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Nordic Fibreboard AS unaudited results for second quarter and 6 months of 2023

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Management report




Consolidated  net  sales  for  Q2  2023 were  EUR  2.01 million  (Q2 2022: EUR 3.65
million).  The main business  area is Nordic  Fibreboard Ltd, the production and
wholesale  of fibreboard, which recorded sales in Q2 2023 of EUR 2.00 million, (Q2
2021: EUR   3.64 million).   The   remaining  business  area  is  Pärnu  Riverside
Development,  real estate management of the property owned in Suur-Jõe street in
Pärnu, who recorded sales of EUR 12 thousand in Q2 2023 (Q2 2022: EUR 9 thousand).

Nordic  Fibreboard Ltd sales of EUR 2.00 million was down 23% from its sales in Q1
2023, and  down  45% from  Q2  2022. The  drop  in sales compared to Q2 2022 was
influenced  by the termination  of sales to  Russian customers in  the spring of
2022 as  a result of sanctions imposed on  Russia due to their aggressive war in
Ukraine.  However, continuing  weak demand  in three  of our main markets, these
being  Finland, Denmark  and Estonia,  also had  a negative on sales development
when  comparing last year and this year. We managed to offset some of this sales
decline  by recording  improved sales  in two  of our  other main markets, these
being Sweden and Latvia.

The  ongoing  reduction  of  woodchip  pricing,  which  is  fibreboard  main raw
material,  as well  as the  new more  favourable electricity contracted which we
entered into on 1.4.2023, resulted in gross margin being 25% in Q2 2023, up from
11% recorded  in Q1 2023. Overhead costs were lower than planned, down in 20% in
Q2 2023 compared to Q1 2023, which led a positive EBITDA 212 thousand euros (11%
of  sales) for Nordic Fibreboard  Ltd in Q2 2023 compared  to Q1 2023 EBITDA for
the quarter, which was negative 76 thousand euros.

Financial  expenses for the Q2 2023 were 76 thousand euros, of which 53 thousand
euros  were  loan  interest  costs,  19 thousand  euros  were  losses  from  the
revaluation  of Trigon Property  Development (TPD) shares,  and 4 thousand euros
were other financial expenses. In the Q2 2022, a total financial income of EUR 82
thousand  was recorded,  consisting of  financial income  of EUR 105 thousand from
dividend  from the  shares of  Trigon Property  Development (TPD), EUR 12 thousand
from  profits from the revaluation of these shares, and financial costs of EUR 35
thousand.  The fibreboard division thus generated net profit of EUR 16 thousand in
Q2 2023 (up from a loss of EUR 578 thousand in Q1 2023).

DIVISIONAL REVIEW

Revenue by business segments

  EUR thousand                         Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022
---------------------------------------------+---------+---------+---------
  Fibreboards production and sales     1,998 |   3,643 |   4,583 |   6,234
---------------------------------------------+---------+---------+---------
  Real Estate Management                  12 |       9 |      23 |      18
---------------------------------------------+---------+---------+---------
  TOTAL                                2,010 |   3,652 |   4,606 |   6,252

Profit by business segments

  EUR thousand                         Q2 2023 | Q2 2022   6M 2023 | 6M 2022
---------------------------------------------+-------------------+---------
  EBITDA by business units:                  |                   |
---------------------------------------------+-------------------+---------
  Fibreboards production and sales       212 |     635       137 |     914
---------------------------------------------+-------------------+---------
  Real Estate Management                 (4) |     (3)      (17) |    (12)
---------------------------------------------+-------------------+---------
  Group transactions                    (18) |     (8)      (24) |    (23)
---------------------------------------------+-------------------+---------
  TOTAL EBITDA                           190 |     624        96 |     879
---------------------------------------------+-------------------+---------
  Depreciation                         (121) |   (126)     (244) |   (248)
---------------------------------------------+-------------------+---------
  TOTAL OPERATING PROFIT/ LOSS            69 |     498     (148) |     631
---------------------------------------------+-------------------+---------
  Extraordinary expenses                   0 |       0     (406) |       0
---------------------------------------------+-------------------+---------
  Net financial costs                   (76) |      82      (50) |     100
---------------------------------------------+-------------------+---------
  NET PROFIT/ LOSS                       (7) |     580     (604) |     731

NORDIC FIBREBOARD LTD: Fibreboard production and sales

Fibreboard sales in Q2 2023 were EUR 2.00 million (2022: EUR 3.64 million). The main
reasons  for  this  slowdown  in  sales  is  due  to  the  weak  global economic
environment,  caused by macro  factors such as  higher interest rates and higher
consumer  pricing  which  have  a  negative  effect  on  consumer  and  business
confidence.  Sales to our largest market Finland  was down 29% for the first six
months  of 2023 compared to same period in  2022, while our market share in sale
of  fibreboards in Finland have remained  unchanged during these periods. Nordic
Fibreboard  Ltd's homemarket in Estonia have experienced the most dramatic sales
decline  with 45% when  comparing the  two aforementioned  periods. We  had some
positive  news with restarting sales  to our old customers  in Africa during the
first six months of this year.

