Interim report 01-06/2011

Tulikivi Corporation                        Interim report

                                            August 4, 2011 at 12.30

Interim report 01-06/2011

- The Tulikivi Group’s second-quarter net sales were EUR 15.6 million (EUR 14.7. million, 04-06/2010), the operating loss EUR -0.3 (+0.5) million and the loss before taxes EUR -0.5 (+0.2) million.

- The operating profit before the expenses caused by a concentration on core businesses was EUR +0.3 million. The Group’s comparable net sales, adjusted for the effect of selling the building stone business’s inventories, were EUR 15.2 million.

- The Group’s net sales for the reporting period were EUR 28.2. million (EUR 25.4 million, 01-06/2010), the operating loss EUR -1.8 (-1.3) million and the loss before taxes EUR -2.2 (-1.7) million. The operating loss before expenses caused by concentration was EUR -1.2 million.

- Earnings per share were EUR -0.04 (-0.04) for the reporting period and EUR -0.01 (0.00)for the second quarter.

- Cash flow from operating activities was EUR -2.3 (-2.1) million.

- The order books at the end of the reporting period were EUR 8.5 (6.7) million.

- Future outlook: The comparable net sales for 2011 are expected to increase by approximately 10 per cent. Due to the seasonal nature of the industry, profit is mostly accumulated in the second half of the year.  As a result of improved cost efficiency and despite the expenses caused by concentration, the operating profit for 2011 is expected to improve and to be positive. 

Summary of the interim report 1-6/2011. The full interim report is attached to this release.

Key financial ratios

Managing Director’s comments:

”Tulikivi Corporation’s net sales growth in the second quarter was lower than anticipated. Deliveries are scheduled more in the early autumn, than in the early summer as they were in the previous year.       

In Finland, despite increased general economic uncertainty, demand remains rather strong. The expansion of the distribution channel carried out early in the year will support sales growth in the autumn.

In fireplace exports, the demand is strongest in Germany, Russia, Sweden and the Baltic countries. 

The energy decisions made in Germany are likely to be reflected positively in lining stone demand during the autumn. Net sales in lining stone products will also remain good in the second half of 2011.

Efforts to expand the product range of the sauna business and to develop distribution have continued as planned, and this has squeezed profitability. Product distribution is in the launch phase.

The project to focus on core businesses has progressed according to plan.

The efficiency improvement measures taken will create a good basis for higher profitability, if product demand continues to grow at the same rate as now.”      

Concentration on core businesses

The Group’s core businesses are the manufacture of fireplace, sauna and interior stone products, the development of product concepts and their marketing to consumers. Tulikivi will discontinue the manufacture of ceramic utensils by the end of the year. At the end of the review period, the building stone business in Taivassalo was also sold, and a decision was made to focus on the manufacture of natural stone products at the Espoo factory.

As a result of this concentration, the Group’s personnel was reduced by about 50 people, 38 of whom were made redundant. Second-quarter net sales include income of EUR 0.4 million from the sale of the building stone business’s inventories, while profit was affected by non-recurring net expenses of some EUR 0.6 million due to restructuring. These comprise a restructuring provision of approximately EUR 0.5 million, impairment losses and other expenses and provisions of EUR 0.3 million, offset by sales gains of EUR 0.2 million. EUR -0.4 million of these net expenses relate to the Fireplaces Business and EUR -0.2 million to the Natural Stone Products Business.  The impact of the sale of building stone business on Tulikivi Corporation´s net sales of year 2011 will be about EUR -0.6 million, but do not have significant impact on the Group´s financial result in the latter part of year 2011.

The concentration on core businesses will enable a further improvement in the Group’s profitability in the 2012 financial year. The restructuring will reduce annual net sales by slightly under EUR 3 million. 

Net sales and profit

Consolidated net sales amounted to EUR 28.2 million (EUR 25.4 million in 01-06/2010). The net sales of the Fireplaces Business were EUR 24.9 (22.5) million and of the Natural Stone Products Business EUR 3.3 (2.9) million. The comparable net sales of the Natural Stone Products Business were EUR 2.9 million.

