s second-quarter net sales were EUR 14.7 million (EUR 13.0 million, 4-6/2009) and profit before taxes was EUR 0.2 (-0.9) million. Earnings per share amounted to EUR 0.00 (-0.02).
The Group’s programme of profitability and centralisation measures launched in 2009 has been completed and the objectives mainly met.
Financing and investments
Cash flow from operating activities before investments was EUR - 2.1 (-1.4) million. Working capital increased by EUR 3.0 million in the period and came to EUR 9.4 million (EUR 8.9 million on 30 June 2009). Interest-bearing debt was EUR 26.7 (23.3) million and consolidated net financial expenses were EUR 0.5 (0.6) million. The equity ratio was 35.8 per cent (39.6 per cent on 30 June 2009). The ratio of interest-bearing net debt to equity, or gearing, was 84.4 (79.3) per cent. The current ratio was 1.8 (1.6). Equity per share was EUR 0.58 (0.62).
The Group has a solid financial position. At the end of the report period, the Group’s cash assets were EUR 8.4 (4.9) million and unused credit limits amounted to EUR 1.0 (4.0) million.
The Group’s investments in production, quarrying and development were EUR 1.2 (0.9) million in the report period. Research and development costs were EUR 0.9 (0.7) million, i.e. 3.6 (2.7) per cent of net sales. EUR 0.2 (0.2) million of this was capitalised in the balance sheet.
Product development focused on productisation of the Tulikivi Green products and an interior design fireplace collection and other new products. These products will complement and expand the uses of fireplaces in household heating. Other large development projects include development of the Group’s processes and up- dating of the enterprise resource planning system.
Personnel
The Group employed an average of 374 (393) people during the report period. Salaries and bonuses during the report period totalled EUR 7.8 (8.3) 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 plan, introduced in 2008, comprises three earning periods, which are the calendar years 2008, 2009 and 2010. The bonus is determined on the basis of the Group’s result after financial items and the cash flow from operating activities after investments. A maximum total of about 360 000 Series A shares and a cash payment corresponding to the value of the shares can be paid as rewards on the basis of the entire share-based incentive plan. The maximum share reward for 2010 is 218 750 A shares and a cash payment corresponding to the value of the shares. The Managing Director’s share of the share reward is a maximum of 50 000 shares.
The incentive pay scheme is based on the Group’s result and on the improvement in productivity, and the Managing Director and key personnel also have personal targets in addition to this.
Annual General Meeting
Tulikivi Corporation’s Annual General Meeting, held on 14 April 2010, resolved to pay a dividend of EUR 0.0250 on Series A shares and EUR 0.0233 on Series K shares. The dividend payout date was 26 April 2010. The other decisions of the general meeting can be found in the separate release published in the date of the meeting.
Transfer of the funds of the share premium account to the reserve for invested unrestricted equity
The decision of the Annual General Meeting taken on 14 April 2010 to transfer the funds of the share premium account to the reserve for invested unrestricted equity has been entered in the Trade Register and was announced on 6 May 2010. The due date for debtors is 19 August 2010.
As decided by the Annual General Meeting, the share premium account (part of the equity) on the company’s balance sheet as of 31 December 2009 will be reduced by EUR 7 334 116.06, by transferring all the funds in the share premium account on the balance sheet as of 31 December 2009 to the reserve for invested unrestricted equity.
Treasury shares
The company did not purchase or assign any of its own shares during the report period. At the end of the period, the total number of Tulikivi shares held by company was 124 200 Series A shares, which corresponds to 0.3 per cent of the company’s share capital and 0.1 per cent of all voting rights.
Risks and uncertainties
The Group’s near-term risks are mainly associated with the increased uncertainty among consumers and the effect of this on consumers’ building and fireplace projects.
The risks and the means of preventing and controlling them are presented in more detail in section 38 of the notes to the financial statements in the 2009 Annual Report.
Future outlook
The increase in private house building in Finland will improve the demand for Tulikivi products. Exports of lining stone products will continue at a good level. In Central Europe the demand for fireplaces varies by country but is expected to remain lower than before as a whole. New products will improve the company’s net sales during the second half of the year.
With the company’s recovering sales and improved cost efficiency, the full-year consolidated net sales are expected to be up from the previous year and the 2010 result before taxes is expected to be positive.
The order books at the end of the report period amounted to EUR 6.7 million (EUR 6.5 million on 30 June 2009 and EUR 4.8 million on 31 December 2009).
Strategy
The revised strategy put in place in the Group at the beginning of the report period covers all key operating and financial targets to the end of 2015. Under the strategy, the company’s organic growth target is an annual growth of over 10 per cent, and the target for profit before taxes is 10 per cent of net sales over the next five years. The target for return on equity is to exceed 20 per cent. Corporate acquisitions in support of the strategy are also possible.