EBITDA,  of the  fibreboard activities  in Q2  2023 was positive at 212 thousand
euros, which is a good improvement compared to Q1 2023 EBITDA which was negative
76 thousand  euros, but far  short of Q2  2022 when  EBITDA was  a positive 635
thousand  euros. Fibreboard division's net profit  for Q2 2023 was EUR 16 thousand
(Q2 2022: net profit EUR 592 thousand).

FIBREBOARD SALES BY GEOGRAPHICAL SEGMENTS

                      EUR thousand     |    EUR thousand
                 ----------+---------+---------+---------
                   Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022
---------------------------+---------+---------+---------
  European Union     1,862 |   3,444 |   4,317 |   5,702
---------------------------+---------+---------+---------
  Africa                40 |       0 |      93 |       0
---------------------------+---------+---------+---------
  Middle East           28 |      13 |      28 |      26
---------------------------+---------+---------+---------
  Asia                  23 |      28 |      55 |      70
---------------------------+---------+---------+---------
  Russia                 0 |     158 |       0 |     427
---------------------------+---------+---------+---------
  Other                 45 |       0 |      90 |       9
---------------------------+---------+---------+---------
  TOTAL              1,998 |   3,643 |   4,583 |   6,234


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 EUR 12 thousand in Q2 2023, (Q2 2022: EUR 9 thousand).

The real estate management EBITDA for Q2 2023 were negative EUR 4 thousand and net
loss  EUR 4 thousand  (Q2 2022: EBITDA  negative EUR  3 thousand and  net loss  EUR 3
thousand).

STATEMENT OF FINANCIAL POSITION AND CASH FLOW STATEMENT

As  of 30.06.2023 the  total assets  of Nordic  Fibreboard AS were EUR 8.9 million
(30.06.2022:   EUR 9.1 million). The liabilities of  the company as of 30.06.2023
were  EUR 4.4 million  (30.06.2022: EUR  4.5 million), of  which Group  has payables
amounting  to  EUR  0.9 million  as  at 30.06.2023 (30.06.2022: EUR 0.8 million) and
borrowings of EUR 3.0 million as at 30.06.2023 (30.06.2022: EUR 3.2 million).

Receivables  and  prepayments  amounted  to  EUR  0.7 million  as  at  30.06.2023
(30.06.2022:  EUR 1.6 million). Inventories  were EUR 0.9 million  as of 30.06.2023
(30.06.2022: EUR 0.6 million). Fixed assets were EUR 7.2 million as of 30.06.2023 (EUR
6.7 million as of 30.06.2022).

During  6M 2023, the Group's cash flows  from operating activities totalled cash
inflow  of EUR 378 thousand  (6M 2022: cash inflow  EUR 269 thousand). Cash outflows
due  to investment activities  was EUR 171 thousand  during 6M 2023, consisting of
investments  into production assets (6M  2022: cash outflow EUR 39 thousand). Cash
outflows  due  to  financing  activities  was EUR 207 thousand during 6M 2023, (6M
2022: cash outflow EUR 74 thousand). The net cash flow for the 6M 2023 was EUR 0 (6M
2022: cash inflows EUR 156 thousand).



OUTLOOK

NORDIC FIBREBOARD LTD

The  overall  demand  picture  continues  to  be challenging, and the short-term
outlook  remains uncertain due  to headwinds coming  from macro factors, such as
increasing  interest rates, global economic uncertainty,  and the ongoing war in
Ukraine. All have led to a construction/renovation market slowdown and a lack of
confidence  among  end  users  of  building  materials, including the use of the
company's fibreboards.

Main  operation issue remains the ongoing preparation of upgrading the company's
wood-based boiler house in Pärnu so to meet the new emission requirements coming
into force in 01.01.2025.

