Last update: 26.11.2024 20:30 (GMT+2)
VIISNURK
COMMENTARY TO FINANCIAL RESULTS
ACTIVITY REPORT 2000
Highlights of the Year
In 2000, AS Viisnurk continued successful operation in
all its primary business units:
- the Furniture Factory (production of domestic
furniture);
- the Ski Factory (production of cross-country skis
and hockey sticks, resale of sports goods);
- the Softboard Factory (production of insulation and
finishing boards).
Supporting units include the Forestry Centre (procurement
of timber and production of sawn timber), the Boiler
House (production of heat energy) and the Technical
Services Unit (maintenance and repairs).
The most important event of 2000 was the establishment of
the Wood Panels Factory that is scheduled to launch its
activities in the 1st quarter of 2001. The Factory
specialises in the production of edge-glued panels of
soft- and hardwood and furniture components for the
furniture and building materials industries. The
installed annual output of the Wood Panels Factory is
16,500 m3 of softwood panels, or 5,000 m3 of hardwood
panels. In 2000, 81 million kroons were invested in this
new production area. The launching of the Wood Panels
Factory and the continuous upgrading of the Forestry
Centre, which was established in 1999, should ensure
timber supply for the other primary business units and
contribute substantially to the growth of turnover and
profits.
For the whole company, 2000 was a year of process
development and streamlining.
- At the end of the year, the Management Board
approved the corporate strategic management model that
was prepared in co-operation with KPMG and should ensure
a more systematic approach to and consistency in the
strategic management of the company.
- The Softboard and the Furniture Factories worked
efficiently on implementing the ISO 9001 quality system.
As a result of their efforts, the Softboard Factory was
awarded an ISO certificate in the middle of December. The
Furniture Factory will receive it at the beginning of
2001.
- In May, the Furniture Factory concluded an agreement
with the Baltic Goldratt Network consultation company to
improve production management and information systems.
The project should be completed in 2001.
- The Forestry Centre launched production in the
sawmill and started to import timber from neighbouring
regions.
- The Technical Services Unit completed the
centralised takeover of the maintenance and repairs
activities of all units.
- In August we took the first step towards the
termination and outsourcing of heat energy production by
signing a contract with Vattenfall Estonia OÜ, who will
erect a boiler house to the Wood Panels Factory.
Financial Review
2000 was the year of records for AS Viisnurk. The net
sales of the company reached the record amount of 309.1m
kroons. For the first time, the operating profit
amounted to 34.2m kroons and net profit to 31.6m kroons.
The results of the primary and supporting activities were
as follows:
Th EEK Net sales Operating profit
Furniture 121,373 19,233
Factory
Ski Factory 98,828 11,847
Softboard 72,252 19,362
Factory
Other 16,630 -3,805
activities
AS compared to 1999, the sales of AS Viisnurk increased
by 45.4%, operating profit by 72.8% and net profit by
20.7%. Among the units, the greatest increase in both
sales (78%) and profits (3.2 times) was attained at the
Furniture Factory.
The profit margin of AS Viisnurk for 2000 was 11.1%,
reflecting a 2% increase on 1999. The profit margin
improved first and foremost thanks to a flexible response
to market opportunities and an increase in production
efficiency. The latter was achieved due to the
investments of previous periods and sustained improvement
of production management. The net profit margin suffered
a decline (10.2% vs. 12.3%). However, the substantial
increase in the net profit for 1999 (of 8.6m kroons)
resulted from changes in the Income Tax Act (the deferred
tax liability was transferred to profit), and
extraordinary income from the sale of a subsidiary. In
2000, there was neither extraordinary income nor expense.
As of 31.12.2000, the balance-sheet total of AS Viisnurk
was 331.9m kroons. In the accounting year, the company
significantly improved its financial leverage with a long-
term loan of 88.3m kroons taken to launch the Wood Panels
Factory. At the end of last year the debt-to-equity
ratio was 57% (cf. 38% at the end of 1999). The solvency
of the company remains good – 1.96. The mean return on
assets was 12.4% and return on equity remained above 20%
for the fourth consecutive year, being 22.1% in 2000.
The share of AS Viisnurk broke records at Tallinn Stock
Exchange. On 20 November, the highest closing price in
history, 48 kroons, was registered, and the market value
of AS Viisnurk was about 216m kroons. The lowest price,
22 kroons, was registered on 3 January, the first trading
day of the year. The end-of-the-year closing price was
47.3 kroons; thus the annual yield of the share was about
115%.
