Annual Report • Mar 24, 2017
Annual Report
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www.tulikivi.com
1
| The year 2016 in brief | 4 |
|---|---|
| Strategic policies | 7 |
| Product groups | 9 |
| Managing Director's review | 12 |
| Performance Improvement Programme | 15 |
| Stone supplies and reserves | 19 |
| Corporate responsibility | 20 |
| Highlights of the year 2016 | 24 |
| Management | 28 |
| Management Group | 30 |
| Corporate Governance Statement 2016 | 32 |
| Salary and remuneration report | 36 |
| Information for shareholders | 38 |
| Annual summary | 39 |
| Tulikivi Corporation's Board of Directors' report | |
| and financial statements for 2016 | 40 |
| Board of Directors' report | 41 |
| Consolidated Financial Statements, IFRS | 44 |
| Financial and share-related key figures | 84 |
| Calculations of Key Ratios | 86 |
| Parent company financial statements, FAS | 87 |
| Tulikivi Corporation's shareholders | |
| and management ownership | 100 |
| Signatures to Board of Directors' report | |
| and financial statements | 101 |
| Auditors' report | 102 |
| Contact information | 104 |
8 Fireplaces 10 Sauna 11 Interior
The Tulikivi Corporation is a stock-exchange listed family business and the world's largest manufacturer of heat-retaining fireplaces. The company has three product groups: Fireplaces, Sauna and Interior.
Tulikivi and its customers value wellbeing, interior design and the benefits of bioenergy. Tulikivi's net sales are approximately EUR 30.5 million (EUR 32.0 million in 2015), of which exports account for about half. Tulikivi employs approximately 200 people.
The companies included in the Group are the parent company Tulikivi Corporation, Tulikivi U.S. Inc. and OOO Tulikivi. Group companies also include Tulikivi GmbH and The New Alberene Stone Company, Inc., which are dormant. AWL-Marmori Oy was merged into the parent company on 7 November 2016.
The formulae for calculating key figures are on page 86.
| 2016 | 2015 | Change, % | |
|---|---|---|---|
| Net Sales, MEUR | 30.5 | 32.0 | -4,6 |
| Operating result, MEUR | -1.4 | -2.9 | 53,5 |
| Result before income tax, MEUR | -2.1 | -3.9 | |
| Return on investments, % | -4.3 | -7.7 | |
| Solvency ratio, % | 33.4 | 36.9 | |
| Earnings per share, EUR | -0.03 | -0.06 | |
| Equity per share, EUR | 0.21 | 0.25 | |
| Payment of dividend on | |||
| A share, EUR | - | - | |
| K share, EUR | - | - |
Net Cash Flow from Operating Activities, MEUR
Investments and Depreciation, MEUR
Share Price of the A Share, Dec. 31, EUR
Tulikivi has three product groups: Fireplaces, Sauna and Interior.
Fireplaces (In USA a Tulikivi is often referred to as Masonry Heater) The Fireplaces product group consists of an extensive range of soapstone and ceramic products: heat-retaining fireplaces, fireplaces with bakeoven, bakeovens, stoves, convection fireplaces, prefabricated fireplaces, Green products, fireplace accessories and stone cladding for fireplaces.
The products emphasise timeless design, convenience, innovative technology and high quality. Product development focuses on clean combustion, which is why most Tulikivi fireplaces already beat the world's toughest emission standards.
Besides the standard models, custom-made fireplaces can also be ordered from Tulikivi to meet the customer's own specific requirements.
The Fireplaces product group also includes the Tulikivi Green products. These pellet, air-heating, water-heating and fireplace control systems are connected to the fireplace and improve the efficiency of its use. They are especially suitable for heating in low-energy and passive buildings.
Tulikivi is the world's largest manufacturer of heat-retaining fireplaces, and in Finland it is the market leader in this sector. The products in the Fireplaces product group are on sale in all of the company's markets in Europe, North America, Russia and Asia. Most customers are building new homes or renovating existing homes, and they value bioenergy as a form of heating and appreciate the economic advantages of wood-based heating. Tulikivi fireplaces appeal to customers because of their eco-friendliness, energy efficiency, aesthetics and durability, and because of the enjoyable heat they produce.
Tulikivi launched production for its Sauna product group in 2011. The main products are electric and woodburning sauna heaters clad with soapstone, other natural stone, ceramic tiles or cast stone, or with a metal finish. Tulikivi also manufactures sauna heaters for smoke saunas and commercial saunas. Thanks to the large stone compartments in Tulikivi's sauna heaters, they always give an enjoyable and gentle sauna experience.
In sauna heaters, Tulikivi's strengths are its careful attention to safety and design. The modern and unique design has gained re cognition e.g. a prestigious Fennia Prize in the international Fennia Prize competition in 2012.
The Sauna products are sold under the Tulikivi brand, and their principal markets are Finland, Russia and Sweden. The Sauna product group accessories include sauna stones, heater lights, glass covers, soapstone interior design products and tiles, and electric sauna heater control units that allow the temperature in the sauna to be regulated to the nearest degree. Tulikivi sauna heaters can also be directly connected to a building automation system.
The main products in the Interior product group are countertops made of different natural or composite stone materials and tiling for different rooms in the home. Tulikivi has an extensive interior stone product collection.
In home construction, natural stone is a genuine and timeless material that is extremely well suited for use in kitchens and bathrooms and for floors, walls and stairs. Each stone product is individual and unique, and natural stone products can be combined almost limitlessly. As an interior design material, natural stone is eco-friendly and fire safe and it also raises the value of the home, because stone wears better than many other surface materials.
Tulikivi also has a large paving stone collection that includes products for path and patio paving, garden borders, wall cladding, stairs and other uses in a garden or yard.
The Interior product group's most important customer segment consists of Finnish fitted kitchen suppliers, with which Tulikivi works very closely. Products are also sold directly to home builders and renovators who appreciate the natural aesthetic quality, eco-friendliness and durability of Tulikivi's interior stone products.
The Interior products are mostly manufactured at Tulikivi's own factory in Espoo, and their principal market is Finland. Soapstone interior design products and countertops are also manufactured for export to various project sites abroad.
Soapstone tiles are Tulikivi's specialty. They are very handy especially for bathroom floors as they are not slippery even when wet. In spaces with floor-heating the heat-retaining capability of soapstone comes to its full potential.
The long-term work continues
In recent years, Tulikivi has worked hard for a turnaround. The company has reduced its debt by EUR 11 million since 2013, when its debt stood at EUR 27 million. During that time, we have invested around EUR 5 million in reorganisation and structural changes. At the same time, the company has invested EUR 3 million in updating its ceramic fireplace collection and new soapstone fireplace collection. The ceramic collection is primarily targeted at Finnish customers with new house-building projects, while the soapstone collection is intended for the export markets. These investments will enable profitable growth in the future.
The Tulikivi Group's net sales in 2016 were EUR 30.5 million (EUR 32.0 million in 2015). Its net sales in Finland increased in the review period and were EUR 15.5 (15.1) million, or 50.9 (47.2) per cent of total net sales. Net sales from exports amounted to EUR 15.0 (16.9) million. However, the market situation in fireplace sales continued to be challenging in Finland compared with the peak years. This was due to the low level of low-rise housing construction, low heating energy prices and consumer uncertainty in purchasing decisions.
In Finland, measures taken to improve cooperation with the home-building industry have led to increased deliveries of fireplaces to the new construction market, despite challenging market conditions. Tulikivi has signed several cooperation agreements on fireplace deliveries to the home-building industry. The renewed ceramic fireplace collection has been positively received. According to a study conducted by RTS Oy, Tulikivi's market share has grown from 21 per cent to 30 per cent.
Tulikivi's customer base now includes nearly all major home-building companies. Its market share has been further increased through closer cooperation with new-home sellers. Despite stronger consumer trust, the Finnish fireplace market has not grown. During the year, we further developed our renovation service and sales concept to increase our market share.
To boost sales in the Helsinki metropolitan area, we have recruited new employees for sales to professionals and consumers. These investments have increased the order intake, particularly in sauna products and interior stone products.
The market situation continued to be relatively weak throughout the year in Germany and France, our main markets in Central Europe. This was reflected in the demand for Tulikivi fireplaces and heater lining stones. Despite the improved economic situation and increased construction activity, there is not yet any clear improvement in sight in the fireplace market. In exports, sales efficiency measures are primarily being targeted at Germany and France. These measures aim to strengthen Tulikivi's position in the sales catalogues of its current dealers and identify new dealers where necessary. The new soapstone fireplace collection was designed in cooperation with our most important clients to meet the design and heating requirements of the market.
Our main export countries were Russia, Sweden, Germany, France and Denmark. In Russia, net sales grew in all product groups year-on-year.
To increase net sales over the long term, Tulikivi continued to expand its network of sales offices in cooperation with its new partners in Poland, Belarus and South Korea. The South Korean market is Tulikivi's point of entry to Asia. We have now opened eight sales offices there. In Asia, consumers are impressed with the Tulikivi brand and soapstone, a valued natural material. In addition to South Korea, we are seeking to expand our distribution network in Japan.
Tulikivi products have been sold in the North American market for 30 years. In recent years, construction activity has increased, with a growing interest in green energy. For this reason, we have renewed our product range, as well as our logistics and marketing operations, with a new person in charge.
With its net sales declining, the company continued to focus on improving its operational efficiency. We succeeded in reducing our fixed costs as planned, by around EUR 1 million compared with 2015.
As a result of the structural efficiency measures implemented in 2016, the company improved its profitability year-on-year. Due to decreased fixed costs and lower depreciation, the company's operating result for the review period improved by EUR 1.5 million compared with the previous year.