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

 EUR thousand
                                  |          |                     |
 Income statement                 |   Q2 2023|   Q2 2022    6M 2023|   6M 2022
----------------------------------+----------+----------+----------+----------
 Revenue                          |     2,010|     3,652|     4,606|     6,252
----------------------------------+----------+----------+----------+----------
 EBITDA                           |       190|       624|        96|       879
----------------------------------+----------+----------+----------+----------
 EBITDA margin                    |        9%|       17%|        2%|       14%
----------------------------------+----------+----------+----------+----------
 Operating profit                 |        69|       498|     (148)|       631
----------------------------------+----------+----------+----------+----------
 Operating margin                 |        3%|       14%|      (3%)|       10%
----------------------------------+----------+----------+----------+----------
 Net profit                       |       (7)|       580|     (604)|       731
----------------------------------+----------+----------+----------+----------
 Net margin                       |      (0%)|       16%|     (13%)|       12%
                                  |          |          |          |

                                  |          |          |          |
 Statement of financial position  |30.06.2023|31.12.2022|30.06.2022|31.12.2021
----------------------------------+----------+----------+----------+----------
 Total assets                     |     8,856|     9,408|     9,100|     8,063
----------------------------------+----------+----------+----------+----------
 Return on assets                 |      (7%)|       13%|        8%|       15%
----------------------------------+----------+----------+----------+----------
 Equity                           |     4,480|     5,084|     4,582|     3,850
----------------------------------+----------+----------+----------+----------
 Return on equity                 |     (13%)|       24%|       16%|       31%
----------------------------------+----------+----------+----------+----------
 Debt-to-assets ratio             |       49%|       46%|       50%|       52%
                                  |          |          |          |

                                  |          |          |          |
 Share                            |30.06.2023|31.12.2022|30.06.2022|31.12.2021
----------------------------------+----------+----------+----------+----------
 Last Price*                      |      1.24|      1.60|      1.66|      1.95
----------------------------------+----------+----------+----------+----------
 Earnings per share               |    (0.02)|      0.27|      0.17|      0.27
----------------------------------+----------+----------+----------+----------
 Price-earnings ratio             |   (54.66)|      5.83|      9.61|      7.30
----------------------------------+----------+----------+----------+----------
 Book value of a share            |      1.00|      1.13|      1.02|      0.86
----------------------------------+----------+----------+----------+----------
 Market to book ratio             |      1.25|      1.42|      1.63|      2.28
----------------------------------+----------+----------+----------+----------
 Market capitalization, EUR thousand|     5,579|     7,198|     7,468|     8,773
----------------------------------+----------+----------+----------+----------
 Number of shares                 | 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-assets 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 positions

 EUR thousand                        |30.06.2023|31.12.2022|30.06.2022|31.12.2021
-----------------------------------+----------+----------+----------+----------
 Cash and cash equivalents         |         2|         2|       213|        57
-----------------------------------+----------+----------+----------+----------
 Receivables and prepayments (Note |          |          |          |
 2)                                |       717|       559|     1,632|       902
-----------------------------------+----------+----------+----------+----------
 Inventories (Note 3)              |       930|     1,672|       587|       390
-----------------------------------+----------+----------+----------+----------
 Total current assets              |     1,649|     2,233|     2,432|     1,349
-----------------------------------+----------+----------+----------+----------
                                   |          |          |          |
-----------------------------------+----------+----------+----------+----------
 Investment property (Note 4)      |     1,859|     1,859|     1,152|     1,152
-----------------------------------+----------+----------+----------+----------
 Financial assets at fair value    |          |          |          |
 through profit or loss (Note 7)   |       698|       644|       708|       644
-----------------------------------+----------+----------+----------+----------
 Property, plant and equipment     |          |          |          |
 (Note 5)                          |     4,648|     4,670|     4,805|     4,915
-----------------------------------+----------+----------+----------+----------
 Intangible assets (Note 6)        |         2|         2|         3|         3
-----------------------------------+----------+----------+----------+----------
 Total non-current assets          |     7,207|     7,175|     6,668|     6,714
-----------------------------------+----------+----------+----------+----------
                                   |          |          |          |
-----------------------------------+----------+----------+----------+----------
 TOTAL ASSETS                      |     8,856|     9,408|     9,100|     8,063
-----------------------------------+----------+----------+----------+----------
                                   |          |          |          |
-----------------------------------+----------+----------+----------+----------
 Borrowings (Note 8)               |       324|       290|        75|       146
-----------------------------------+----------+----------+----------+----------
 Payables and prepayments (Note 9) |     1,094|     1,014|     1,218|       829
-----------------------------------+----------+----------+----------+----------
 Short-term provisions (Note 10)   |         8|        18|         9|        19
-----------------------------------+----------+----------+----------+----------
 Total current liabilities         |     1,426|     1,322|     1,302|       994
-----------------------------------+----------+----------+----------+----------
                                   |          |          |          |
-----------------------------------+----------+----------+----------+----------
 Long-term borrowings (Note 8)     |     2,684|     2,875|     3,071|     3,074
-----------------------------------+----------+----------+----------+----------
 Long-term payables and prepayments|          |          |          |
 (Note 9)                          |       139|         0|         0|         0
-----------------------------------+----------+----------+----------+----------
 Long-term provisions (Note 10)    |       127|       127|       145|       145
-----------------------------------+----------+----------+----------+----------
 Total non-current liabilities     |     2,950|     3,002|     3,216|     3,219
-----------------------------------+----------+----------+----------+----------
 Total liabilities                 |     4,376|     4,323|     4,518|     4,213
-----------------------------------+----------+----------+----------+----------
                                   |          |          |          |
-----------------------------------+----------+----------+----------+----------
 Share capital (at nominal value)  |          |          |          |
 (Note 11)                         |       450|       450|       450|       450
-----------------------------------+----------+----------+----------+----------
 Statutory reserve capital         |        45|        45|        45|         0
-----------------------------------+----------+----------+----------+----------
 Retained earnings (loss)          |     3,985|     4,589|     4,087|     3,400
-----------------------------------+----------+----------+----------+----------
 Total equity                      |     4,480|     5,084|     4,582|     3,850
-----------------------------------+----------+----------+----------+----------
                                   |          |          |          |
-----------------------------------+----------+----------+----------+----------
 TOTAL LIABILITIES AND EQUITY      |     8,856|     9,408|     9,100|     8,063