Net sales in Finland accounted for EUR 15.1 (13.3) million, or 53.4 (52.2) per cent, of consolidated net sales. Exports accounted for EUR 13.1 (12.1) million of net sales. The principal export countries were Sweden, France and Germany. The growth in exports was from increased sales of lining stone.

The Group’s operating loss after the above-mentioned expenses of concentration was EUR -1.8 (-1.3) million. Reporting by segment, the Fireplaces Business had an operating loss of EUR -0.6 (-0.3) million, and the Natural Stone Products Business an operating loss of EUR -0.3 (-0.1) million. The expenses recognized under ‘Other items’ totalled EUR -0.9 (-0.9) million. During the reporting period the operating profit was affected not only by the costs of concentration on core businesses, but also by EUR 0.6 million in expenses caused by the launch of electric sauna heaters, the expansion of the Finnish distribution channel and the renewal of the corporate image.

The consolidated loss before taxes was EUR -2.2 (-1.7) million and the net loss was EUR -1.7 million (-1.3) million. Earnings per share amounted to EUR -0.04 (-0.04).

The Group’s second quarter sales totalled EUR 15.6 million (EUR 14.7. million in 04-06/2010), the operating loss was EUR -0.3 (+0.5) million and the loss before taxes EUR -0.5 (+0.2) million. Without the concentration measures, the second quarter net sales would have been EUR 15.2 million and the operating profit EUR +0.3 million. Earnings per share were EUR -0.01 (-0.00).

Financing and investments

Cash flow from operating activities before investments was EUR -2.3 (-2.1) million. Working capital increased by EUR 1.5 million during the reporting period and stood at EUR 8.7 (9.4 on 30.6.2010) million. Interest-bearing debt was EUR 26.5 (26.7) million and net financial expenses EUR 0.4 (0.5) million. The equity ratio was 33.3 (35.8% on 30.6.2010) per cent. The gearing ratio was 100.5 (84.4) per cent. The current ratio was 1.6 (1.8). Equity per share was EUR 0.53 (0.58).

The Group’s financial position is solid. At the end of the period, the Group’s cash and cash equivalents were EUR 6.9 (8.4) million, and the amount of undrawn credit facilities was EUR 3.0 (1.0) million.

The Group’s capital expenditure on production, quarrying and development totalled EUR 2.3 (1.2) million. Research and development costs increased and stood at EUR 1.2 (0.9) million, i.e. 4.3 (3.6) per cent of net sales. EUR 0.3 (0.2) million of this figure was capitalized.

Personnel

The Group employed  510 (498) people at the end of the reporting period. As a result of the concentration of operations, the number of employees in the Group was reduced by 49 people, 38 of whom were made redundant. After these reductions, the number of employees is 461. Salaries and bonuses during the reporting period totalled EUR 8.9 (7.8) million. The Group employed an average of 421 (374) people during the reporting period.

Resolutions of the Annual General Meeting

Tulikivi Corporation’s Annual General Meeting, held on 14 April 2011, resolved to pay a dividend of EUR 0.0250 on A shares and EUR 0.0233 on K shares. The dividend payout date was 28 April 2011. The other decisions of the general meeting can be found in the separate release published on the date of the meeting.

Near-term risks and uncertainties

Financial uncertainty has increased in Europe. The Group’s near-term risks include unexpected negative fluctuations in the economy. Another risk is that consumer demand may be driven solely by price and not by the qualities of the product. The renewal of the ERP system is in the start-up phase. Schedule and cost risks are often associated with such projects. More information on risks can be found in the 2010 Board of Directors' report and the notes to the financial statements.

Future outlook

In Finland, the outlook for fireplace products is good as a result of active new construction and rising consumer energy prices. Likewise, in exports, the revival of new construction and the rising costs of energy will improve the demand for fireplaces during 2011. The demand for lining stone products will remain good.

The new sauna and fireplace products and expanding distribution network will also increase net sales.

The comparable net sales for 2011 are expected to increase by about 10 per cent. Due to the seasonal nature of the industry, profit is mostly accumulated in the second half of the year. As a result of improved cost efficiency and despite the expenses caused by concentration, the operating profit for the year is expected to improve and to be positive.

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

Enclosure: Tulikivi Corporation´s Interim report Jan-June 2011