MANAGEMENT REPORT
Consolidated net sales for Q3 2022 were € 2.79 million (Q3 2021: € 2.33 million). The main business area is the production and wholesale of fibreboard, which recorded sales in Q3 2022 of € 2.78 million, an increase of 23% compared to Q3 2021. The remaining business area is real estate management of the property owned in Suur-Jõe street in Pärnu, who recorded sales of € 9 thousand in Q3 2022 (Q3 2021: 65 thousand).
The reason for the increase in sales revenue in Q3 2022 for Nordic Fibreboard Ltd was the ongoing strong demand for building materials in the construction sector, as reflected in both volume growth and price increases. That being said, towards the end of Q3 2022 we started to see a reduction in customers orders, reflecting the softening of business confidence as a result of negative macro factors, such as increasing interest rates, energy crisis, and higher food prices. As a result of these sentiments, Nordic Fibreboard is announcing the layoff of 8 production workers and is therefore reducing production capacity to keep up with the decline in demand.
The consolidated EBITDA of Nordic Fibreboard for Q3 2022 was € 193 thousand, the EBITDA margin was 7% (Q3 2022: EBITDA was € 356 thousand and the EBITDA margin was 15%). Compared to the Q3 2021 the Group`s gross margin decreased from 32% to 19% in the Q3 2022. The main reason for this reduction in profitability was due to the sharp increase in raw material costs, ie woodchips and energy, experienced during Q3 2022, which more than offset our price increases.
Total financial income of € 49 thousand was recorded in Q3 2022, which consist of the profit from the revaluation of Trigon Property Development (TPD) shares in the amount of € 79 thousand and the interest expense of loan obligations in the amount of € 30 thousand. In Q3 2021, the financial cost was € 159 thousand, which consisted of the loss of € 128 thousand from the revaluation of TPD shares and the interest expense of loan obligations in the amount of € 31 thousand.
Group`s consolidated net profit for Q3 2022 was € 117 thousand (Q3 2021: profit € 73 thousand).
DIVISIONAL REVIEW
Revenue by business segments
| € thousand | € thousand | |||
| Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | |
| Fibreboards production and sales | 2,782 | 2,270 | 9,015 | 7,539 |
| Real Estate Management | 9 | 65 | 28 | 218 |
| TOTAL | 2,791 | 2,334 | 9,043 | 7,757 |
Profit by business segments
| € thousand | € thousand | |||
| Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | |
| EBITDA by business units: | ||||
| Fibreboards production and sales | 201 | 344 | 1,114 | 1,337 |
| Real Estate Management | (6) | 11 | (18) | 10 |
| Group transactions | (2) | 1 | (25) | (5) |
| TOTAL EBITDA | 193 | 356 | 1,071 | 1,341 |
| Depreciation | (125) | (123) | (372) | (380) |
| TOTAL OPERATING PROFIT | 68 | 232 | 699 | 962 |
| Net financial income/ costs | 49 | (159) | 149* | 267** |
| NET PROFIT | 117 | 73 | 848 | 1,229 |
* Includes financial income of € 143 thousand in the first 9 months of 2022, received from the revaluation of the shareholding owned by the group in the real estate development company Trigon Property Development AS, and the dividends received from these (TPD) shares in the amount of € 105 thousand.
** Includes financial financial income of € 354 thousand in the first 9 months of 2021 from the revaluation of TPD shares..
NORDIC FIBREBOARD LTD: Fibreboard production and sales
Fibreboard sales in Q3 2022 were € 2.78 million (Q3 2021: € 2.27 million). In addition to demand for construction materials remaining strong, the increase in sales revenue was also influenced by the price increases implemented during Q2 2022. The price increase was inevitable, as there has been a continuous increase in the price of raw materials and energy throughout 2022. Despite the decline in Estonian industrial production in the Q3 2022, the fibreboard order volume remained stable throughout the Q3 2022, which shows the strength of local north European markets.
The largest sales growth in Q3 2022, compared to Q3 2021, was reflected in the markets of Finland, Denmark and Latvia. Sales to Russia ended in May 2022 due to the sanctions imposed as a result of Russia’s war on Ukraine.
The operating profitability, ie EBITDA, of the fibreboard activities in Q3 2022 was € 201 thousand, a decrease of 42% compared to the same period last year. This being caused by increased cost prices for woodchips, our main raw material, as well as higher electricity prices during Q3 2022.
FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS
| € thousand | € thousand | |||
| Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 | |
| European Union | 2,723 | 1,980 | 8,425 | 6,233 |
| Middle East | 47 | 13 | 73 | 13 |
| Russia | 0 | 269 | 427 | 1,083 |
| Asia | 0 | 0 | 69 | 124 |
| Africa | 0 | 0 | 0 | 46 |
| Other | 12 | 8 | 21 | 40 |
| TOTAL | 2,782 | 2,270 | 9,015 | 7,539 |
PÄRNU RIVERSIDE DEVELOPMENT: Real estate management
Pärnu Riverside Development owns the property located at Suur-Jõe 48 in Pärnu. The property has some rental tenants and rental income from real estate management was € 9 thousand in Q3 2022, (Q3 2021: € 65 thousand). The reason for the decrease in sales revenue was caused by the loss of the largest tenant at the end of 2021.
The real estate management EBITDA for Q3 2022 were negative € 6 thousand and net loss € 6 thousand (Q3 2021: EBITDA positive € 11 thousand and net profit € 11 thousand).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND CASH FLOW STATEMENT
As of 30.09.2022 the total assets of Nordic Fibreboard AS were € 9.4 million (30.09.2021: € 8.3 million). The liabilities of the company as of 30.09.2022 were € 4.7 million (30.09.2021: € 4.4 million), of which the Group has payables of € 1.0 million as at 30.09.2022 (30.09.2021: € 0.6 million) and borrowings of € 3.1 million as at 30.09.2022 (30.09.2021: € 3.3 million).
Receivables and prepayments amounted to € 1.3 million as at 30.09.2022 (30.09.2021: € 1.1 million). Inventories were € 0.9 million as of 30.09.2022 (30.09.2021: € 0.4 million). Fixed assets were € 6.7 million as of 30.09.2022 (€ 6.6 million as of 30.09.2021).
During 2022 9M, the Group’s cash flows from operating activities totalled cash inflow of € 617 thousand (2021 9M: cash inflow € 512 thousand). Cash outflows due to investment activities was € 93 thousand during 9M 2022, mainly consisting of investments into production assets of € 194 thousand and dividend received from TPD shares of € 105 thousand (9M 2021: cash outflow € 243 thousand). Cash outflows due to financing activities was € 111 thousand during 9M 2022, consisting of loans repaid of € 76 thousand and finance lease payments of € 35 thousand (9M 2022: cash outflow € 91 thousand). Net cash effect during 9M 2021 showed cash inflows of € 413 thousand, (2021 9M: cash inflows € 178 thousand).
OUTLOOK
NORDIC FIBREBOARD LTD
Demand for fibreboards was stabile during Q3 2022, however we are now experiencing a decline in customer orders. As a result of such drop in demand, we intend to reduce our production capacity and lay off 8 production workers. It has been an ongoing rise in the price of woodchips, our main input material, and at this stage the future outlook for woodchip prices remain unclear. Demand for woodchips has risen as a result of power plants now using more biomass, and sale of wood pellets have also increased as a result of increased heating costs. The uncertainty this autumn of the direction of the electricity market forced us to lock in electricity prices for period 1.1.2023 to 30.6.2024. We alleviated the impact of higher electricity prices in 2023, as a result of the new fixed electricity contract, by increasing our prices during Q4 2022.
PÄRNU RIVERSIDE DEVELOPMENT
We will continue to manage and develop the property on Suur-Jõe Street 48, Pärnu. A detail plan for the property is ongoing, with the intention of converting the property into a private residential property.
