Q2-2013

Kährs Holding AB (publ)
Interim report – Q2-2013
27 August 2013
CEO comments on Q2-2013
Net sales in the second quarter came in
7% below last year due to a slightly
weaker market, but also due to the
stronger Swedish Krona. The operational
result, EBITDA-R, of 63 MSEK or 10.0%
was 10 MSEK better than last year’s level
despite lower net sales. This was achieved
through a higher gross margin of 34.9%
and lower fixed costs than last year.
The net sales loss in Q2 was compensated by a
higher gross margin at 34.9% vs. 32.5% last
year and on top of this the fixed cost levels
were reduced. High focus on profitable
business in combination with a stronger
product mix continued to support the result
improvement. Profitability was 10 MSEK better
than Q2-2012. Operational result, EBITDA-R,
reached 63 MSEK or 10.0% compared with 53
MSEK or 7.8% the same period last year.
Net sales were below last year in Q2 due to a
slightly weaker market in Russia/CIS region and
also a slow project market for resilient
flooring. Also the strong Swedish Krona had a
negative impact on net sales by 15 MSEK.
The main driver for increased NWC since year
end 2012 is related to seasonality on accounts
receivable and increased safety stock for
projects. There is a continued high focus on
net working capital reductions during the
remaining part of the year. The main potential
is within the inventory and also in a continued
reduction of the number of SKUs.
In the second quarter, a detailed analysis
including negotiations with the unions has
been performed with main focus to optimize
the production footprint within the group. The
outcome of this review has resulted in that the
factory in Kuopio, Finland will be closed in
2013 and the production unit in Tuupovaara,
Finland will produce the Saima product range
only.
Christer Persson
President and CEO
2 (13)
Financial overview April-June
Financial overview June YTD
 Net sales: MSEK 633 (683 LY)
 Net sales: MSEK 1,246 (1,384 LY)
 Gross margin in %: 34.9% (32.5%)
 Gross margin in %: 34.3% (32.8%)
 EBITDA-R: MSEK 63 (53) or 10.0% (7.8%)
 EBITDA-R: MSEK 108 (99) or 8.7% (7.2%)
 EBIT: MSEK 32 (18) or 5.1% (2.6%)
 EBIT: MSEK 50 (34) or 4.0% (2.5%)
 Net working capital: MSEK 828 (962)
 Net debt: MSEK 188 (518)
Net sales overview per product
group and region
Group net sales per June YTD amounted to
1,246 (1,384) MSEK. The decline of 138 MSEK
was partly due to negative FX movements
amounting to 31 MSEK. Sales within hardwood
flooring amounted to 1,047 (1,141) MSEK, a
decline of 8%, while resilient flooring business
amounted to 125 (165) MSEK, a decline of 24%.
Net sales for other business, accessories and
energy, during the period January to June was
74 (77), a decline of 4%.
Total group net sales in Q2-13 were 7% below
last year and reached 633 MSEK (683). The
strong Swedish Krona explained 15 MSEK of
this net sales loss.
Net Sales by Product Group
Hardwood flooring continued to show a mixed
development in the regions and during the
second quarter 2013 the hardwood sales
dropped by 5% to 533 MSEK compared with LY.
Net sales per product group
Q2-2013
Other
Resilient 6%
10%
The resilient flooring business reached a net
sales in Q2 of 60 MSEK and was 21% behind LY
due to a weak project market.
Net sales for other business, including mainly
accessories and energy sales, grew 5% to 40
MSEK in Q2.
Hardwood
flooring
84%
Net Sales by region
Net sales per region
Q2-2013
The regions showed a mixed performance in
Q2 with Nordic as the strongest region with 4%
growth followed by Americas at 2% growth.
The development in the Nordics was driven by
favorable market growth. The Russia/CIS region
showed a negative sales development of 5%,
while Central Europe and Finland/Baltics had
net sales losses of 14% and 18% respectively
due to weaker market conditions.