*The  notes  to  the  financial  statements  presented  on pages 14 to 25 are an
integral part of these consolidated financial statements.



Consolidated statement of profit or loss and other comprehensive income

  EUR thousand                           | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022
---------------------------------------+---------+---------+---------+---------
  Revenue (Note 13)                    |   2,010 |   3,652 |   4,606 |   6,252
---------------------------------------+---------+---------+---------+---------
  Cost of goods sold (Note 14)         |   1,629 |   2,687 |   4,064 |   4,746
---------------------------------------+---------+---------+---------+---------
  Gross profit                         |     381 |     965 |     542 |   1,506
---------------------------------------+---------+---------+---------+---------
                                       |         |         |         |
---------------------------------------+---------+---------+---------+---------
  Distribution costs (Note 15)         |     171 |     356 |     403 |     641
---------------------------------------+---------+---------+---------+---------
  Administrative expenses (Note 16)    |     133 |     104 |     273 |     226
---------------------------------------+---------+---------+---------+---------
  Other operating expenses (Note 18)   |       8 |       7 |      14 |       8
---------------------------------------+---------+---------+---------+---------
  Operating profit (loss)              |      69 |     498 |   (148) |     631
---------------------------------------+---------+---------+---------+---------
                                       |         |         |         |
---------------------------------------+---------+---------+---------+---------
  Extraordinary expenses               |       0 |       0 |     406 |       0
---------------------------------------+---------+---------+---------+---------
  Finance income (Note 19)             |       0 |     117 |      74 |     169
---------------------------------------+---------+---------+---------+---------
  Finance costs (Note 19)              |      76 |      35 |     124 |      69
---------------------------------------+---------+---------+---------+---------
  PROFIT (LOSS) BEFORE INCOME TAX      |     (7) |     580 |   (604) |     731
---------------------------------------+---------+---------+---------+---------
                                       |         |         |         |
---------------------------------------+---------+---------+---------+---------
  NET PROFIT (LOSS) FOR THE PERIOD     |     (7) |     580 |   (604) |     731
---------------------------------------+---------+---------+---------+---------
                                       |         |         |         |
---------------------------------------+---------+---------+---------+---------
  Basic earnings per share (Note 12)   |  (0.00) |    0.13 |  (0.13) |    0.16
---------------------------------------+---------+---------+---------+---------
  Diluted earnings per share (Note 12) |  (0.00) |    0.13 |  (0.13) |    0.16

*The  notes  to  the  financial  statements  presented  on pages 14 to 25 are an
integral part of these consolidated financial statements.



TORFINN LOSVIK

Chairman of the board
Phone: +372 56 99 0988
[email protected]
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