Net cash flow from operating activities during the financial year was EUR 2.0 (0.8) million. At the end of 2016, working capital stood at EUR 3.7 (5.5) million. We achieved our target of reducing working capital by EUR 1.0 million in 2016. Loan repayments totalled EUR 1.4 (2.2) million in the financial year. Interest-bearing debt stood at EUR 16.4 (17.8) million at the end of the review period, and net financial expenses in the review period were EUR 0.8 (1.0) million.
The Group's investments totalled EUR 1.3 (1.1) million in the financial year.
Research and development expenditure was EUR 1.0 (1.0) million, or 3.4 (3.1) per cent of net sales. Of this total, EUR 0.5 (0.3) million was capitalised on the balance sheet. In product development, the focus was on developing the new soapstone fireplace collection, making use of the advantages of soapstone as a material
for fireplaces and interior design. In February 2017, the company introduced its new soapstone collection at the Batibouw fair in Belgium. The collection is based on high-quality design and a new type of soapstone surface finish. A surface-finish investment project of around EUR 0.5 million was implemented in conjunction with the new collection.
Further improvement in profitability in 2017 Even though the operating environment is likely to remain challenging in 2017, the company believes that successful sales efficiency measures will prevent its net sales from decreasing further. Profitability is expected to improve in 2017 as a result of structural savings and production efficiency measures. To improve its profitability, the company will continue to enhance its operational efficiency, aiming for savings of EUR 0.5 million in fixed costs in 2017.
The year 2016 required good cooperation in all operations. Our success is evident in our introduction of an excellent soapstone fireplace collection and entirely new type of production technology for processing soapstone. I would like to take this opportunity to thank all of Tulikivi's partners and everyone at Tulikivi for their hard work and flexibility during a challenging year.
Helsinki, March 8, 2017 Heikki Vauhkonen, Managing Director
Low-rise construction activity increased in Europe during 2016. This means that the strong decline that started in 2008 is now over. According to a Euroconstruct study, low-rise construction is expected to increase by around 5 per cent annually within the EU over the next three years. According to an estimate by the Confederation of Finnish Construction Industries, new low-rise construction projects in Finland in 2016 were at the previous year's level. The construction of detached houses is expected to increase by 5–10 per cent in 2017. All of Tulikivi's product groups will benefit from the increase in construction activity.
The EU has set goals for replacing fossil fuels with renewable energy by 2020. They include EU-level goals for the use of wood and pellets. In Finland, wood is the main source of renewable energy.
The cost of energy is a major reason for buying a fireplace in Finland and abroad. The prices of oil, gas and electricity have been unusually low due to the recession. This has affected the development of the fireplace market. In addition to economic trends, tax policies affect the price of energy. Additional taxes, such as electricity tax and tighter taxation of oil heating, could increase the price of energy. Real-time pricing and electricity transmission charges could also increase the price consumers have to pay for energy.
Heat-retaining fireplaces are known for their practicality and great heating capacity in conventional houses. According to a study carried out by VTT Technical Research Centre of Finland in 2014, a heat-retaining fireplace is the best choice for modern low-energy houses, in addition to conventional houses. In both house types, a single heat-retaining fireplace can supply more than 50 per cent of the annual need for heating energy. This is because the fireplace releases heat evenly to the rooms, at a relatively low output. In low-energy houses, room-heating stoves and fireplace inserts generate high momentary heat. Rooms quickly become too hot, and ventilation is needed to remove the excess heat. As of 2018, the annual efficiency of heat-retaining fireplaces can be calculated at 3,000 kWh instead of 2,000 kWh. This will make heat-retaining fireplaces more competitive in comparison to other modes of heating by offering an affordable heating solution also for new houses.
In 2014, the EU determined permitted emission levels for fireplaces, to be implemented in 2022. Tulikivi's export models already meet these requirements. In Finland, the permitted emission levels are already low and will become substantially lower when the new regulations come into effect.
Fireplaces are an important part of Finland's security of supply. The same applies to Europe's security of supply. Fireplaces are the only way to create energy that is independent of other energy sources. They are an important part of crisis preparedness in society in case the availability and distribution of energy are affected.
Shareholders and Management Ownership December 31, 2016
| 10 Major shareholders according to number of shares Shares registered in the name of a nominee are not included. |
K shares | A shares | Proportion, % |
|---|---|---|---|
| 1. Vauhkonen Heikki | 5 809 500 | 1 064 339 | 11.48 |
| 2. Elo Mutual Pension Insurance Company | 4 545 454 | 7.59 | |
| 3. Ilmarinen Mutual Pension Insurance Company | 3 720 562 | 6.21 | |
| 4. Elo Eliisa | 477 500 | 2 631 036 | 5.19 |
| 5. Varma Mutual Pension Insurance Company | 2 813 948 | 4.70 | |
| 6. Toivanen Jouko | 100 000 | 2 431 259 | 4.23 |
| 7. Finnish Cultural Foundation | 100 000 | 2 158 181 | 3.77 |
| 8. Mutanen Susanna | 797 500 | 846 300 | 2.75 |
| 9. Fennia Mutual Insurance Company | 1 515 151 | 2.53 | |
| 10.Nikkola Jarkko | 1 266 440 | 2.12 | |
| 10 Major shareholders according to number of votes Shares registered in the name of a nominee are not included. |
Votes/K shares | Votes/A shares | Proportion, % |
| 1. Vauhkonen Heikki | 58 095 000 | 1 064 339 | 45.86 |
| 2. Mutanen Susanna | 7 975 000 | 846 300 | 6.84 |
| 3. Elo Eliisa | 4 775 000 | 2 631 036 | 5.74 |
| 4. Elo Mutual Pension Insurance Company | 4 545 454 | 3.52 | |
| 5.Vauhkonen Mikko | 3 975 000 | 343 810 | 3.35 |
| 6. Ilmarinen Mutual Pension Insurance Company | 3 720 562 | 2.88 | |
| 7. Toivanen Jouko | 1 000 000 | 2 431 259 | 2.66 |
| 8. Finnish Cultural Foundation | 1 000 000 | 2 158 181 | 2.45 |
| 9. Varma Mutual Pension Insurance Company | 2 813 948 | 2.18 |
The members of the Board and Managing Director control 5 810 000 K shares and 1 557 056 A shares representing 46.24 % of votes.
In accordance with its strategy, Tulikivi Corporation strives to ensure that the company is in possession of the best possible soapstone reserves. The company has been systematically examining soapstone reserves for over 30 years, for example by using the expert services of the Geological Survey of Finland. The aim of examination has been to evaluate current soapstone reserves in greater detail as well as to seek new soapstone reserves.
Tulikivi Corporation's stone supplies and reserves total over 8 million m3. Examined and evaluated deposits are located at Nunnanlahti, Kuhmo, Paltamo and Suomussalmi. The company has in total eight valid mining patents: two at Suomussalmi, one at Kuhmo, one at Paltamo and four at Juuka. The total area of the mining patents is 340 ha. Soapstone is currently quarried and products are manufactured at Nunnanlahti and Suomussalmi. In 2016, the examination of deposits focused on Nunnanlahti. Examination of potential deposits and further work on current deposits will continue in 2017.
In geographic terms quarrying is limited to small areas in comparison with, for example, clear cutting of forest resources. A total of approximately from 70 000 to 100 000 cubic metres of soapstone is annually quarried from the company's quarries. Approximately from 15000 to 20 000 cubic metres of quarried soapstone is delivered to three soapstone factories. Adjoining rock, which is not part of the deposits, is quarried annually just under from 50 000 to 70 000 cubic metres. Soil needs also to be moved when excavating quarries in order to access the deposits, from time to time. When a quarry is closed, the area will be made safe and the quarry's stacking area will be landscaped.
In accordance with Tulikivi's environmental strategy, sparing use of natural resources is considered important. The overall yield of raw material is improved through development of the production technologies and product development as well as taking account of the properties of raw material. Tulikivi's strategic objective is to ensure sufficient raw material reserves for decades to come.
Soapstone is extracted by sawing. The extraction does not require chemical treatment, and no chemicals are used in the quarrying. The saws used in the quarrying run on electricity and do not require cooling water.
Only rapeseed oil is used for lubricating the blades. The rainwater entering the quarry is pumped into sedimentation pools through measurement pits. Water samples are taken three times a year in order to monitor the environmental impact of the quarrying operation. Watering is used to prevent the dust from spreading. The noise from the extraction is mainly sawing and machine noise. The noise levels emitted from quarrying are within the permitted limits. In the quarrying work, the explosion breaking of adjoining rock takes place once a week, on average.
Quarrying process accords with environmental and mining permits The principal goals of Tulikivi's operations are as follows: a safe and healthy working environment, the sparing use of natural resources and the management of quarrying and production processes that minimizes adverse environmental effects. Tulikivi takes environmental considerations into account in its procurement of raw materials, in production and in the end products. Tulikivi monitors the environmental effects of its operations in accordance with officially approved monitoring programmes. Tulikivi has permits for its entire production and for the storage and use of blasting materials, granted by the environmental and mining authorities.
Tulikivi's operations are guided by the company's values. Accordingly, it complies with the relevant legislation and regulations in all its activities and operates responsibly towards society at large, the environment and the company's stakeholders. The most important stakeholders for Tulikivi are its customers, personnel, shareholders, finance providers and other cooperation partners, both
in Finland and abroad.
The aim of environmental work is to improve the company's ability to use natural resources sparingly, and to manage processes and products in a way that minimises their impact on the environment. The safety and quality of products and operations are defined in the company's quality, environmental, occupational health and occupational safety policies. Tulikivi has been granted an ISO 9001 quality certificate. Work on environmental and safety matters is continuously being developed in accordance with the ISO 14001 and OHSAS 18001 standards.