INTERIM REPORT January – June 2010, SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME MEUR 1-6/ 1-6/ Change, 1-12/ 4-6/ 4-6/ Change 2010 2009 % 2009 2010 2009 %
Sales 25.4 24.0 5.9 53.1 14.7 13.0 13.3 Other operating income 0.3 0.4 0.6 0.2 0.3 Increase/decrease in inventories in finished goods and in work in progress 1.1 -0.6 -1.0 1.1 -0.1 Production for own use 0.1 0.2 0.3 0.0 0.1 Raw materials and consumables 5.6 4.7 10.2 3.4 2.6 External services 4.0 3.4 7.6 2.5 1.9 Personnel expenses 9.7 10.6 20.0 5.3 5.2 Depreciation 2.4 2.8 5.5 1.2 1.6 Other operating expenses 6.5 5.9 12.1 3.1 2.8
Operating profit/ loss -1.3 -3.4 62.2 -2.4 0.5 -0.7 160.7 Percentage of sales -5.0 -14.0 -4.5 3.1 -4.9 Finance income 0.1 0.1 0.2 0.1 0.0 Finance expense -0.6 -0.7 -1.1 -0.3 -0.3 Share of the profit of associated company 0.0 0.0 0.0 0.0 0.0
Profit before tax -1.7 -3.9 56.1 -3.3 0.2 -0.9 122.0 Percentage of sales -6.8 -16.3 -6.2 1.3 -6.8 Direct taxes 0.4 0.9 1.0 0.0 0.2
Profit/loss for the period -1.3 -3.1 56.9 -2.4 0.2 -0.7 135.1
Other comprehensive income Interest rate swaps 0.0 0.0 0.0 0.0 0.0 Translation differences 0.0 0.0 0.0 -0.1 0.0
Total comprehensive income for the period -1.3 -3.1 56.8 -2.4 0.1 -0.7 111.6
Earnings per share attributable to the equity holders of the parent company, EUR basic and diluted -0.04 -0.08 56.8-0.06 0.00 -0.02 121.1
CONSOLIDATED STATEMENT OF FINANCIAL POSITION MEUR 06/2010 06/2009 12/2009 ASSETS Non-current assets Property, plant and equipment Land 1.0 1.0 1.0 Buildings 7.2 7.7 7.4 Machinery and equipment 7.2 9.1 8.1 Other tangible assets 1.0 1.1 1.1 Intangible assets Goodwill 4.2 4.3 4.2 Other intangible assets 10.6 10.7 10.6 Investment properties 0.2 0.2 0.2 Available-for-sale investments 0.1 0.1 0.1 Receivables Deferred tax assets 1.9 1.7 1.6 Total non-current assets 33.4 35.9 34.3
Current assets Inventories 11.1 10.9 10.2 Trade receivables 6.4 5.4 4.1 Current income tax receivables 0.1 0.2 0.3 Other receivables 1.1 1.0 0.9 Cash and cash equivalents 8.4 4.9 10.6 Total current assets 27.1 22.4 26.1 Total assets 60.5 58.3 60.4
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 -0.1 Translation difference 0.0 0.0 -0.1 Revaluation reserve -0.1 -0.1 -0.1 Retained earnings 8.2 9.6 10.4 Total equity 21.6 23.1 23.8 Non-current liabilities Deferred income tax liabilities 1.8 1.9 1.0 Provisions 1.0 0.9 1.9 Interest-bearing debt 21.1 18.3 19.9 Other debt 0.1 0.1 Total non-current liabilities 24.0 21.1 22.9 Current liabilities Trade and other payables 9.1 8.7 8.7 Current income tax liabilities 0.0 Current provisions 0.2 0.5 0.2 Short-term interest-bearing debt 5.6 4.9 4.8 Total current liabilities 14.9 14.1 13.7 Total liabilities 38.9 35.2 36.6 Total equity and liabilities 60.5 58.3 60.4
CONSOLIDATED STATEMENT OF CASH FLOWS 01-06/ 01-06/ 01-12/ MEUR 2010 2009 2009
Cash flows from operating activities Profit for the period -1.3 -3.1 -2.4 Adjustments: Non-cash transactions 2.5 2.8 5.5 Interest expenses and interest income and taxes 0.0 -0.3 0.0 Change in working capital -3.0 0.0 1.8 Interest paid and received and taxes paid -0.3 -0.8 -1.2 Net cash flow from operating activities -2.1 -1.4 3.7
Cash flows from investing activities Investment in property, plant and equipment and intangible assets -1.3 -0.9 -2.0 Grants received for investments and sales of property, plant and equipment 0.1 0.1 0.2 Net cash flow from investing activities -1.2 -0.8 -1.8
