MANAGEMENT REPORT
Consolidated net sales for Q2 2022 were € 3.65 million (Q2 2021: € 2.58 million). The main business area is the production and wholesale of fibreboard, which recorded sales in Q2 2022 of € 3.64 million, an increase of 45% compared to Q2 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 Q2 2022 (Q2 2021: 64 thousand).
The reason for the increase in sales revenue in Q2 2022 was the continuing strong demand for building materials in the construction sector and a higher production volume compared to the Q2 2021. Production was running at full capacity and delivery times to our key customers was on average 3 months, which has been the norm during the last 2 years. Real estate management lost its largest tenant end of last year, which thus resulted in less sales in Q2 2022 compared to Q2 2021.
The consolidated EBITDA of Nordic Fibreboard for Q2 2021 was € 624 thousand, the EBITDA margin was 17% (Q2 2021: EBITDA was € 502 thousand and the EBITDA margin was 19%). Compared to the Q2 2021 the Group`s gross margin decreased from 37% to 30% in the Q2 2022. The main reason for this reduction in profitability is due to the sharp increase in raw material costs, ie woodchips and energy, experienced during 2022.
In the Q2 2022, a total financial income of € 82 thousand was recorded, consisting of financial income of € 105 thousand from dividend from the shares of Trigon Property Development (TPD), € 12 thousand from profits from the revaluation of these shares, and financial costs of € 35 thousand. In the Q2 2021, the financial income of € 227 thousand consisted of profit from the revaluation of TPD shares of € 257 thousand, and financial costs of € 30 thousand.
Group`s consolidated net profit for Q2 2022 was € 580 thousand (Q2 2021: profit € 606 thousand).
DIVISIONAL REVIEW
Revenue by business segments
| € thousand | Q2 2022 | Q2 2021 | 6M 2022 | 6M 2021 |
| Fibreboards production and sales | 3,643 | 2,513 | 6,234 | 5,269 |
| Real Estate Management | 9 | 64 | 18 | 153 |
| TOTAL | 3,652 | 2,576 | 6,252 | 5,422 |
Profit by business segments
| € thousand | Q2 2022 | Q2 2021 | 6M 2022 | 6M 2021 |
| EBITDA by business units: | ||||
| Fibreboards production and sales | 635 | 497 | 914 | 993 |
| Real Estate Management | (3) | (9) | (12) | (1) |
| Group transactions | (8) | 14 | (23) | (6) |
| TOTAL EBITDA | 624 | 502 | 879 | 986 |
| Depreciation | (126) | (123) | (248) | (256) |
| TOTAL OPERATING PROFIT/ LOSS | 498 | 379 | 631 | 730 |
| Net financial income | 82 | 227 | 100 | 427 |
| NET PROFIT/ LOSS | 580 | 606 | 731 | 1,157 |
NORDIC FIBREBOARD LTD: FIBREBOARD PRODUCTION AND SALES
Fibreboard sales in Q2 2022 were € 3.64 million (2021: € 2.51 million). The order backlog remained strong throughout Q2 2022 reflecting the strong local markets, however we are keeping in close touch with existing customers in far away markets, which resulted in some sales to Asia and Middle East. During Q2 2022, we increased the prices of our products to compensate for the increase in raw materials prices and energy costs.
The biggest increase in sales growth in Q2 2022 came from strong sales and volume growth in our three largest markets, these being Finland, Denmark, and Estonia. 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 Q2 2022 was € 635 thousand, an increase of 22% compared to the same period last year. Fibreboard division’s net profit for Q2 2022 was € 592 thousand (Q2 2021: net profit € 603 thousand).
FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS
| € thousand | € thousand | |||
| Q2 2022 | Q2 2021 | 6M 2022 | 6M 2021 | |
| European Union | 3,444 | 2,094 | 5,702 | 4,253 |
| Russia | 158 | 381 | 427 | 814 |
| Asia | 28 | 22 | 70 | 124 |
| Middle East | 13 | 0 | 26 | 0 |
| Africa | 0 | 0 | 0 | 46 |
| Other | 0 | 16 | 9 | 32 |
| TOTAL | 3,643 | 2,513 | 6,234 | 5,269 |
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 Q2 2022, (Q2 2021: € 64 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 Q2 2022 were negative € 3 thousand and net loss € 3 thousand (Q2 2021: EBITDA negative € 9 thousand and net loss € 9 thousand).
STATEMENT OF FINANCIAL POSITION AND CASH FLOW STATEMENT
As of 30.06.2022 the total assets of Nordic Fibreboard AS were € 9.1 million (30.06.2021: € 8.1 million). The liabilities of the company as of 30.06.2022 were € 4.5 million (30.06.2021: € 4.3 million), of which Group has payables amounting to € 0.8 million as at 30.06.2022 (30.06.2021: € 0.5 million) and borrowings of € 3.2 million as at 30.06.2022 (30.06.2021: also € 3.2 million).
Receivables and prepayments amounted to € 1.6 million as at 30.06.2022 (30.06.2021: € 1.0 million). Inventories were € 0.6 million as of 30.06.2022 (30.06.2021: € 0.5 million). Fixed assets were € 6.7 million as of 30.06.2022 (€ 6.6 million as of 30.06.2021).
During 6M 2022, the Group’s cash flows from operating activities totalled cash inflow of € 269 thousand (6M 2021: cash inflow € 110 thousand). Cash outflows due to investment activities was € 39 thousand during 6M 2022, consisting of investments into production assets of € 144 thousand and dividend received from TPD shares of € 105 thousand (6M 2021: cash outflow € 58 thousand). Cash outflows due to financing activities was € 74 thousand during 6M 2022, consisting of loans repaid of € 50 thousand and finance lease payments of € 24 (6M 2022: cash outflow € 40 thousand). Net cash effect during 6M 2022 showed cash inflows of € 156 thousand (6M 2021: cash inflows € 12 thousand).
OUTLOOK
NORDIC FIBREBOARD LTD
Demand for fibreboards was strong during Q2 2022 and the outlook near term indicate that demand is still good despite the current market uncertainty driven by higher energy costs and an increased interest rate environment. Our relatively inexpensive fibreboards, with its green credentials, should provide a somewhat good hedge against any future softening of the building material markets. Nordic Fibreboard’s extensive customer reach on several continents is also a comforting factor when looking ahead.
The management is in process of securing financing for a new biomass boiler, the objective being to improve the boiler house`s energy and resource use , which would improve the efficiency of using wood fuel and reduce air emissions. The goal of Nordic Fibreboard`s is to improve the company`s current energy use so that it can operate more efficiently and environmentally friendly in the future.
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
| Income statement | Q2 2022 | Q2 2021 | 6M 2022 | 6M 2021 |
| Revenue | 3,652 | 2,576 | 6,252 | 5,422 |
| EBITDA | 624 | 502 | 879 | 986 |
| EBITDA margin | 17% | 19% | 14% | 18% |
| Operating profit | 498 | 379 | 631 | 730 |
| Operating margin | 14% | 15% | 10% | 13% |
| Net profit | 580 | 606 | 731 | 1 157 |