Americas
8%
Other
markets
3%
Central
Europe
23%
Russia/CIS
16%
3 (13)
Nordic
33%
Finland/
Baltic
17%
Operational result
Net debt amounted to 188 (518) per the end of
June 2013. The ratio between Net debt to
EBITDA including one-off items (LTM) was 1.1.
The operational result, EBITDA-R, was 63 (53)
MSEK in the second quarter, an improvement
of 10 MSEK or 19% compared with LY. The
strengthened Swedish Krona had a negative FX
impact on EBITDA-R of 3 MSEK in Q2. The
improvement in EBITDA-R is mainly driven by
higher gross margins and reduced fixed costs.
Consolidated cash and cash equivalents per
June 30, 2013 was 312 MSEK compared with
397 MSEK per December 31, 2012. Due to the
excess cash position, and no material
acquisitions planned in 2013, the Group is
currently evaluating a repayment up to 130
MSEK of the shareholder loans during the
fourth quarter.
The operational result, EBITDA-R, for the first
six months in 2013 amounted to 108 (99)
MSEK. This increase was achieved through
improved gross margins and focused cost
control.
Loan and borrowings
The group issued bonds on 20 December 2012
with gross proceeds of 500 MSEK. An additional
tap-issue of maximum 250 MSEK can be issued
subject to pro forma incurrence test being met.
Cashflow
The operational Cashflow amounted to 25 (32)
MSEK in Q2. Working capital was increased by
39 (20) MSEK due to seasonality and safety
stock build up for projects and summer shutdown of the production facilities over 2-4
weeks.
These bonds are transferable, unsecured,
callable floating rate bonds with a coupon of
STIBOR (3 months) plus 7.50 percent p.a.
Interest are payable on a quarterly basis on 20
March, 20 June, 20 September and 20
December.
After net investments in Q2 of 29 (18) MSEK
and restructuring costs of 4 (5) MSEK, the
Cashflow before financing amounted to -8 (11)
MSEK.
The group is currently working with the IFRS
conversion and the prospectus for listing the
corporate bond on NASDAQ OMX Stockholm.
Target listing date is October 2013.
Operational Cashflow before financing for the
period January to June amounted to -50 (23)
MSEK. This development was mainly driven by
increases in net working capital in terms of
higher accounts receivable and also increased
finished goods inventory as safety stock.
Employees
The number of employees per 30 June 2013
was 1,599, which is a decrease of 13 employees
since 31 December 2012.
Financial position
The equity ratio (incl. negative goodwill and
shareholder loans) amounted to 48% on 30
June 2013 to be compared with 49% on 31
December 2012. No dividend has been paid to
shareholders during the period January-June.
4 (13)
Events after balance sheet date
US customs
Karelia-Upofloor Oy, the Finnish subsidiary of
Kährs Holding AB (publ), has in July 2013
finalized its negotiations initiated in May at its
Kuopio and Tuupovaara hardwood flooring
units in Finland. As a result, the Kuopio and
Tuupovaara
production,
excluding
the
production of Saima products in Tuupovaara,
will be integrated into other production units
within the Group network. The Kuopio
production will be fully discontinued in 2013.
The U.S. customs case for Kährs International
Inc. is related to product classification and
tariffs for importing parquet to the US. This
legal case was lost in the US appeals court in
April 2013 and no rehearing was granted in
June 2013.
The U.S. Customs may be entitled to claim
import duties of 8 percent retroactively for the
years 2001–2005. The higher tariff of 8 percent
has been paid by Kährs International Inc. since
the legal case was initiated back in 2006.
The negotiations were initiated to improve
long-term competitiveness, by reorganizing the
Group’s production network. The European
hardwood floor business is undergoing a
restructuring – the industry has been
characterized by a large amount of small
producers and overcapacity. By reorganizing
the hardwood floor production, the group will
enhance the operations to better meet the
market challenges.
In order to recover any amount from Kährs
International Inc., the U.S. Customs would need
to prove that Kährs International Inc. failed to
exercise reasonable care when importing the
flooring products during the period 2001-2005.