Tulikivi carries out long-term product development in order to ensure and enhance the environmentally friendly aspects of its products. The products must be as durable and safe as possible and their environmental
impact must be minimised at all stages of their
life cycle. The aims of Tulikivi's research and development work include the provision of reliable information on the environmental impacts of its products in production and use, and the improvement of eco-efficiency and material efficiency. To improve material efficiency, Tulikivi utilizes waste materials from other parts of the ceramics industry as a raw material for its ceramic fireplaces. The materials and components used in the products are tested regularly and the products must pass type approval tests. Tulikivi's soapstone has been approved as a material that can come into contact with food, for
example. We strive to increase our suppliers awareness of their environmental responsibilities and to act in accordance with the principles of sustainable development.
Material choices, energy consumption and modes of transport together account for a significant proportion of the environmental impact of our products in the production chain. Using bioenergy-fuelled fireplaces as a heating source instead of electricity helps to cut the CO2 emissions of energy generation, thus offsetting the carbon footprint of fireplace production. Tulikivi's fireplaces already beat the world's strictest emissions standards (BimSchV), and the company is continuing its research into even cleaner combustion.
All of Tulikivi Corporation's operational quarries and production plants have valid mining and environmental permits. Tulikivi monitors the environmental impact of quarrying and complies with the officially approved supervision programmes. Operating principles have been drawn up for the quarries, and these require regular analysis of operating risks, taking into account both safety and environmental considerations. Landscaping is carried out as part of normal quarrying operations and at quarries that have ceased operating.
The raw materials used at the production plants include soapstone, natural stone and ceramic material. No substances that are hazardous to the environment are used in the processing of soapstone, and none are produced in the manufacturing process. The production plants use closed process water circulation. Tulikivi has identified energy efficiency improvement and further development of waste management as areas of its operations that require development input. Improvements in energy efficiency are being made in accordance with the energy efficiency agreement of the Confederation of Finnish Industries (EK). The purpose of the agreement is to meet Finland's international commitments in mitigating climate change, based on the national energy and climate strategy. Tulikivi is committed to the measures set out in the energy efficiency agreement's action programme for 2008–2016. The agreement aims to increase the efficiency of corporate energy use by at least 9 per cent, and to continuously improve energy efficiency and promote renewable energy sources. Waste management is being developed at all of Tulikivi's sites by adopting a waste sorting system, aiming to reduce the amount of andfill waste and to reuse as much waste as possible for energy production and other purposes. Recyclable waste (e.g. board and paper) goes for recycling via normal waste management. Tulikivi has joined the Environmental Register of Packaging PYR Ltd and is a member of SELT ry (Electrical and Electronic Equipment Producers' Association)..
Tulikivi's operations affect many stakeholders: customers, suppliers, service providers, employees, investors and the public sector. The direct financial impact of Tulikivi's operations on stakeholders comprised the following in 2016. Customers generated a total of EUR 30.5 million (32.0) in net sales. This consisted of Tulikivi and Kermansavi fireplaces, natural stone products, sauna heaters and product-related services sold to customers. Tulikivi paid EUR 6.3 million (7.3) to suppliers of goods and semi-finished products and EUR 12.0 million (12.7) to service providers. In addition, the company paid EUR 0.3 million (0.3) for machinery and equipment. Employees' investments depreciation Share Price of the A Share, Dec. 31, EUR 2012 2013 2014 2015 2016 1.1 1.3 2012 2013 2014 2015 2016 0.20 0.17 0.21 0.57 0.34 8.4% 91.6% Net Sales per Business Area, % Fireplaces Interior Stone Products
salaries and bonuses totalled EUR 8.9 million (9.4), and the related pension and other insurance contributions were EUR 2.0 million (2.2). The effect of the restructuring provision has been accounted for in the figures for the period. Finance providers were paid EUR 0.8 million (1.0) net in interest and other financial expenses. Shareholders were paid no dividends for 2016 or for 2015. 0.02 0.0 -0.02 -0.04 -0.06 -0.08 -0.06 -0.02 -0.09 -0.10 -0.04 Formation of Carbon Footprint in Tulikivi's Own Production
Tulikivi is a responsible employer and its products are safe, expertly prepared. Employee's commitment to work and good craftsmanship ensure the quality of products. Success of the turnkey delivery is guaranteed Gearing, % 125 (calculated 2010) British Standard PAS 2050 Transportations Materials
Formation of Carbon Footprint in Tulikivi's Own Production Net Sales
(calculated 2010) British Standard PAS 2050
6 0.17 0.16 0.20 0.20 0.18 0.19 0.19 The carbon equivalent was calculated per a kilo of soapstone; the result is 0.612 CO2 eqv kg/kg.
by specialized oven champion, installer and sales network. 0.80 100 89.8
Tulikivi Group's average personnel was 209 (219 in 2015) employees. The average number of employees is calculated in full time equivalent. The number of personnel was adjusted to meet sales development mainly by temporary lay-offs. Few employees have been currently laid off. 0.60 0.50 0.30 0.20 -0.03 0.49 0.35 0.30 2012 2013 2015 2016 75 50 25 0 59.3 2014
Training of employees was focused on the controlling current situation. This includes related knowledge requirements in legislation or other regulation as well as occupational safety training. Sales network was targeted training on technical sales and sales training. In addition, training was provided for utilizing web network in sales and customer service, as well as data protection matters. One person was trained for work study. All employees attended in a meeting and a lecture on the development of the work community. Learning by doing is still the most important way of learning in the company. Apprenticeship training is used increasingly. Two people completed the training during the financial year and at the end of the year four people were under training, including one clerical worker and three blue collar workers. 0 Monthly Development of the 2012 2013 2015 2016 2012 2013 2015 2016 2014 125.0 Monthly Development of the Average Price of the A share, EUR 8 6 4 2 0 0.0 1 2 3 4 5 6 7 8 9 10 11 12 0.17 0.16 0.20 0.20 0.18 0.19 0.22 0.21 0.25 0.19
Professional skills of oven champions, installers and sales network is maintained through annual training on topical issues. 2.0 0.21 0.21 6.19
Development projects will effect on a number of operational activities when completed. In 2016 development projects focused on product development. The company is currently in process a large-scale product development program, which will renew soapstone collection during the years 2017-2019. To the collection will be brought new features, such as cooking (inside grilling) possibility, targeted heat transfer feature and a modern control and measurement system. First part of the collection will be launched in February 2017. In addition, Tulikivi focuses on complementing sauna products with products related to new sauna stove and other sauna and sauna taking. During the year 2016 a new electric wall heater range was launched. Product development personnel has been, and is far into the future engaged primarily on the completion of these projects. In addition, the projects have resulted a large scale machinery investment in Juuka factory in 2017. Monthly Development of the Average Price of the A share, EUR 1.5 2.0 2.5 2012 2013 2015 2016 113.4 125.0 2014 89.8 0.19 0.22 0.21 0.25
The development of IT systems focused on further development of e-commerce (B2B). Tightening IT security was another major project. 0 0.0 0.5 1 2 3 4 5 6 7 8 9 10 11 12
Focus in the occupational health care is on preventive actions, but also the basic level of health care is included in the occupational health care. In accordance with the model of
early support discussions for functional capacity takes place regularly in cases sickness absences amounts to 40 hours and after on 12-month follow-up period. Workplace surveys have been carried out in various locations in collaboration with the occupational health care and Finnish Institute of Occupational Health. Wellbeing of the employees was studied with a research undertaken with the insurance company. Based on the results, it was noted same level of satisfaction as in the industrial sector in general.
In 2016 new initiatives were made 80 (62) pieces. The accident frequency rate was 27 (24) accidents per million working hours. Monthly Development of the Trading Volume of A share, %
Tulikivi Corporation is a member of numerous organisations and forums, including Finland Chamber of Commerce, the Finnish Natural Stone Association, Glass and Ceramic Industry Federation (of Finland), the Central Association of Chimney Sweeps, the Finnish Family Firms Association, Confederation of Finnish Construction Industries, the Finnish Society of Indoor Air Quality and Climate, the Association for Finnish Work, the Federation of Finnish Enterprises, the Fireplace and Chimney Association TSY, TTS – 1 2 3 4 5 6 7 8 9 10 11 12 1.09 0.91 0.81 2.40 1.76 3.78 1.35 2.20
GenderDistribution of Personnel,Dec.31,2016
Työtehoseura (Work Efficiency Institute). Personnel per Segments Average During the
Age Distribution of Personnel, Dec. 31, 2016
Highlights of 2016
Tulikivi made an impression at the Progetto Fuoco exhibition in Verona, Italy. The company displayed an extensive range of fireplaces, with live fires burning in some of them. In addition, Tulikivi introduced three-dimensional fireplace surfaces created using a water machining tool. The new surface finish gives soapstone an entirely new appearance while also highlighting its natural sparkle. The new products received praise from dealers and end customers alike.
Three-dimensional haptic surfaces are increasingly popular in design. Tulikivi introduced a surface finish that gives soapstone a pleasant, fascinating feel. The Grafia finish will initially be available for three heatretaining fireplaces: Vasa Grafia, Valkia Grafia and Sarmi Grafia. Heat-retaining fireplaces release heat for a long time, up to 24 hours after 2 hours of heating. The new fireplaces were introduced at the Housing Fair Finland event.
"Natural soapstone has a smooth, matte feel. The Grafia surface finish adds a new type of texture and roughness to the soapstone surface, which is just like the surface of a rock. The method brings out the colour differences in the grey stone beautifully," says Markku Prättälä, Sales Manager at Tulikivi.
Tulikivi has broad and varied experience in processing soapstone, as the largest soapstone reserves in Finland are located in Juuka, the region where the company is based. Soapstone is easy to process because of its high talc content, lending itself to patterns and ribbing that appeal to the senses of touch and sight.
"We presented the new surface finish at the Progetto Fuoco exhibition in Verona in February, and it met with great enthusiasm. International interest in the new, multidimensional soapstone surface has been substantial. The trends are favouring soapstone, so it may well soar in popularity in the same manner as marble," says Prättälä.
The annual Housing Fair Finland event was held in Seinäjoki from 8 July to 7 August 2016.
