NEO INDUSTRIAL PLC HALF YEAR FINANCIAL REPORT 15 August 2018 at 9.58 AM
Neo Industrial: Operating result for April-June 2018 nearly doubled compared to same period last year
Neo Industrial Plc’s operating result for April-June 2018 nearly doubled compared to same period last year and turned positive during second quarter as forecasted.
Figures in brackets refer to the same period a year earlier, unless otherwise stated. The figures are unaudited.
January–June
-The Group’s turnover was EUR 54.6 million (58.0 million).
-The operating result was EUR 1.0 (2.3) million.
-The operating result of the Cable Segment was EUR 1.4 (3.0) million.
-The Group’s result for the period was EUR 0.1 (1.2) million.
MANAGING DIRECTOR RALF SOHLSTRÖM:
Compared to previous year, the amount of underground cable deliveries diminished in the beginning of the year due to the slowdown in installation activity caused by long periods of low sub-zero temperatures. As a consequence, deliveries had to be made at a lower price level than before. As a result of the measures initiated during the first quarter of the year and increased demand, Neo Industrial’s operating result is positive for the second quarter and the whole first half of the year. According to current information, the new anti-Russia sanctions against the production of aluminum raw materials by October 2018 have not affected Neo Industrial's business operations.
The nature of Neo Industrial's business involves major fluctuations between quarters and may differ from year to year. Winter’s hard sub-zero temperatures reflected on the result of the beginning of the year and on the cumulative result, but in the second quarter the operating result was almost double compared to last year.
| 1-3/2018 | 1-3/2017 | 4-6/2018 | 4-6/2017 | 1-6/2018 | 1-6/2017 | |
| Turnover, EUR million | 22.9 | 26.0 | 31.8 | 32.0 | 54.6 | 58.0 |
| Operating result, EUR million | -1.1 | 1.2 | 2.1 | 1.1 | 1.0 | 2.3 |
| Operating result before change in the value of open customer derivatives | -0.7 | 0.8 | 1.8 | 1.5 | 1.1 | 2.3 |
Neo Industrial has decided to change the way customer-specific open derivatives made from January 1, 2018 onwards are presented in financial reporting. The impact of these to first half year operating profit is less than EUR 10 thousand negative. Open customer derivatives made before January 1, 2018 are included as before in the half-year report's operating result. In order to facilitate comparison of figures, operating result as before the new way presenting open customer derivatives has been added to bottom row of the table above. These figures are comparable with the figures for the coming years.
When comparing the quarters, it can be concluded that in the second quarter of 2018 almost similar turnover close to doubled the operating result.
KEY FIGURES
| 1-6/2018 | 1-6/2017 | 1-12/2017 | |
| Turnover, EUR million | 54.6 | 58.0 | 110.9 |
| Operating result, EUR million | 1.0 | 2.3 | 5.1 |
| Result for the period, EUR million | 0.1 | 1.2 | 3.0 |
| Earnings per share, EUR | 0.02 | 0.20 | 0.51 |
| ROI, % | 22.2 | 20.0 | 25.4 |
| IAS 19 corrected Equity ratio, % | 26.0 | 23.2 | 30.4 |
RISKS AND UNCERTAINTY FACTORS
Neo Industrial’s financial risks include currency, interest rate, commodity, liquidity, credit and investment market risks. Financial risks and the related protection measures are described in more detail in the notes to the latest financial statements. The company’s future risk factors are related to the business development of its portfolio companies.
In the Cable Segment the most significant risks are related to market development, fluctuations of raw material prices and currencies as well as working capital management in various situations. During considerable seasonal changes, suppliers’ terms of payment affect significantly the ability to ensure competitive delivery times through sufficient inventories. Also, operation models are being developed in order to balance out the effects of seasonal changes on the load rates of factories.
In the Cable Segment the key raw materials are metals (copper and aluminum) and plastics. In the metals purchases partial price hedging is used with the aid of commodity derivatives. With metals the development of both the dollar-denominated price and the USD / EUR exchange rate are important.
MAJOR EVENTS AFTER THE REVIEW PERIOD
Neo Industrial issued a profit warning on 15 August 2018, in which the Company lowers its near-term outlook as a result of July 2018 being more quiet than expected and market outlook appearing uncertain.
NEAR-TERM OUTLOOK
As a result of July 2018 being more quiet than expected and market market outlook appearing uncertain, Neo Industrial Plc (“Neo Industrial”) lowers its near-term outlook as follows:
The sanctions concerning the production of aluminum raw materials imposed by United States against Russia have been postponed to October 2018. Due to this, it is not possible to provide a reliable assessment on the effects of the sanctions on the availability and prices of aluminum raw materials as well as on the price level of aluminium cables for the time being. The company has secured significant part of its aluminum rod deliveries utilised in connection with cable production with current contracts.
Turnover in 2018 is expected to remain lower as compared to the previous year. Due to the weak performance of the first quarter of 2018 and the uncertain market overlook, the full-year operating result is expected to significantly weaken from last year, albeit to remain clearly positive.
DISCLOSURE POLICY OF HALF YEAR FINANCIAL REPORT
Neo Industrial discloses relevant information related to its Half Year Financial Report with this Stock Exchange Release. The entire Half Year Report for January–June 2017 is attached to this release and is also available on company's website at www.neoindustrial.fi/en.
Hyvinkää 15 August 2018
Neo Industrial Plc
Board of Directors
Further information:
Markku E. Rentto, Chairman of the Board, tel. +358 40 500 1858
Ralf Sohlström, Managing Director , tel. +358 40 770 2720
All comments in this report that do not refer to actual facts are future estimates. Such estimates include expectations concerning market trends, growth and profitability as well as statements including the words "believe", "assume" or "will be" or a similar expression. Since thses estimates are based on current plans and estimates, they involve risks and uncertainty factors that may cause the actual results to differ substantially from current statements.
Among other things, such factors include 1) operating conditions, such as continued success in production and the ensuing efficiency benefits, availability and cost of production inputs, demand for new products and changes in circumstances affecting the acquisition of capital under acceptable conditions; 2) sector-specific circumstances, such as the intensity of demand for products, the competition, current and future market prices for the Group’s products and related pricing pressures, the financial situation of the Group’s customers and competitors and competitors’ possible new products; and 3) the general economic situation, such as economic growth in the Group’s main market areas and change in exchange rates and interest rates.
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