– The Tulikivi Group’s second-quarter net sales were EUR 10.6 million (EUR 13.2 million, Q2/2012), operating result EUR -0.8 (0.6) million and the result before taxes was EUR -1.0 (0.3) million.
– The Group’s net sales for the January–June 2013 review period were EUR 19.8 million (EUR 23.9 million for Jan-Jun/2012), operating result EUR -2.5 (-0.8) million and the result before taxes was EUR -3.0 (-1.2) million.
– Earnings per share amounted to EUR -0.06 (-0.02) for the review period, and EUR -0.02 (0.01) for the second quarter.
– Net cash flow from operating activities in the review period was EUR -1.5 (-3.7) million.
– Order books at the end of the period were at EUR 7.2 million (EUR 7.3 million on 30 June 2012).
– Future outlook: The demand for Tulikivi products is dependent on consumer confidence. New products will allow us to increase our market share; however, the turnover is expected to be lower than in 2012. The company estimates that operating result in 2013 will be unprofitable.
Summary of the interim report 1-6/2013. The full interim report is attached to this release.
Key financial ratios
Comments by Jouni Pitko, Managing Director:
Due to the weak state of low-rise housing construction and renovation projects in the domestic market, net sales for the review period were lower than in 2012 in the Fireplaces and Interior Stone businesses in Finland. This is in part a result of tighter lending by the banks and deteriorating consumer confidence.
Europe’s persistent recession has led to lower export sales. Moreover uncertainty concerning changes to building regulations and the tax treatment of different modes of heating in certain countries has also reduced the demand for fireplaces. For these reasons sales have been weak since the start of the year. On the other hand, in its second largest export market, Russia, Tulikivi successfully increased its net sales in the Fireplaces business. There are also signs of sales picking up in Central Europe, especially Germany, in comparison with the situation at the start of the year.
The company’s order books have become stronger following the weak situation earlier in the year and now correspond to the situation a year ago. Working capital has developed more favourably during the review period compared to the same period a year earlier. To improve profitability, production capacity has been adjusted to the market situation.
Tulikivi Corporation’s adjustment measures undertaken in 2011 and 2012 as a consequence of the decline in sales have not had a sufficient impact, and so the company has started to plan a new performance improvement programme. The performance improvement programme is part of the company’s strategy to focus on its core business and competence in order to ensure profitable future growth.
The reduced level of low-rise housing construction and renovation projects has weakened the demand for fireplaces in Finland, which is in part also a result of tighter lending by the banks and deteriorating consumer confidence.
Europe’s persistent recession has led to lower export sales. Moreover, uncertainty concerning changes to building regulations and the tax treatment of different modes of heating in certain countries has also had an impact on sales. For these reasons both sales and profit performance have been weak.
After a weak start to the year, the company’s order books returned to the level of a year earlier, amounting to EUR 7.2 million (EUR 7.3 million on 30 June 2012) at the end of the period.
Net sales and result
The Group’s net sales were EUR 19.8 million (EUR 23.9 million, Jan-Jun/2012). The net sales of the Fireplaces Business were EUR 17.8 (21.6) million and of the Interior Stone Business EUR 2.0 (2.3) million.
Net sales in Finland accounted for EUR 10.0 (12.2) million, or 50.5 (51.2) per cent, of total net sales. Exports amounted to EUR 9.8 (11.7) million in net sales. The principal export countries were France, Russia, Germany, Belgium and Sweden.
The consolidated operating result was EUR -2.5(-0.8) million. In the segment reporting, the corresponding operating result for the Fireplaces Business was EUR -2.4 (-0.7) million, and for the Interior Stone Business EUR -0.1 (-0.1) million.
The consolidated result before taxes was EUR -3.0 (-1.2) million, and the result for the reporting period was EUR -2.3 (-0.9) million. Earnings per share amounted to EUR -0.06 (-0.02).
The Group’s second-quarter net sales were EUR 10.6 million (EUR 13.2 million for 1 April–30 June 2012), the operating result was EUR -0.8 (0.6) million and profit before taxes was EUR -1.0 (0.3) million.
Financing and investments
Cash flow from operating activities before investments was EUR -1.5 (-3.7) million. Working capital increased by EUR 0.5 (4.5) million in the period and came to EUR 10.4 million (EUR 10.0 million on 30 June 2012). Interest-bearing debt was EUR 27.1 (26.8) million. Financial income was EUR 0.0 (0.1) million and financial expenses EUR 0.6 (0.5) million. The equity ratio was 30.2 gearing, was 143.6 (126.3) per cent. The current ratio was 1.5 (1.6). Equity per share was EUR 0.43 (0.48).
At the end of the reporting period, the Group’s cash and other liquid assets were EUR 4.3 (3.8) million. The total of undrawn credit facilities and unused credit limits amounted to EUR 0.0 (0.0) million.
The Group’s interest-bearing debt includes covenants which are tied to the Group’s equity. The covenant conditions were met at the close of the reporting period. In addition, the Group has a covenant concerning the relation of net debt to EBITDA, the review of which was transferred from the end of the second quarter to the end of the fourth quarter, in accordance with an agreement reached with the financiers.
The Group’s investments in production, quarrying and development were EUR 0.9 (1.5) million in the reporting period. Research and development expenditure was EUR 0.8 (0.8) million, i.e. 4.0 (3.3) per cent of net sales. EUR 0.2 (0.2) million of this was capitalised in the balance sheet.
In product development, the Group focused on improving the new modular hybrid fireplaces of the Hiisi product family to better meet the new needs of the export market. New fireplace and sauna heater products were also launched.
The Group employed an average of 290 (370) people during the reporting period.
Salaries and bonuses during the period totalled EUR 6.4 (7.4) million. The 2012 comparison figure is reduced by the cancellation of a restructuring provision.
Near-term risks and uncertainties
A substantial decline in euro zone consumer confidence is the Group’s most significant risk. If access to consumer credit weakens, it will reduce new construction and renovation, which could have an impact on the demand for fireplaces.
Maintaining the Group’s current financial position will require improvements in profitability. On account of the weakening level of profitability, the company has begun to prepare a performance improvement programme for the years 2013-2015. The company is investigating options for reinforcing its financial position.
A more comprehensive explanation of the Tulikivi Group’s other risks can be found under note 38 (‘Major risks and their management’) in the Consolidated Financial Statements of the Annual Report for 2012.
In the EU, construction legislation is currently being revised. New country-specific energy efficiency provisions that meet the EU’s energy efficiency policies will come into force within 2013 and could influence the competition between different forms of heating and thus the demand for fireplaces in different markets.
The demand for Tulikivi products is dependent on consumer confidence. New products will allow us to increase our market share; however, the turnover is expected to be lower than in 2012. The company estimates that operating result in 2013 will be unprofitable.
Order books at the end of the reporting period amounted to EUR 7.2 million (EUR 7.3 million on 30 June 2012).
Board of Directors
Distribution: NASDAQ OMX Helsinki
Additional information: Tulikivi Corporation, FIN-83900 Juuka, Finland, tel. +358 207 636 000, www.tulikivi.com
– Heikki Vauhkonen, Chairman of the Board, tel. +358 207 636 555
– Jouni Pitko, Managing Director, tel. +358 403 063 222
ATTACHEMENT: Interim Report 1-6/2013