| Net margin | 16% | 24% | 12% | 21% |
| Statement of financial position | 30.06.2022 | 31.12.2021 | 30.06.2021 | 31.12.2020 |
| Total assets | 9,100 | 8,063 | 8,140 | 7,650 |
| Return on assets | 8% | 15% | 14% | 14% |
| Equity | 4,582 | 3,850 | 3,805 | 2,648 |
| Return on equity | 16% | 31% | 30% | 41% |
| Debt-to-equity ratio | 50% | 52% | 53% | 65% |
| Share | 30.06.2022 | 31.12.2021 | 30.06.2021 | 31.12.2020 |
| Last Price* | 1.66 | 1.95 | 1.74 | 0.45 |
| Earnings per share | 0.17 | 0.27 | 0.57 | 0.24 |
| Price-earnings ratio | 9.61 | 7.30 | 3.05 | 1.89 |
| Book value of a share | 1.02 | 0.86 | 0.85 | 0.59 |
| Market to book ratio | 1.63 | 2.28 | 2.06 | 0.76 |
| Market capitalization, € thousand | 7,468 | 8,773 | 7,828 | 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 number of shares
*http://www.nasdaqbaltic.com/
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| € thousand | 30.06.2022 | 31.12.2021 | 30.06.2021 | 31.12.2020 |
| Cash and cash equivalents | 213 | 57 | 38 | 26 |
| Receivables and prepayments (Note 2) | 1,632 | 902 | 977 | 794 |
| Inventories (Note 3) | 587 | 390 | 526 | 544 |
| Total current assets | 2,432 | 1,349 | 1,541 | 1,364 |
| Investment property (Note 4) | 1,152 | 1,152 | 1,136 | 1,134 |
| Financial assets at fair value through profit or loss (Note 7) | 708 | 644 | 933 | 451 |
| Property, plant and equipment (Note 5) | 4,805 | 4,915 | 4,527 | 4,695 |
| Intangible assets (Note 6) | 3 | 3 | 3 | 6 |
| Total non-current assets | 6,668 | 6,714 | 6,599 | 6,286 |
| TOTAL ASSETS | 9,100 | 8,063 | 8,140 | 7,650 |
| Borrowings (Notes 8) | 75 | 146 | 70 | 756 |
| Payables and prepayments (Notes 9) | 1,218 | 829 | 927 | 1,574 |
| Short-term provisions (Note 10) | 9 | 19 | 9 | 18 |
| Total current liabilities | 1,302 | 994 | 1,006 | 2,348 |
| Long-term borrowings (Notes 8) | 3,071 | 3,074 | 3,168 | 2,493 |
| Long-term provisions (Note 10) | 145 | 145 | 161 | 161 |
| Total non-current liabilities | 3,216 | 3,219 | 3,329 | 2,654 |
| Total liabilities | 4,518 | 4,213 | 4,335 | 5,002 |
| Share capital (at nominal value) (Note 11) | 450 | 450 | 450 | 450 |
| Statutory reserve capital | 45 | 0 | 0 | 0 |
| Retained earnings (loss) | 4,087 | 3,400 | 3,355 | 2,198 |
| Total equity | 4,582 | 3,850 | 3,805 | 2,648 |
| TOTAL LIABILITIES AND EQUITY | 9,100 | 8,063 | 8,140 | 7,650 |
*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 COMREHENSIVE INCOME
| € thousand | Q2 2022 | Q2 2021 | 6M 2022 | 6M 2021 |
| Revenue (Note 13) | 3,652 | 2,576 | 6,252 | 5,422 |
| Cost of goods sold (Note 14) | 2,687 | 1,750 | 4,746 | 3,729 |
| Gross profit | 965 | 826 | 1,506 | 1,693 |
| Distribution costs (Note 15) | 356 | 298 | 641 | 640 |
| Administrative expenses (Note 16) | 104 | 142 | 226 | 314 |
| Other operating income (Note 18) | 0 | 1 | 0 | 3 |
| Other operating expenses (Note 18) | 7 | 8 | 8 | 12 |
| Operating profit (loss) | 498 | 379 | 631 | 730 |
| Finance income (Note 19) | 117 | 257 | 169 | 483 |
| Finance costs (Note 19) | 35 | 30 | 69 | 56 |
| PROFIT BEFORE INCOME TAX | 580 | 606 | 731 | 1,157 |
| NET PROFIT FOR THE PERIOD | 580 | 606 | 731 | 1,157 |
| Basic earnings per share (Note 12) | 0.13 | 0.13 | 0.16 | 0.26 |
| Diluted earnings per share (Note 12) | 0.13 | 0.13 | 0.16 | 0.26 |
*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
Attachment