Tulikivi was the main partner of the event, and its products were displayed on multiple sites, in addition to its own exhibition department. The exhibition area was located by Kyrkösjärvi, an artificial lake, with a total of 43 exhibition sites. The Tulikivi department was located near the Tulikivimylly area, which had a total of 15 sites.
Tulikivi's ceramic fireplaces and electric sauna heaters were extensively displayed on the exhibition sites. Nearly half of the 35 low-rise houses built for the exhibition featured one or more Tulikivi products. In our own department, the Valkia Grafia fireplace was particularly popular, with its sparkling surface pattern made using a water machining tool. New products also included the redesigned Nuoska electric sauna heater and Routa, our first wall-mounted heater.
Our department was located near the main route in the Ahead section, which was dedicated to design. We attracted a large number of visitors. The popularity of the Tulikivi brand was also reflected in the large number of journalists and bloggers who attended our media briefing. The visitors were particularly impressed with the new surface of the Valkia Grafia fireplace. Nuoska and Routa, our new sauna heaters, were praised for their beautiful design. Examples of our wide selection of stone countertops, as well as mosaic and stone tiles, were highlighted more visibly than before.
Tulikivi introduced its first wall-mounted electric sauna heater at the Housing Fair Finland event in 2016.
Its insightful design saves space in the sauna. Its small safety distances enable the sauna benches to be installed near the narrow electric heater, which is shaped like a superellipse. This makes it suitable even for smaller saunas. The heating elements are installed in a manner that allows for a large stone compartment, despite the small external dimensions of the heater. The heater is clad with horizontally ribbed soapstone, which retains heat and releases it over a long period of time, ensuring an enjoyably soft and humid sauna experience. The heat-retaining soapstone cladding also dries the sauna facilities afterwards, which keeps the benches and other wooden elements in good condition.
The ceramic Nuoska electric sauna heater was given a more streamlined appearance:
the soapstone tiles were replaced with a ceramic surface cladding that has no vertical joints. Its beautiful matte surface is even more harmonious than before. Nuoska comes in two colours: white and black. This electric sauna heater won the Fennia Prize in 2012. It creates a luxurious spa atmosphere in the sauna. The heater can be integrated into the sauna benches by recessing its lower part into the bench structure.
The Nuoska sauna heater comes with a ceramic temperature sensor that can be installed on a wall or the ceiling. The sensor enables the sauna temperature to be controlled precisely. Its electronic components allow the temperature of the stone compartment and the sauna room to be adjusted to the nearest degree. This precise control reduces the energy consumption of the heater by up to 30 per cent. The Nuoska sauna heater can be connected directly to a KNX building automation system, without a separate control unit. In apartments that do not have a KNX building automation system, the sauna heater can be controlled using a Tulikivi Touch Screen unit.
Tulikivi cooperates with all major suppliers of prefabricated houses.
Today, more than half of all new detached houses are delivered as turnkey projects. The manufacturers of prefabricated houses offer fireplaces as part of the delivery. Tulikivi has participated in the development of the ValmisTuli solution, which includes the turnkey delivery of a fireplace and a flue. Their onsite installation takes 2–4 hours, which significantly improves the efficiency of the delivery of prefabricated houses. Tulikivi is the only company offering a heat-retaining fireplace as a turnkey solution. This rapid operating method is ideal for modern construction and also accelerates project implementation. The number of turnkey fireplace deliveries to the home-building industry increased significantly in 2016.
Tulikivi Corporation share ownership: Series A shares: 159 453 pieces
LL.M, MBA, Attorney at Law. Member of the Board of Directors of Tulikivi Corporation since 2015. Chairman of the Board since April 13, 2015.
Reijo Svanborg (b. 1943) M. Sc. (Eng.) Member of the Board of Directors
Other key positions of trust: Member of the Board of Directors of PKC Group Oy 1999-2016. of Tulikivi Corporation since 2015,Member of the Audit Committee since 2015.
Primary work experience: Borenius Attorneys Ltd. : President and CEO 1997-2008, Partner since 1991, and prior to this, has worked as a lawyer for other law firms and for the City of Helsinki since 1983. Other key positions of trust: Member of the Boards of Directors of Hakaniemen Metalli Oy/ High Metal Production Ltd., Enero Ltd and Finndomo Ltd.
Tulikivi Corporation share ownership:
Series A shares: 42 553 pieces
M.Sc. (Econ. & Bus.Admin.).Member of the Board of Directors of Tulikivi Corporation since 2009, Member of the Audit Committee since 2009.
Other key positions of trust: Member of the Boards of Directors of Goodwiller Ltd., Mikrobioni Ltd. and Potwell Ltd. Shareholder/partner at Boardman Ltd.
Primary work experience: Järvi-Suomen Portti Ltd: Managing Director 2008-2011, Karelia-Upofloor Ltd: Managing Director 2006-2007, Savon Voima Plc: Managing Director 2004- 2006, Olvi Plc: Managing Director 1985 -2004, CFO 1983-1985 , IS-Yhtymä Ltd: CFO 1977- 1982, part-time authorized public accountant in
a number of companies 1984-2003.
Primary work experience: Finndomo Ltd: Managing Director 2001-2007, Tulikivi Corporation: Managing Director 1997-2001, Tebelmkt/Tetra Pak Tebel N.B.V: Managing Director 1990-1996, Oy Hackman Ab: Strategy Director 1989-1990, Hackman Catertec Oy: Managing Director 1983-1989.
Series A share 196 208 pieces
LLB, BBA, Member of the Board of Directors of Tulikivi Corporation since 2001, Managing Director April 2007 – April 2013, Chairman of the Board April 16, 2013- August 22, 2013, Managing Director since August 23, 2013. Member of the Management Group since 2001. Has worked for Tulikivi since 1997.
Other key positions of trust: Member of the Board of Directors of Tulikivi Corporation since 2001, Member of the Superivisory Board of Fennia since 2011, Member of the Board of Directors of Suomen Lähienergialiitto ry since 2015, Member of the Board of Directors of Rakennusteollisuus RTT ry since 2012, Chairman of the Board of Directors of the Finnish Stone Research Foundation since 2015.
Primary work experience: Tulikivi Corporation: Managing Director August since 2013, Chairman of the Tulikivi Board of Directors April 2013- August 2013, Managing Director 2007- April 2013, Marketing Director 2002-2007, Tulikivi U.S., Inc.: Vice President 1997-2001.
Series A shares 1 064 339 pieces Series K shares 5 809 500 pieces
Professor, D.Sc. (Econ.), DA, M.Sc. (Tech). Member of the Board of Tulikivi Corporation since 2016.
Other key positions of trust: Member of the Boards of Are (since 2016), HOK-Elanto (since 2014) and MARK Finnish Marketing Federation (since 2012). Vice Chairman of the Board of TEN (Ethics Council of Market Research Industry.
Tulikivi Corporation share ownership: No shareholding
Tulikivi's Board of Directors from left to right:
Jyrki Tähtinen, Markku Rönkkö, Reijo Svanborg, Heikki Vauhkonen and Jaakko Aspara.
LLB, BBA, Member of the Board of Directors of Tulikivi Corporation since 2001, Managing Director April 2007 – April 2013, Chairman of the Board April 16, 2013- August 22, 2013, Managing Director since August 23, 2013. Member of the Management Group since 2001. Has worked for Tulikivi since 1997.
Other key positions of trust: Member of the Board of Directors of Tulikivi Corporation since 2001, Member of the Supervisory Board of Fennia since 2011, Member of the Board of Directors of Suomen Lähienergialiitto ry since 2015, Member of the Board of Directors of Rakennusteollisuus RTT ry since 2012, Chairman of the Board of Directors of the Finnish Stone Research Foundation since 2015.
Primary work experience: Tulikivi Corporation: Managing Director August since 2013, Chairman of the Tulikivi Board of Directors April 2013- August 2013, Managing Director 2007- April 2013, Marketing Director 2002-2007, Tulikivi U.S., Inc.: Vice President 1997-2001.
Series A shares 1 123 090 pieces Series K shares 5 809 500 pieces
BBa & Ba (Hons.) Marketing Manager. Member of the Management Group since 2015. Has worked for Tulikivi since 2012.
Primary work experience: Tulikivi Corporation: Marketing Manager since 2013, Digital Marketing Planner 2012-2013, Aplicom Oy: Marketing communications coordinator 2005- 2012, Iittala Group: Project Manager 2004, Communications Assistant 2003-2004, Personal Assistant to CEO 2002-2003.
Other key positions of trust: Member of the board of Directors Silvast Creative 2016-
M.Sc. (Econ.) Manager of Soapstone Production and Quarrying. Member of the Management Group since 2015. Has worked for Tulikivi since 2008.
Primary work experience: Manager of Soapstone Production and Quarrying since 2015, Production Control Specialist 2014-2015, Accounting and Information System Specialist 2011-2013, Accounting Consultant (entrepreneur)
Automation technician. Sales Director, Finland. Member of the Management Group since 2015. Has worked for Tulikivi since 2006.
Primary work experience: Tulikivi Corporation: Sales Director, Finland since 2015, Sales Manager 2013-2015, Factory and Product Manager 2009-2013, Sales Manager/Kermansavi-fireplaces 2006-2008, Kermansavi Oy: Sales Manager 2004-2006, Varkauden Educa: Managing Director 2003
Tulikivi Corporation share ownership: Series A shares 15 525 pieces
M.Sc (Eng.) Sales Director, Germany and lining stones. Member of the Management Group since 2015. Has worked for Tulikivi 1999-2005 and since 2008.
Primary work experience: Tulikivi Corporation: Sales Director, Germany and lining stones since 2015, Director, saunas and design fireplaces 2011-2014, Business Development Manager 2009-2011, Product Manager 2008-2009, Kesla Oyj: Sales Manager 2006-2008, Tulikivi Corporation: Product Manager 2003-2006, Kiantastone Oy: Marketing Manager 1999-2002, Halton Oy: product development engineer 1996-1999, Enerpac Oy: Sales Engineer 1992-1996.