FINANCIAL HIGHLIGHTS
| € thousand | ||||
| Income statement | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
| Revenue | 2,791 | 2,334 | 9,043 | 7,757 |
| EBITDA | 193 | 356 | 1,071 | 1,341 |
| EBITDA margin | 7% | 15% | 12% | 17% |
| Operating profit | 68 | 232 | 699 | 962 |
| Operating margin | 2% | 10% | 8% | 12% |
| Net profit | 117 | 73 | 848 | 1,229 |
| Net margin | 4% | 3% | 9% | 16% |
| Statement of financial position | 30.09.2022 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
| Total assets | 9,389 | 8,063 | 8,301 | 7,650 |
| Return on assets | 9% | 15% | 15% | 14% |
| Equity | 4,698 | 3,850 | 3,878 | 2,648 |
| Return on equity | 18% | 31% | 32% | 41% |
| Debt-to-equity ratio | 50% | 52% | 53% | 65% |
| Share | 30.09.2022 | 31.12.2021 | 30.09.2021 | 31.12.2020 |
| Last Price* | 1.74 | 1.95 | 2.20 | 0.45 |
| Earnings per share | 0.18 | 0.27 | 0.55 | 0.24 |
| Price-earnings ratio | 9.54 | 7.30 | 4.02 | 1.89 |
| Book value of a share | 1,04 | 0.86 | 0.86 | 0.59 |
| Market to book ratio | 1.67 | 2.28 | 2.55 | 0.76 |
| Market capitalization, € thousand | 7,828 | 8,773 | 9,898 | 2,025 |
| Number of shares, piece | 4,499,061 | 4,499,061 | 4,499,061 | 4,499,061 |
EBITDA = Earnings before interest, taxes, depreciation and amortization
EBITDA margin = EBITDA / Revenue
Operating margin = Operating profit / Revenue
Net margin = Net profit / Revenue
Return on assets = Net profit / Total assets
Return on equity = Net profit / Equity
Debt-to-equity ratio = Liabilities / Total assets
Earnings per share = Trailing twelve months (TTM) net profit / Total shares
Price-earnings ratio = Last price / Earnings per share
Book value of a share = Equity / Total shares
Market to book ratio = Last price / Book value of a share
Market capitalization = Last price * Total shares
*http://www.nasdaqbaltic.com/
Consolidated statement of financial positions
| € thousand | 30.09.2022 | 31.12.2021 | 30.09.2021 |
| Cash and cash equivalents | 470 | 57 | 204 |
| Receivables and prepayments (Note 2) | 1,345 | 902 | 1,118 |
| Inventories (Note 3) | 874 | 390 | 390 |
| Total current assets | 2,689 | 1,349 | 1,712 |
| Investment property (Note 4) | 1,156 | 1,152 | 1,139 |
| Available-for-sale financial assets (Note 7) | 787 | 644 | 805 |
| Property, plant and equipment (Note 5) | 4,755 | 4,915 | 4,642 |
| Intangible assets (Note 6) | 2 | 3 | 3 |
| Total non-current assets | 6,700 | 6,714 | 6,589 |
| TOTAL ASSETS | 9,389 | 8,063 | 8,301 |
| Borrowings (Notes 8) | 38 | 146 | 36 |
| Payables and prepayments (Notes 9) | 1,410 | 829 | 1,002 |
| Short-term provisions (Note 10) | 4 | 19 | 4 |
| Total current liabilities | 1,452 | 994 | 1,042 |
| Long-term borrowings (Notes 8) | 3,094 | 3,074 | 3,220 |
| Long-term provisions (Note 10) | 145 | 145 | 161 |
| Total non-current liabilities | 3,239 | 3,219 | 3,381 |
| Total liabilities | 4,691 | 4,213 | 4,423 |
| Share capital (at nominal value) (Note 11) | 450 | 450 | 450 |
| Statutory reserve capital | 45 | 0 | 0 |
| Retained earnings (loss) | 4,203 | 3,400 | 3,428 |
| Total equity | 4,698 | 3,850 | 3,878 |
| TOTAL LIABILITIES AND EQUITY | 9,389 | 8,063 | 8,301 |
*The notes to the financial statements presented on pages 14 to 24 are an integral part of these consolidated financial statements
Consolidated statement of profit or loss and other comprehensive income
| € thousand | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
| Revenue (Note 13) | 2,791 | 2,334 | 9,043 | 7,757 |
| Cost of goods sold (Note 14) | 2,387 | 1,721 | 7,134 | 5,451 |
| Gross profit | 404 | 613 | 1,909 | 2,306 |
| Distribution costs (Note 15) | 278 | 251 | 919 | 891 |
| Administrative expenses (Note 16) | 90 | 131 | 315 | 445 |
| Other operating income (Note 18) | 33 | 2 | 33 | 5 |
| Other operating expenses (Note 18) | 1 | 1 | 9 | 13 |
| Operating profit | 68 | 232 | 699 | 962 |
| Finance income (Note 19) | 79 | 0 | 248 | 354 |
| Finance costs (Note 19) | 30 | 159 | 99 | 87 |
| Profit before income tax | 117 | 73 | 848 | 1,229 |
| Corporate income tax | 0 | 0 | 0 | 0 |
| Net profit for the period | 117 | 73 | 848 | 1,229 |
| Basic earnings per share (Note 12) | 0.03 | 0.02 | 0.19 | 0.27 |
| Diluted earnings per share (Note 12) | 0.03 | 0.02 | 0.19 | 0.27 |
*The notes to the financial statements presented on pages 14 to 24 are an integral part of these consolidated financial statements.
TORFINN LOSVIK
Chairman of the board
Phone: +372 56 99 0988
torfinn.losvik@nordicfibreboard.com
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