Review of Primary Business Units
Furniture Factory
In 2000, the Furniture Factory became the biggest and the
most successful production unit. Its sales amounted to
121.4m kroons and operating profit to 19.2m kroons. The
success of the Furniture Factory results from its
reorientation to customers with a growth potential, and
modernisation of production by automation of production
management and implementation of new technology, which
were initiated in the second half of 1999. In 2000, the
Furniture Factory invested 14m kroons, mainly in the
improvement of final finishing. Exports accounted for 96%
of sales.
Ski Factory
In 2000, the sales and operating profit of the Ski
Factory amounted to 98.8m kroons (+ 36% compared to the
previous year) and 11.8m kroons (+29% as compared to
1999) respectively. The Ski Factory produced over 300
thousand pairs of cross-country skis and about 40
thousand hockey sticks. Resale of sports goods accounted
for 9.2m kroons of sales. According to the quantity of
skis produced in 2000, AS Viisnurk is currently the
leading cross-country ski producer in the world. In 2000,
the unit focused on producing skis of a higher price
category and promoting the brand. Extensive investments
were made in the development of the hockey stick
production. These measures should ensure a stable and
profitable development of the Factory. Exports amounted
to 87% of sales.
Softboard Factory
The sales of the Softboard Factory amounted to 72.3m
kroons and operating profit to 19.4m kroons. Sales
increased by 14.5% and profit by 36%. This was attained
thanks to favourable market developments and successful
controlling of the prices of the principal production
inputs (heat energy and wood chips). The rise in
profitability was also facilitated by a strategically
planned increase in sales to the neighbouring regions, as
transport costs form a significant part of the end-price.
Exports accounted for 74% of sales.
Activities of the Supporting Units and Administration
Boiler House
In 2000 AS Viisnurk produced 87.2 GWh of heat energy;
83.5% of this was consumed internally and 16.5% (3.1m
kroons) was sold. For heat production, AS Viisnurk uses
mainly wood chips. The role of waste products, however,
is increasing as well.
Forestry Centre
The sawmill of the Forestry Centre produced 7,400 scm of
sawn timber, and in co-operation with small producers of
the neighbourhood – 13,900 scm. About 55% of the output
of the Forestry Centre is used by AS Viisnurk, the rest
is sold (in 2000 the sales were 11.9m kroons).
Technical Services Unit
The Technical Services Unit provides services to all
units. The cost of work completed in 2000 amounted to
23.8m kroons.
Information Technology
In 2000, AS Viisnurk created its corporate website at
<a href='http://www.viisnurk.ee' target='_blank'>http://www.viisnurk.ee</a> and completed construction of a uniform
internal computer network.
Administration
In the reporting year AS Viisnurk completed the
privatisation of the land it owns. To date, eleven
immovable properties with the total area of 69.7 ha have
been registered in the Land Register.
Future Prospects
In 2000, after a two-year standstill (1998-1999), AS
Viisnurk reached the phase of fast growth and management
intends to direct all their efforts at retaining the
growth. During the year, all units prepared their
strategic development plans till 2004. The goals outlined
in the plans, and the large-scale edge-glued panel
production project that will be launched in 2001 should
ensure significant growth in operating capacities.
In line with its mission, AS Viisnurk has established an
almost ideal co-operation chain for its principal
activity – timber beneficiation. The Forestry Centre
deals with the procurement and primary processing of
timber and roundwood. It supplies other production units
with raw materials, from waste products for the boiler
house to semi-manufactured skis for the Ski Factory, and
utilises the timber almost fully. The new Wood Panels
Factory will be an important part of the chain. It will
sell edge-glued panels, adding value to the production of
the sawmill and supplying the Furniture Factory with the
necessary materials.
AS Viisnurk intends to continue improving the timber
beneficiation chain and to focus more on the production
of consumer goods and on the needs of the end-user. It is
planned to establish a semimanufactures industry on the
basis of the Forestry Centre and launching the Wood
Panels Factory. The latter will begin as a producer of
furniture components but should later transform into an
extension of the Furniture Factory. The Ski Factory is
going to focus on the expansion of the hockey stick
production and the promotion of the trademark (in ski
production). The main task of the Softboard Factory is to
find new markets in the neighbouring regions. The
supporting activities (the boiler house, the Technical
Services Unit) will be outsourced so that the attention
of the management and all the resources could be focused
on the development of primary activities.
Andrus Aljas
CFO
37244 78355
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