Cash flows from financing activities Proceeds from non-current and current borrowings 5.0 5.1 Repayment of non-current and current borrowings -3.0 -3.5 -7.0 Dividends paid and treasury shares -0.9 -1.1 -1.1 Net cash flow from financing activities 1.1 -4.6 -3.0
Change in cash and cash equivalents -2.2 -6.8 -1.1
Cash and cash equivalents at beginning of period 10.6 11.7 11.7 Cash and cash equivalents at end of period 8.4 4.9 10.6
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, 2010 6.3 7.4 -0.1 -0.1 -0.1 10.4 23.8 Dividends paid and treasury shares -0.9 -0.9 Total comprehensive income for the period 0.1 -1.3 -1.2 Equity June 30, 2010 6.3 7.4 0.0 -0.1 -0.1 8.2 21.6
Equity Jan. 1, 2009 6.3 7.4 0.0 -0.1 -0.1 13.7 27.2 Total comprehensive income for the period 0.0 -1.0 -1.0 Dividends -3.1 -3.1 Equity June 30, 2009 6.3 7.4 0.0 -0.1 -0.1 9.6 23.1
SEGMENT REPORTING 1-6/ 1-6/ 1-12 MEUR 2010 2009 2009 Operating segments Sales 25.4 24.0 53.1 Fireplaces 22.5 21.0 47.8 Natural Stone Products 2.9 3.0 5.3 Other items - - -
Operating profit/loss -1.3 -3.4 -2.4 Fireplaces -0.3 -2.4 -0.2 Natural Stone Products -0.1 -0.1 -0.3 Other items -0.9 -0.9 -1.9
OPERATING SEGMENTS QUARTERLY Q2/ Q1/ Q4/ Q3/ Q2/ Q1/ 2010 2010 2009 2009 2009 2009 Operating segments Sales 14.7 10.7 15.6 13.5 13.0 11.0 Fireplaces 13.0 9.5 14.4 12.4 11.4 9.6 Natural Stone Products 1.7 1.2 1.2 1.1 1.6 1.4 Other items - - - - - -
Operating profit/loss 0.4 -1.7 0.3 0.7 -0.7 -2.7 Fireplaces 0.8 -1.1 1.0 1.2 -0.2 -2.2 Natural Stone Products 0.1 -0.2 -0.2 0.0 0.0 -0.1 Other items -0.5 -0.4 -0.5 -0.5 -0.5 -0.4
ASSETS AND LIABILITIES BY SEGMENT ON JUNE 30, 2010 Fire- Natural Other Total places Stone items Products Assets by segment 45.1 4.2 11.2 60.5 Liabilities by Segment 8.5 0.9 29.4 38.8 Investments 1.0 0.0 0.2 1.2 Depreciation and amortisation expenses 2.1 0.1 0.2 2.4
KEY FINANCIAL RATIOS AND SHARE RATIOS 1-6/10 1-6/09 4-6/10 4-6/09 1-12/09
Earnings per share, EUR -0.04 -0.08 0,00 -0.02 -0.06 Equity per share, EUR 0.58 0.62 0.58 0.62 0.64 Return on equity, % -11.7 -24.4 2.7 -12.1 -9.2 Return on investments, % -4.7 -12.9 4.3 -3.6 -4.3 Equity ratio, % 35.8 39.6 39.4 Net indebtness ratio, % 84.4 79.3 59.4 Current ratio 1.8 1.6 1.9 Gross investments, MEUR 1.2 0.9 2.1 Gross investments, % of sales 4.8 3.8 4.0 Research and development costs, MEUR 0.9 0.7 1.6 %/sales 3.6 2.7 3.1 Outstanding orders (30 June), MEUR 6.7 6.5 4.8 Average number of staff 374 393 417
Rate development of shares, EUR Lowest share price, EUR 1.07 0.67 0.67 Highest share price, EUR 1.79 1.30 1.30 Average share price, EUR 1.38 0.83 0.96 Closing price, EUR 1.35 0.90 1.06
Market capitalization at the end of period, 1000 EUR 49 976.7 33 317.8 39 241.0 (Supposing that the market price of the K-share is the same as that of the A-share) Number of shares traded, (1000 pcs) 2 342.5 1 349.7 3 959.0 % of total amount of A-shares 8.5 4.9 14.4 Number of shares average 37019770 37027647 37019770 37011603 37023708 Number of shares 30 June 37019770 37019770 37019770 37019770 37019770
NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS This financial statement release has been prepared in accordance with the IAS 34 Interim Financial Reporting standard.