Series A shares 15 000 pieces
D.Sc.(Tech.) M.Sc. (Eng.). Product Development Manager. Member of the Management Group since 2015. Has worked for Tulikivi since 2005.
Positions of trust: Member of the Varparanta
water cooperative 2007-2016.
Primary work experience: Tulikivi Corporation: Product Development Manager since 2009, Laboratory Manager 2005-2009, IVO Consulting/Fortum Engineering /Enprima Engineering Ltd, research engineer, product manager, Engineering Consultant 1998-2005, Tampere University of Technology: researcher 1990-1998.
D.Sc. (Tech.), M.Sc. (Eng.). Director of Finance and Administration. Member of the Management Group Group since 1995. Has worked for Tulikivi since 1993.
Positions of trust: Member of the Board of Directors of the Finnish Natural Stone Association.
Primary work experience: Tulikivi Corporation: Director of Finance and Administration since 2013, Director, lining and interior decoration stone products 2011-2013, Director of Natural Stone Products Business 2003-2011, Financial Director 2001-2007, Director of operational accounting and management systems 1999-2001, Financial Manager 1997-1999, Accounting Manager 1995-1997,
Series K shares 100 000 pieces Series A shares 2 431 259 pieces
The administration of Tulikivi Corporation and its subsidiaries is based on the law, the Articles of Association and the Finnish Corporate Governance Code, which entered into force on 1 January 2016. The company complies with the NASDAQ OMX Helsinki Guidelines for Insiders. This Corporate Governance Statement has been prepared in accordance with Recommendation 54 of the Finnish Corporate Governance Code and Chapter 2(6)(3) of the Finnish Securities Markets Act. The Corporate Governance Statement is published separately from the Board of Directors' report and is available on the company's website and in the Annual Report. The Corporate Governance Code is publicly available on the Securities Market Association website at www.cgfinland.fi/en/.
Tulikivi Corporation prepares its consolidated financial statements and interim reports in accordance with the International Financial
Reporting Standards (IFRS) adopted by the EU. In communications, the Group complies with the Securities Markets Act, the applicable standards
of the Financial Supervisory Authority and NASDAQ OMX Helsinki's regulations. The Board of Directors' Report and the parent company's financial statements are prepared in accordance
with the Finnish Accounting Act and the instructions and statements of the Finnish Accountancy Board.
The companies in the Group are the parent company Tulikivi Corporation, Tulikivi U.S. Inc. and OOO Tulikivi. Group companies also include Tulikivi GmbH and The New Alberene Stone Company, Inc., which are dormant.
The Board of Directors, which is elected by the Annual General Meeting, the Board committees, the Managing Director and the Management
Group, which assists the Managing Director, are responsible for the Tulikivi Group's administration and operations.
The Board of Directors is responsible for the company's administration and the due organisation of operations. The Board of Directors is composed of no fewer than five and no more than seven members. The Annual General Meeting elects the members of the Board for one year at a time. The Board of Directors elects a chairman from among its members. The Board of Directors of The Group's parent company decides on the composition of the subsidiaries' Boards of Directors.
Composition of the Board of Directors
Tulikivi Corporation's Annual General Meeting of 20 April 2016 decided that the Board shall have five members.
Jaakko Aspara, Markku Rönkkö, Reijo Svanborg and Jyrki Tähtinen are Board members who are independent of the company.
The current composition of the Board deviates from the recommendations of the Finnish Corporate Governance Code. The reasons for this include sector-specific expertise and the small size of the Board.
During 1 January–20 April 2016 the members of the Board of Directors were Jyrki Tähtinen, Markku Rönkkö, Reijo Svanborg, Heikki Vauhkonen and Reijo Vauhkonen.
Pursuant to the Limited Liability Companies Act, the Board of Directors must see to the administration of the company and the appropriate organisation of its operations. The Board of Directors is responsible for the appropriate arrangement of the control of the company accounts and finances. The Board di-rects and supervises the company's operational management; appoints and dismisses the Managing Director; approves the company's strategic objectives, budget, total investments and their allocation, and the reward systems employed; decides on agreements that are of far-reaching consequence and the principles of risk management; ensures that the management system is operational; confirms the company's vision, values to be complied with in operations and organisational model; approves and pub-lishes the interim reports, annual report and financial statements; and determines the company's divi-dend policy and summons the General Meeting. It is the duty of the Board of Directors to promote the best interests of the company and all of its shareholders.
rate of the Board members in these meetings was 100 per cent. The attendance of each member at the meetings is shown in the table
below.
The Board of Directors has two committees: the Nomination Committee and the Audit Committee. The Board of Directors appoints the members and Chairmen of the committees.
The Nomination Committee was composed of Jyrki Tähtinen (Chairman), Markku Rönkkö (member) and Heikki Vauhkonen (member). The duties of the Nomination Committee include the preparatory work for proposals for the election of directors to be presented to the General Meeting, the preparation of matters relating to the compensation of members of the Board of Directors and succession planning for members of the Board of Directors. The Nomination Committee met twice in 2016.
The members of the Nomination Committee: •Jyrki Tähtinen, born 1961. LL.M., MBA, attorney-at-law. Chairman. Board membership in several companies.
•Markku Rönkkö, born 1951. M.Sc. (Econ. & Bus. Admin.). Board membership in several companies.
•Heikki Vauhkonen, born 1970. LL.B. and B.B.A. (Econ. & Bus. Admin.). Managing Director of Tulikivi Corporation.
The Audit Committee was composed of Markku Rönkkö (Chairman), Reijo Svanborg (member) and Heikki Vauhkonen (member) The Audit Committee's task is to assist and expedite the work of the Board by dealing with issues associated with the company's financial reporting
and control and ensuring communication with the auditors. The Audit Committee met 4 times in In 2016, the company's Board of Directors convened 12 times. The average participation
Tulikivi Corporation's Managing Director is Heikki Vauhkonen. Pursuant to the Limited Liability Companies Act, the Managing Director sees to the executive management of the company in accordance with the instructions and orders provided by the Board of Directors. The Managing Director must ensure that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. The Managing Director must supply the Board of Directors and its members with the information necessary for the performance of the Board's duties. The Managing Director may undertake measures that are unusual or extensive in view of the scope and nature of the activities of the company only if so authorised by the Board of Directors or if it is not possible to wait for a decision of the Board of Directors without causing essential harm to the business operations of the company. In the latter case, the Board of Directors must be notified of the measures as soon as possible.
The Managing Director is responsible for operational management, the implementation of
In operational management and planning, the Management Director has been assisted by the Management Group, the members of which are as follows, in addition to the Managing Director himself: Jouko Toivanen, Director of Finance and Administration, Markku Prättälä, Sales Director, Finland, Saskia Kerkkänen, Marketing Manager, Martti Purtola, Sales Director, Germany and Sales Manager, Lining Stones, Jari Sutinen, Product Development Manager and Simo Kortelainen, Production Manager, Soapstone Business and Quarrying, Juuka. The Management Group met 46 times in 2016.
Description of the main characteristics of the internal control and risk management systems associated with the financial reporting process
The Tulikivi Group specialises in fireplaces, sauna heaters and interior stone products that
| Jan.1-Dec. 31, 2016 | Board meetings |
Audit Committee |
Nomination Board |
|
|---|---|---|---|---|
| Jyrki Tähtinen | 12/12 | |||
| Jaakko Aspara (from 20.4.) | 10/10 | |||
| Markku Rönkkö | 12/12 | 4/4 | 2/2 | |
| Reijo Svanborg | 12/12 | 4/4 | ||
| Heikki Vauhkonen | 12/12 | 4/4 | 2/2 | |
| Reijo Vauhkonen (until 20.4) | 2/2 |
are of a high quality and made from natural materials. Our customers appreciate the environmentally friendly and aesthetically pleasing nature of our products, the comfort created by these products and the benefits of wood heating. Tulikivi is a versatile company that appreciates its customers, entrepreneurship and fair play.
Engaging in mining activities requires the forming of a mining concession and an environmental permit. Mining operations are regulated by the Mining Act and environmental legislation. The director in charge of quarrying is responsible for ensuring that mining permits are valid and up to date.
Tulikivi's environmental strategy is geared towards systematic progress in environmental efforts in specified sub-areas. The aim of environmental work is to improve the company's ability to use natural resources sparingly and to manage processes and products in a way that minimises their environmental loading. The Group complies with the environmental legislation and norms that concern its operations, and, through the continuous improvement of Tulkivi's operations, it engages in preventive environmen-tal work. The Group acknowledges and is aware of its responsibility as an environmental operator.
Planning and monitoring processes
The Group plans its operations and ensures the efficiency of the operations during its annual strategy planning and budgeting process. The implementation of the plans and changes in the operating environment are monitored through monthly, quarterly and annual reporting.
In the Tulikivi Group, risk analysis and risk management form part of the regular strategic planning process performed each year and also part of the operational management. The purpose of internal control and risk management is to ensure that all operations are efficient and profitable, based on reliable information and compliant with provisions and operating policies.
Based on organisational structure and job descriptions, powers and responsibilities are delegated to persons with budgetary responsibility and to those in charge within in the line organisation. Compliance with laws and regulations is ensured through the operational handbook and other internal guidelines.
In 2016, the focus of operations was on optimising the use of information systems and improving the quality of reporting. The enterprise resources planning system contains the
necessary internal control mechanisms. Internal control is performed by the parties mentioned above, using external specialists when needed. In 2016 In 2016, auditing focused on the organisation and reporting of internal control, sales functions, controls regarding the purchasing process and payment transactions, and inventories and assets. In view of the Group's size and the nature of its activities, it has not been deemed necessary to appoint an internal auditor. The Board may choose to use an external expert in certain fields.