Furthermore, Kährs International Inc. will likely
have the possibility to mitigate and renegotiate
a settlement with the U.S. Customs.
In the event of a successful claim from the
U.S. Customs, or if a favourable settlement
with the U.S. Customs cannot be reached,
Kährs international Inc. could be forced to file
for bankruptcy, which in turn would lead to a
need for a reorganisation of the Group’s U.S
business.
The total amount of Kuopio and Tuupovaara
blue-collar employees in the scope of the
cooperation negotiations was 116.
5 (13)
Parent company
Accounting principles
Kährs Holding AB (publ) is the parent company
of the group and was established in 1996. The
revenue for the period January to June was 0
(0) MSEK with a NIAT of -2 (-1) MSEK. The
parent company’s financials are presented on
page 10-12 in this interim report.
This Q2 interim report is prepared in
accordance with the Swedish Annual Accounts
Act and Swedish GAAP. Information on
accounting principles applied in 2012 is
available in the annual report and the same
principles have been used in this interim
report.
This report has not been reviewed by the
company’s auditor.
6 (13)
Group Income Statement
Income Statement
MSEK
Net sales
Operating costs
EBITDA-R
% of Net sales
Restructuring costs
EBITDA
% of Net sales
Depreciation
EBIT
Apr-Jun
2013
Apr-Jun
2012
(proforma)
Jan-Jun
2013
633
683
1,246
1,384
2,457
-570
-630
-1,138
-1,285
-2,267
63
53
108
Jan-Jun
LTM
2012
Jul-Jun
(proforma) (proforma)
99
190
10,0%
7,8%
8,7%
7,2%
7,7%
-4
-6
-5
-7
-14
59
47
103
92
176
9,3%
6,9%
8,3%
6,6%
7,2%
-27
-29
-53
-58
-111
32
18
50
34
65
% of Net sales
5,1%
2,6%
4,0%
2,5%
2,6%
Finance net
-41
-5
-50
-9
-75
EBT
-9
13
0
25
-10
Tax
0
1
1
0
-8
-9
14
1
25
-18
Net income after tax
7 (13)
Group Balance Sheet
Balance Sheet
MSEK
30 Jun 2013
31 Dec 2012
30 Jun 2012
(proforma)
Tangible assets
635
648
820
Other fixed assets
103
98
21
Inventory
646
629
729
Account receivables
371
290
377
Other current assets
76
69
103
312
397
156
2,143
2,131
2,206
Shareholders’ equity
223
232
515
Negative goodwill
235
233
0
Shareholders’ loans
580
569
494
External interest bearing debt
500
500
674
Account payables
189
186
144
Accrued expenses
206
213
218
Other liabilities
210
198
161
2,143
2,131
2,206
Net working capital
828
733
962
Net debt
188
103
518
Equity ratio (incl. negative goodwill)
21%
22%
23%
Equity ratio (incl. negative goodwill & SH loans)
48%
49%
46%
Fixed assets
Current assets
Cash and bank balances
Total assets
Shareholders’ equity
Liabilities
Total liabilities and equity
8 (13)
Group Cashflow Statement
Cashflow Statement
MSEK
Apr-Jun
2013
Apr-Jun
2012
(proforma)
Jan-Jun
2013
Jan-Jun
2012
(proforma)
EBIT before restructuring
37
23
55
41
Depreciation
27
29
53
58
0
0
0
0
64
52
108
99
Changes in working capital
-39
-20
-114
-38
Cash flow from operations
25
32
-6
61
-29
-18
-42
-33
0
2
3
2
Restructuring costs
-4
-5
-5
-7
Free cash flow before financing
-8
11
-50
23
-41
-5
-50
-9
Change in deferred taxes
-2
1
-5
-2
FX and other changes in equity
28
-3
20
-35
Changes in cash and cash equivalents
-23
4
-85
-23