In preparing of this interim report, Tulikivi has applied same accounting policies as in the 2009 financial statements, with the exception of the following new/amended standards that the group has adopted as from January 1, 2010:
- Revised IFRS 3 Business combinations (effective as of 1 July 2009). The revised standard includes several significant changes. - Amendments to IAS 27 Consolidated and separate financial statements (effective as of 1 July 2009). The amended standard affects accounting for step acquisitions and divestments. - Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible hedged items (effective as of 1 July 2009) - IFRIC 17 Distributions of Non-cash Assets to Owners (effective as of 1 July 2009) - IFRIC 18 Transfers of assets from customers (effective as of 1 July 2009) - Improvements to IFRSs (April 2009, mainly effective as of 1 January 2010). - Amendments to IFRS 2 Share-based Payment – Intra-group cash- settled share-based payment transaction (effective as of 1 January 2010).
The Group’s view is that the adoption of the standards and interpretations mentioned above will not have any significant effect on the financial statements of 2010 reporting period. The adaptation of the revised IFRS 3 would affect the financial statements of Tulikivi Group in 2010, should a transaction during the financial period meet the definition of a business combination.
The key performance ratios and share ratios are calculated using the same methods as for the consolidated financial statements for 2009. The calculations rules can be found in the 2009 annual report, page 76.
Income taxes EUR million 01-06/10 01-06/09 01-12/09 Taxes for the current and previous reporting periods 0.0 0.0 0.1 Deferred taxes 0.4 0.9 0.9 Total 0.4 0.9 1.0
Collaterals given EUR million 6/10 6/09 12/09 Loans from credit institutions and other long term debts and loan guarantees, with related mortgages and pledges 24.8 22.4 21.9 Mortgages granted and collaterals pledged 29.3 25.1 28.2 Other given guarantees and pledges on behalf of own liabilities 0.8 0.5 0.8 Derivatives Interest rate swaps Nominal value 6.5 11.9 7.3 Fair value -0.2 -0.3 -0.3 Foreign exchange forward contracts Nominal value 0.2 - 0.1 Fair value 0.0 0.0 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 0.6 million and a warranty provision of EUR 0.4 million. Current provisions include the latter part of in 2009 recognized restructuring provision of EUR 0.2 million.
Non-current provisions are itemized in greater detail in notes 26. Provisions and 34. Contingent liabilities in the consolidated financial statements in Annual Report 2009. Contingent liabilities have not changed after the end of the financial period.
Changes in tangible assets are classified as follows: 6/10 6/09 12/09 Acquisition costs 0.6 0.9 1.1 Proceeds from sale 0.0 0.0 -0.1 Total 0.6 0.9 1.0
Share capital Share capital by share series
Number of % of % of Share, 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 June 30, 2010 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 NASDAQ OMX Helsinki Ltd. No flagging notifications were made to the company during the review period. The number of the shares in the company´s possession at the end of the period was 124 200 series A shares.
Board authorizations The Annual General Meeting of April 14, 2010 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 Annual General Meeting 2011.
The Board of Directors has further an authorization to decide on share issues and the conveyance of the company’s own shares in the possession of the company. 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 Annual General Meeting 2011.
Related party transactions The following transactions with related parties took place: EUR 1000 6/10 6/09 12/09 Sales to associated companies 6 7 Purchases from associated companies 94 85 148
Sales to related parties 12
Leases from related parties 54 56 109
Receivables from the related parties - - 1 Debts to the related parties 2
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 66 thousand (65 thousand) in the period. The rent corresponds with the market rents. The service charges from the Foundation were EUR 2 thousand.
EUR 1000 6/10 6/09 12/09 Salaries and other short-term employee benefits of the Board of Directors and Managing Directors 213 274 479 Other long term employee benefits 32 32 61
Largest shareholders on June 30, 2010 Name of shareholder Shares Pro- portion of total vote
Vauhkonen Reijo 4 186 827 24.3 % Vauhkonen Heikki 3 014 724 24.1 % Elo Eliisa 2 957 020 5.9 % Virtaala Matti 2 429 887 12.6 % Mutual Pension Insurance Ilmarinen 1 902 380 1.5 % Mutanen Susanna 1 643 800 7.2 % Vauhkonen Mikko 782 310 3.5 % Paatero Ilkka 718 430 0.6 % Nuutinen Tarja 674 540 3.5 % Investment Fond Phoebus 585 690 0.5 % Other shareholders 18 248 362 16.3 %
The information in the interim report is unaudited.
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 The New Alberene Stone Company, Inc., which is 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, Leppävirran Matkailukeskus Oy and Rakentamisen MALL 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, www.tulikivi.com - Chairman of the Board of Directors Matti Virtaala, +358 207 636 666 - Managing Director Heikki Vauhkonen, +358 207 636 555