Risk management is part of the company's control system. The purpose of risk management is to ensure that business risks are identified and constantly monitored and evaluated as part of normal business operations.
The purpose of risk management is to ensure that the Tulikivi Group's business risks are identified and managed as effectively as possible. This allows the Group to achieve its strategic and financial goals. All goals have been assigned risk limits. If these risk limits are exceeded, or if other divergences from operating plans so require, the person in charge will initiate enhanced risk
Internal control is a part of the planning and monitoring process.
management procedures. Regular reporting indicates when financial risk limits have been exceeded.
In accordance with the reporting system, the Managing Director reports monthly to the Board of Directors on the operations and performance of the Group and its various business units and on any divergence from the budget and adjusted projections. The Managing Director also reports quarterly to the Board of Directors on the operating profit based on the interim reports or annual financial state-ments. The Managing Director must also report immediately on fundamental changes in the operating environment. The relevant persons in charge report according to the internal reporting system. The parent company's Director of Finance and Administration is responsible for Group-level reporting. The parent company's financial department handles accounts and group-level accounting for domestic companies. The accounts and reporting of foreign subsidiaries are handled locally, using qualified ac-counting firms or external experts. The parent company's auditors compare the contents of the Russian subsidiary's Russian reporting with the financial reporting delivered to the parent company for the consolidated financial statements.
Financial reporting guidelines, competence development, reliable information systems, standard control mechanisms and expanded audits ensure accuracy in reporting. Any reported divergences from the budget and operating plans call for closer analysis to find the underlying causes.
The Director of Finance and Administration and the auditors monitor the accuracy of financial reporting. Periodic information system evaluations also serve this purpose. The Group seeks to ensure operational compliance with laws and regulations by using external experts and services.
To ensure the effectiveness of financial reporting, the Tulikivi Group has guidelines that all units must comply with. Organisational competence is ensured through briefings and training. Accounting
| Risk analysis and prioritization |
- identifying risks at the group level and in different areas of responsibility - evaluating the effects and probability of risks - determining risk limits for set goals - determining control points - identifying risks related to reporting |
|---|---|
| Risk management | - establishing risk management procedures - assigning responsible persons for different procedures - setting a time frame for implementation - establishing procedures for monitoring implementation |
| Risk management process control |
- responsible persons report to the Managing Director on risk materialization, implemented measures and their effectiveness - risk evaluations related to controls |
| Risk management process continuity |
- measures implemented during a reporting period, as well as foreseeable changes in the business environment, will affect the plans and risk management measures for the subsequent period - risk identification requires continuous collection of background information |
schedules and any changes to accounting policies and laws are reviewed in preparatory meetings related to annual financial statements. The Audit Committee evaluates the functionality of the financial reporting system quarterly on the basis of performance analyses of profit outlooks governance and separately on the basis of audit reports. In financial reporting, continuous monitoring measures include comparing goals with actual results, implementing reconciliations and monitoring the regularity of operational reports.
and assessment of the reporting accuracy. The evalua-tion also includes studying the risks associated with malpractice and illegal activity. The auditors audit the contents of the deviation reporting during the extended audit. The The Board of Directors' annual plan includes planning and monitoring meetings. The Group's information systems are largely well-established, and external experts regularly evaluate their reliability.
Management Group members monitor the
accuracy of result reporting on a monthly basis and, within their respective areas of responsibility evaluate the reasons for any deviation. insider administration
The guidelines for reporting and accounting principles are provided to all financial personnel and those who produce information and auditing results for the financial system. The Managing Director reports any defects observed in the field of internal control, including the accuracy of reporting, to the Audit Committee. In its meetings, the Audit Committee processes the audit reports and extended audit reports and the statements for those reports provided by the persons in charge. Moreover, the Audit Committee reports to the Board about any observations it has made and any guidelines or recommen-dations it has supplied to the organisation.
The Managing Director is responsible for communications at the Tulikivi Group. The Group's communications guidelines cover both internal and external communications. They also specify the persons with the right to speak on behalf of the company.
The efficiency of internal control is evaluated regularly in conjunction with management and Accountants.
6.The company's insiders and
The company complies with the valid NASDAQ OMX Helsinki Guidelines for Insiders. The members of the Tulikivi Corporation Board of
Directors and Management Group have been specified as managers as referred to in the Market Abuse Regulation. A Tulikivi manager may not trade in Tulikivi shares during the 30 days preceding financial results announcements. Managers and persons closely related to them must notify the company and the Financial Supervisory Authority of all transactions made on their behalf concerning the company's financial instruments. The company must publish such information in a stock exchange release. Persons and parties with access to specific insider information are entered in a project-specific insider list. A person or party entered in a projectspecific insider list may not engage in trading while they are on the list.
The auditor is elected at the Annual General Meeting for a term ending at the conclusion of the subsequent Annual General Meeting. The auditor was KPMG Oy Ab, Authorised Public
The Annual General Meeting of Tulikivi Corporation decides the remuneration of the members of the Board of Directors.
The annual remuneration of the members of the Board of Directors was EUR 18 000 since 24th April 2016 (the annual remuneration prior to date was EUR 18 000 respectively), which was paid in cash. In addition, the part-time Chairman of the Board of Directors was paid a monthly fee of EUR 4 500 (4 500) and the member of the Board responsible for secretarial duties received a monthly fee of EUR 1 400 (1 400). The members of the Board's Audit Committee and Nomination Committee were paid a meeting attendance allowance of EUR 330 (330) per meeting. In 2016, no other fees than those related to their duties on the Board and the committees, were paid to the members of the Board of Directors.
The remuneration of the Managing Director and of the other members of the Management Group is composed of a fixed basic salary and, as determined in the incentive plan, annual incentive payment (variable) and a share-based payment.
The Board of Directors decides the Managing Director's salary, fees and other terms of his service contract.
The incentive plan for the other members of
the Management Group and for the managing directors of foreign subsidiaries is determined by the Board of Directors, and their fixed salaries by the Managing Director together with the Board Chairman.
The fixed salary of the Managing Director was EUR 183 196 (175 951) in 2016. The Managing Director received EUR 553 fee on the basis of the incentive plan in 2016 (no annual incentive payments in 2015). The Managing Director's period of dismissal is three months. If the company terminates his service contract, the period of dismissal is 12 months. A separate severance payment will not be paid at the termination of the service contract. The CEO's pension cover is arranged through a statutory pension insurance (YEL). Pension payments totaled EUR 31 600 (31 516).
The fixed salaries of the other members of the Management Group and of the managing directors of foreign subsidiaries were EUR 577 427 (671 852), while the variable part of salary based on incentive plan and sales growth paid in 2016 was EUR 21 170 (12 000).
To support the commitment of management and key personnel to the implementation of the performance improvement programme, the Board of Directors of Tulikivi Corporation decided on September 17, 2013 on a new stock option programme for the key personnel of Tulikivi Corporation, on the basis of the authorization granted by the Annual General Meeting on April 16, 2013. The
purpose of the stock options is to provide an incentive to key personnel to commit to long-term work in order to increase shareholder value. A further purpose of the options is to commit key personnel to their employer. The plan's target group includes approximately 14 key persons, including the members of the Management Group.
The maximum total number of stock options issued is 1,800,000, and they entitle their owners to subscribe for a maximum total of 1,800,000 new A shares in the company or existing A shares held by the company. The option rights are divided into three classes. The share subscription period, for the stock option 2013A will be 1 May 2016—31 May 2018, for the stock option 2013B, 1 May 2017—31 May 2019, and the for stock option 2013C, 1 May 2018—31 May 2020. The share subscription price for all stock options is EUR 0.33 per share. The Board of Directors will determine separate financial targets based on the company's performance improvement programme for each option
type, which must be met in order to the option to be granted.
The number of 2013A stock options is 500 000, 2013B 650 000 and 2013C 650 000. The EBITDA target set for their subscription was not met in the 2014 to 2016 reporting period. Hence stock options were not issued in 2014 to 2016. The Board decided to extend the monitoring period to the 2017 reporting period.
The Tulikivi Corporation has an incentive pay scheme for the whole personnel. The Board of Directors determines the earnings criteria and the amount of the incentive pay. The incentive scheme is in force for one year at a time. The Board of Directors approves the payment of incentive plan remunerations to the Managing Director, members of the Management Group and the managing directors of foreign subsidiaries, and the Managing Director approves the payments to others after relevant calculations have been prepared.
The incentive pay scheme covers the whole personnel and is based on the consolidated result. Bonuses amounting to EUR 10 119 to all employees was accrued based on the performance bonus incentive plan for the year 2016, the result for 2015 did not justify the incentive payment.
The auditor is appointed at the Annual General Meeting for a term ending at the conclusion of the subsequent Annual General Meeting. The auditor is KPMG Oy Ab, Authorized Public Accountants. In 2016, the auditing company was paid a total of EUR 65 802 (74 163), of which the portion of statutory audit amounted to EUR 57 562 (62 675).
| Annual fees paid to members of the Board of Directors in 2016 for their Board and committee work (EUR): |
|---|
| --------------------------------------------------------------------------------------------------------- |
| Annual remunerations |
Audit Committee |
Nomination Committee |
Total | |
|---|---|---|---|---|
| Aspara Jaakko. Member of the Board | 18 000 | 18 000 | ||
| Rönkkö Markku, Member of the Board, Secretary of the Board | 34 800 | 1 320 | 660 | 36 780 |
| Svanborg Reijo, Member of the Board | 18 000 | 1 320 | 19 320 | |
| Tähtinen Jyrki, Member of the Board, Part-time Chairman of the Board | 72 000 | 660 | 72 660 | |
| Vauhkonen Heikki, Member of the Board | 18 000 | 1 320 | 660 | 19 980 |
| Total | 160 800 | 3 960 | 1 980 | 166 740 |
The Annual General Meeting of Tulikivi Corporation will be held in the Ekberg Extra, Bulevardi 9 A, II krs., Helsinki, on April 20, 2017, at 12:00. Financial statement documents will be available for inspection at the company's Internet site and head office in Nunnanlahti as from March 24, 2017. Copies of these documents will be sent to shareholders upon request. The right to participate in the Annual General Meeting rests with a shareholder who by April 6, 2017 at the latest has been registered in the company's shareholder list that is maintained by Euroclear Finland Ltd. Shareholders who wish to attend the Annual General Meeting must notify the company thereof by April 10, 2017, either by telephoning mat +351 207 636 322 (Monday to Friday 8 a.m. to 4 p.m.) by emailing: kaija.