Cash & bank assets, opening balance
335
152
397
179
Cash & bank assets, closing balance
312
156
312
156
Taxes paid
Cashflow from operations
(before changes in working capital)
Investments
Changes in other investments and
long-term non-interest bearing items
Finance net
9 (13)
Kährs Holding AB (publ) - Income Statement
Income Statement
MSEK
Apr-Jun
2013
Apr-Jun
2012
(proforma)
Jan-Jun
2013
Net sales
0
0
0
0
0
Operating costs
0
-1
-1
-1
-1
EBITDA-R
% of Net sales
Restructuring costs
EBITDA
% of Net sales
Depreciation
EBIT
0
-1
-1
Jan-Jun
LTM
2012
Jul-Jun
(proforma) (proforma)
-1
-1
0%
0%
0%
0%
0%
0
0
0
0
0
0
-1
-1
-1
-1
0%
0%
0%
0%
0%
0
0
0
0
0
0
-1
-1
-1
-1
% of Net sales
0%
0%
0%
0%
0%
Finance net
-2
0
-9
-1
60
EBT
-2
-1
-10
-2
59
Tax
0
0
0
0
0
-2
-1
-10
-2
59
Net income after tax
10 (13)
Kährs Holding AB (publ) - Balance Sheet
Balance Sheet
MSEK
30 Jun 2013
31 Dec 2012
30 Jun 2012
(proforma)
0
0
0
1,078
1,085
465
Inventory
0
0
0
Account receivables
0
0
0
Other current assets
23
5
0
Cash and bank balances
20
8
0
1,121
1,098
465
332
342
247
0
0
0
Shareholders’ loans
196
193
207
External interest bearing debt
500
500
0
Account payables
5
8
0
Accrued expenses
13
15
2
Other liabilities
75
40
9
1,121
1,098
465
-5
-8
0
Net debt
480
492
0
Equity ratio (incl. negative goodwill)
30%
31%
53%
Equity ratio (incl. negative goodwill & SH loans)
47%
49%
98%
Fixed assets
Tangible assets
Other fixed assets
Current assets
Total assets
Shareholders’ equity
Shareholders’ equity
Negative goodwill
Liabilities
Total liabilities and equity
Net working capital
11 (13)
Kährs Holding AB (publ) - Cashflow Statement
Cashflow Statement
MSEK
Apr-Jun
2013
Apr-Jun
2012
(proforma)
Jan-Jun
2013
Jan-Jun
2012
(proforma)
EBIT before restructuring
0
-1
-1
-1
Depreciation
0
0
0
0
Taxes paid
0
0
0
0
Cashflow from operations
(before changes in working capital)
0
-1
-1
-1
Changes in working capital
3
2
23
2
Cash flow from operations
3
1
22
1
Investments
0
0
0
0
Changes in other investments and
long-term non-interest bearing items
0
0
0
0
Restructuring costs
0
0
0
0
Free cash flow before financing
3
1
22
1
-2
0
-9
-1
0
0
0
0
FX and other changes in equity
-2
-2
-1
-1
Changes in cash and cash equivalents
-1
-1
12
-1
Cash & bank assets, opening balance
21
1
8
1
Cash & bank assets, closing balance
20
0
20
0
Finance net
Change in deferred taxes
12 (13)
Financial reporting 2013
Kährs Holding AB (publ)’s interim reports as well as the year end-report are available on Kährs website
www.kahrs.com.
The following interim reporting will occur in 2013:







Proforma report 2012
Statutory report 2012
Shareholder’s general meeting
Interim report Q1
Interim report Q2
Interim report Q3
Interim report Q4
February 2013
April 2013
April 2013
May 2013
August 2013
November 2013
February 2014
For further information, please contact:
Christer Persson
President and CEO
Phone: +46 70 271 2014
Email: [email protected]
Peter Ericsson
CFO
Phone: +46 70 461 1039
Email: [email protected]
Address:
Kährs Holding AB (publ)
Dunderbergsgatan 10
382 28 Nybro
Sweden
Corporate identity number: 556534-2481
Phone: +46 481 46000
13 (13)