[email protected]; by faxing: +358 20 605 0701 or by writing: Tulikivi Corporation /
Annual General Meeting, Kuhnustantie 65, FI-83900 Juuka. Holders of nominee registered shares: instructions for the partisipants in the general meeting in address www.tulikivi.com> Investors>General Meeting> General Meeting 2017.
The Board of Directors proposes to the Annual General Meeting that the dividend will not be paid for year 2016
We request shareholders to report any changes in their personal details, address and share Monday to Friday 8.00 a.m. to 4 p.m., excluding ownership to the book-entry register in which the
shareholder has a book-entry securities account.
Tulikivi Corporation will publish the following financial reports in 2017:
Financial Statement Release for 2016: February 8, 2017 Annual Report for 2016: week 12 Interim Report for January –March: April 28, 2017 Interim Report for April-June: August 11, 2017 Interim Report for July-September: October 27, 2017
The Annual Report, Interim Reports and the company's stock exchange releases are published in Finnish and English.
The Annual Report will be published on the company´s website in week 12. Financial reports are posted on the company´s website, www.tulikivi.com, on their day of publication.
If you have questions concerning investor relations, please contact the company´s director of finance and administration Jouko Toivanen, Tel. +358 207 636 330.
Analyst following Tulikivi Corporation: Matias Rautionmaa / OP Financial Group, Tel. +358 10 252 4408, [email protected]
| 27.10.2016 | Intermin report,1 January –September 30, 2016 |
|---|---|
| 29.09.2016 | Tulikivi Corporation´s general meeting and financial reports in 2017 |
| 04.08.2016 | Half year financial report, 1 January – June 30, 2016 |
| 21.06.2016 | AWL-Marmori Oy to merge with Tulikivi Corporation |
| 28.04.2016 | Interim report, 1 January – March 31, 2016 |
| 20.04.2016 | Resolutions of the Annual General Meeting of Tulikivi Corporation and organization of the Board |
| 24.03.2016 | Annual Report 2015 |
| 17.03.2016 | Notice the General Meeting of Tulikivi Corporation 2016 |
| 17.03.2016 | Vesting criterion of Tulikivi Corporation stock options 2013 and market value of stock options 2013 C |
| 05.02.2016 | Corporate Governance Statement 2015 |
05.02.2016 Financial statement release 1-12/2015
| Board of Directors' Report | 41 |
|---|---|
| Consolidated Financial Statements, IFRS | 44 |
| Consolidated Statement of Comprehensive Income | 44 |
| Consolidated Statement of Financial Position | 45 |
| Consolidated Statement of Cash Flows | 46 |
| Consolidated Statement of Changes in Equity | 47 |
| Notes to the Consolidated Financial Statements | 48 |
| Key Financial Indicators | |
| Development of the Group by Quartal and Business Area | 84 |
| Calculations of Key Ratios | 86 |
| Parent Company Financial Statements, FAS | 87 |
| Parent Company Income Statement | 87 |
| Parent Company Balance Sheet | 88 |
| Parent Company Cash Flow Statement | 91 |
| Shares and Shareholders of Tulikivi Corporation | 92 |
| Signatures to Report of the Board and Financial Statements | 100 |
| Auditors' Report | 102 |
These are the financial statements of Tulikivi Corporation, that have been prepared in accordance with International Financial Reporting Standards (IFRS) and in compliance with the IAS and IFRS standards as well as the SIC and IFRIC interpretations upon force as at December 31, 2016. The term IFRS refers to the standards and interpretations upon these in the Finnish
Accounting Act and regulations issued by virtue to it and endorsed in the EU in accordance with the procedure defined in the EU Regulation (EY) No 1606/2002. The notes to the consolidated financial statements also conform with Finnish Accounting and Corporate Legislation.
The consolidated financial statements are presented in thousands of Euros.
The recovery of low-rise housing construction and renovation projects, together with a slight improvement in consumer confidence compared with 2015, has energised demand for fireplaces in Finland. Low-rise housing construction has begun to increase in the EU, which will boost the performance of the fireplace market in the near future. In Russia, the fluctuating rouble and economic developments are affecting the demand for Tulikivi products.
The Tulikivi Group's fourth-quarter net sales totalled EUR 8.5 million (EUR 9.0 million Q4/2015), the operating result was EUR -0.1 (0.1) million and the result before taxes was EUR -0.3 (-0.3) million. The Group's net sales in 2016 were EUR 30.5
million (EUR 32.0 million 1–12/2015), the operating result was EUR -1.4 (-2.9) million and the result before taxes was EUR - 0.03 (-0.06) million.
Order books at the end of the year amounted to EUR 3.2 (3.9) million. In the fourth quarter, the company's order intake was EUR 8.4 (8.2) million. new dealers where necessary.
Net sales in Finland increased in the review period and were EUR 15.5 (15.1) million, or 50.9% (47.2%) of total net sales. Net sales from exports amounted to EUR 15.0 (16.9) million. The principal export countries were Russia, Sweden, Germany, France, and Denmark. Tulikivi has increased its market share in Finland by concluding several cooperation agreements regarding fireplace deliveries to the homebuilding
industry. Sales of the ceramic fireplace collection that was renewed last year grew in Finland in the review period.
In Germany and France, the main markets in Central Europe, market conditions continued to be relatively weak in the autumn. In the final quarter, net sales from fireplace exports to France and Germany were also considerably lower than the year before. Despite the improved
economic conditions and increased construction activity, there is yet no improvement in sight in the fireplace market. In exports, sales efficiency measures are being targeted at Germany and France. The goal of these measures is to
strengthen Tulikivi's position in the sales catalogues of current dealers and to identify In Russia, net sales grew in all product groups on the previous year.
The company has continued its measures to improve profitability by enhancing the efficiency of its operations. Targeted structural savings of EUR 1.0 million in fixed costs were achieved in the 2016 financial year.
In the fourth quarter, net cash flow from operating activities was EUR 2.1 (0.7) million and EUR 2.0 (0.8) million during the financial year. At the end of 2016, working capital stood at EUR 3.7 (5.5) million. The goal set for 2016 to reduce working capital by EUR 1.0 million was achieved. Loan repayments totalled EUR 1.4 (2.2) million in the financial year. Interest-bearing debt stood at EUR 16.4 (17.8) million at the end of the financial year, and net financial expenses for the financial year were EUR 0.8 (1.0) million. The equity ratio at the end of the financial year was 33.4% (36.9%). The ratio of interest-bearing net debt to equity, or gearing, was 125.0% (113.4%). The current ratio was 1.1 (1.7) and equity per share was EUR 0.21 (0.24). At the end of the financial year, the Group's cash and other liquid assets totalled EUR 0.9 (1.4) million.
The financing agreement includes covenants concerning EBITDA, the equity ratio and the ratio of debt to EBITDA. On 20 December 2016, the company agreed with its financing providers that a repayment falling due on 31 December 2016 be paid in 2017. The finance providers also granted Tulikivi Corporation a waiver from compliance with the covenant conditions at 31 December 2016. The company's management estimates that the company's financing is secure and that it will fulfil the covenants of the financing agreement in 2017.
The Group's investments for the financial year totalled EUR 1.3 (1.1) million.
Research and development expenditure was EUR 1.0 (1.0) million, or 3.4% (3.1%) of net sales. EUR 0.5 (0.3) million of this was capitalised on the balance sheet. In product development, the focus was on developing the soapstone fireplace collection, making good use of the advantages of soapstone as a material for fireplaces and interior design.
In February 2017 the company will introduce its new soapstone collection at the Batibouw fair in Belgium. The collection is based on a new kind of surface finish of soapstone and a high quality of design. A surface finishing investment worth approximately EUR 0.5 million will be carried out in conjunction with the new collection.
The Group employed an average of 209 (219) people during the financial year. Salaries and bo-nuses during the financial year totalled EUR 8.9 (9.4) million. The number of personnel will be adjusted through lay-offs in accordance with the level of demand. In addition to temporary lay-offs, 2 (6) members of the office staff have been laid off for the time being. The Tulikivi Group has an incentive pay scheme for all personnel. The company also has a stock option scheme for management that was launched in 2013. 1
Tulikivi Corporation's Annual General Meeting, held on 20 April 2016, resolved not to distribute a dividend for the 2015 financial year. Jaakko Aspara, Markku Rönkkö, Reijo Svanborg, Jyrki Tähtinen and Heikki Vauhkonen were elected as 2012 2013 2014 2015 2016 -4 -3.9 -5 -6 -5.3
members of the Board of Directors. The Board elected Jyrki Tähtinen as its Chairman. The auditor appointed was KPMG Oy Ab, Authorised Public Accountants, with Kirsi Jantunen, APA, as chief auditor.
The Annual General Meeting authorised the Board of Directors to decide on issuing new shares and on the transfer of Tulikivi Corporation shares held by the company in accordance with the pro-posals of the Board. Tulikivi can issue
new shares or transfer treasury shares held by the company as follows: a maximum of 10,437,748 Series A shares and a maximum of 1,536,500 Series K shares.
The authorisation includes the right to decide on a directed rights issue, deviating from the share-holders' right of pre-emption, provided that there is compelling financial reason for the company. The authorisation also includes the right to decide on a bonus issue to the company itself, where the number of shares issued to the company is no more than one tenth of the total number of the company's shares. Result Before Income Tax, MEUR Return on Equity, % Development of the Sales, MEUR -2.1 5.0 0 -5.0 -10.0 -15.0 -3.4
The authorisation also includes the right to issue special rights referred to in Chapter 10, section 1, of the Limited Liability Companies Act, which would give entitlement to Tulikivi shares against payment or by setting off the 2012 2013 2015 2016 -20.0 -25.0 -22.6
receivable. The authorisation includes the right to pay the company's share rewards. The Board is authorised to decide on other matters concerning share issues. The authorisation is valid until the 2017 Annual General Meeting.
The company did not purchase or assign any treasury shares during the reporting period. At the end of the period, the total number of Tulikivi shares held by the company was 124,200 Series A shares, corresponding to 0.2% of the company's share capital and 0.1% of all voting rights.
The parent company has no distributable equity. The Board will propose to the Annual General Meeting that no dividend be paid out for 2016. 70 60 50 51.2
The Group's most significant risk is the potential continuation of the decline in net sales in the principal market areas. Potential halt of the increase in new construction and renovation projects impact the demand for Tulikivi products in Finland. The slower-than-predicted -23.8 -15.9 2014 -13.5 20 10 0
recovery of the markets in Central Europe and the uncertain economic situation in Russia also have an impact on the demand for fireplaces. Maintaining the Group's financing position at the present level and securing the continuation of financing will depend on an improvement in profitability in the future. If the company's business operations and result do not develop as planned, the repayment of its debts may create a greater burden on the company's cash flow than anticipated.
As regards the company's foreign currency risk, the most significant currencies are the Russian rouble and the U.S. dollar. About 90% of the company's cash flow is in euros, which means that the company's exposure to foreign currency risks is very low. A weakening of currencies may have an adverse effect on the sales margin.
The risks are described in more detail on page 82 of the Tulikivi Annual Report for 2015 and in the 2016 annual report that will be published during the week beginning on 20 March 2016 (week 12). 21.4 16.9 15.0 32.0 30.5 43.7
Net sales in 2017 are expected to be at the previous year's level, and the operating result is expected to improve year-on-year. Finland Export 2012 2013 2014 2015 2016
The Group strategy covers all key operating and financial targets to the end of 2019. Underthe strategy, the company is targeting annualorganic growth of over 10 per cent in the nextfew years. The aim is also to achieve anoperating profit of 10 per cent within the nextthree years. The target for return on equity is that is it should exceed 20 per cent. Corporate acquisitions in support of the strategy are alsopossible. Due to unstable environment, theGroup did not meet its strategic goals. The Group has prepared to improve profitability of business operations. 2012 2013 2014 2015 2016 0 -1 -2 -3 -4 -3.3 -3.9 -0.8 -5 -6 -5.3 investments depreciation Share Price of the A Share, Dec. 31, EUR 2012 2013 2014 2015 2016 2.0 2012 2013 2014 2015 2016 4 2 1 2.4 3.5 3.3 4.1 1.6 3.8 1.6 1.4 1.2 1.0
The Group´s order book, financial ratios and key indicators per share together with their definitions as well as information on shareholders and management ownership are presented in connection with the financial statements. Earnings per Share, EUR Equity/Share, EUR 0.02 0.0 -0.02 -0.04 0.4 0.2 0 0.20 0.17 0.21 0.34
Tulikivi Corporation will issue its Corporate Governance Statement for 2016 separately from the Annual Report. The Corporate Governance Statement has been prepared in accordance with Recommendation 54 of the 2012 2013 2015 2016 -0.09 -0.11 -0.11 2014
Finnish Corporate Governance Code and Chapter 2, section 6 of the Securities Markets Act. Information on corporate governance can be found on Tulikivi's website, at: http://www.tulikivi.com/en/tulikivi/ Corporate governance_and_management Result Before Income Tax, MEUR Return on Equity, % Development of the Sales, MEUR 5.0 Earnings per Share, EUR Equity/Share, EUR 1.1 1.3 3.3 0.02 0.0
-0.02
-3.4
The companies included in the Group are the parent company Tulikivi Corporation, Tulikivi U.S. Inc. and OOO Tulikivi. Group companies also include Tulikivi GmbH and The New Alberene Stone Company, Inc., which are dormant. AWL-Marmori Oy was merged into the parent company on 7 November 2016. 2012 2013 2015 2016 -15.0 -25.0 -22.6 2012 2013 2015 2016 -0.06 -0.08 -0.09 -0.10 -0.11 -0.11
2.5
| EUR 1 000 | Note | Jan. 1 - Dec. 31, 2016 | Jan. 1 - Dec. 31, 2015 |
|---|---|---|---|
| Sales | 3 | 30 485 | 31 951 |
| Other operating income | 4 | 337 | 585 |
| Increase/decrease in inventories of finished goods and in work in progress | -347 | -730 | |
| Production for own use | 746 | 533 | |
| Raw materials and consumables | -6 747 | -7 101 | |
| External services | -4 576 | -4 579 | |
| Personnel expenses | 5 | -11 149 | -11 806 |
| Depreciation and amortisation | 6 | -2 472 | -3 271 |
| Impairment | -12 | 0 | |
| Other operating expenses | 7 | -7 626 | -8 513 |
| Operating result | -1 361 | -2 931 | |
| Financial income | 8 | 58 | 240 |
| Financial expenses | 9 | -815 | -1 183 |
| Share of result of associates | 0 | -7 | |
| Result before income tax | -2 118 | -3 881 | |
| Income taxes expense | 11 | -14 | 0 |
| Result for the year | -2 132 | -3 881 | |
| Other comprehensive income | |||
| Items that may be reclassified to profit or loss | |||
| Cash flow hedges | 10 | 75 | 39 |
| Translation differences | 10 | 55 | 67 |
| Income tax on other comprehensive income | 10 | -35 | -8 |
| Other comprehensive income, net of tax | 95 | 98 | |
| Total comprehensive result for the year | -2 037 | -3 783 | |
| Calculated from result attributable to the equity holders of the parent company | |||
| earnings per share, EUR | |||
| basic/diluted | 12 | -0,03 | -0,06 |
| EUR 1 000 | Note | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 13 | 8 685 | 9 732 |
| Goodwill | 15 | 4 162 | 4 174 |
| Other intangible assets | 15 | 9 435 | 9 592 |
| Investment properties | 14 | 92 | 92 |
| Other financial assets | 18 | 26 | 26 |
| Deferred tax assets | 19 | 3 180 | 3 244 |
| Other receivables | 2 | 15 | |
| Total non-current assets | 25 582 | 26 875 | |
| Current assets | |||
| Inventories | 20 | 7 863 | 8 666 |
| Trade and other receivables | 21 | 3 083 | 2 426 |
| Cash and cash equivalents | 22 | 894 | 1 429 |
| Total current assets | 11 840 | 12 521 | |
| Total assets | 37 422 | 39 396 | |
| Equity and liabilities | |||
| Capital and reserves attributable to equity holders of the Company | |||
| Share capital | 23 | 6 314 | 6 314 |
| Treasury shares | 23 | -108 | -108 |
| The invested unrestricted equity fund | 23 | 14 407 | 14 407 |
| Translation differences | 23 | 156 | 101 |
| Revaluation reserve | 23 | -99 | -139 |
| Retained earnings | -8 273 | -6 166 | |
| Total equity | 12 397 | 14 409 | |
| Non-current liabilities | |||
| Deferred income tax liabilities | 19 | 764 | 795 |
| Provisions | 25 | 654 | 839 |
| Interest-bearing liabilities | 26 | 13 008 | 15 766 |
| Total non-current liabilities | 14 426 | 17 400 | |
| Current liabilities | |||
| Trade and other payables | 27 | 7 206 | 5 522 |
| Current tax liabilities | 2 | 7 | |
| Provisions | 25 | 6 | 58 |
| Short-term interest-bearing liabilities | 26 | 3 385 | 2 000 |
| Total current liabilities | 10 599 | 7 587 | |
| Total liabilities | 25 025 | 24 987 | |
| Total equity and liabilities | 37 422 | 39 396 |
| EUR 1 000 | Note | Jan. 1 - Dec. 31, 2016 | Jan. 1 - Dec. 31, 2015 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Result for the year | -2 132 | -3 881 | |
| Adjustments: | |||
| Non-cash transactions | 30 | 2 330 | 2 908 |
| Interest expense and finance costs | 815 | 1 183 | |
| Interest income | -57 | -235 | |
| Dividend income | -1 | -5 | |
| Income taxes | 11 | 14 | 0 |
| Changes in working capital: | |||
| Change in trade and other receivables | -666 | 1 670 | |
| Change in inventories | 803 | 1 453 | |
| Change in trade and other payables | 1 908 | -1 374 | |
| Interest paid | -972 | -970 | |
| Interest received | 19 | 6 | |
| Dividends received | 1 | 5 | |
| Income tax paid | -25 | 0 | |
| Net cash flow from operating activities | 2 037 | 760 | |
| Cash flows from investing activities | |||
| Purchases of property, plant and equipment (PPE) | -359 | -389 | |
| Grants received for PPE | 0 | 37 | |
| Purchases of intangible assets | -916 | -835 | |
| Grants received for intangible assets | 0 | 14 | |
| Proceeds from sale of tangible assets | 38 | 390 | |
| Net cash flow from investing activities | -1 237 | -783 | |
| Cash flows from financing activities | |||
| Proceeds from non-current borrowings | 0 | 2 000 | |
| Repayments of borrowings | -1 372 | -4 216 | |
| Net cash flow from financing activities | -1 372 | -2 216 | |
| Net decrease (-) / increase (+) in cash and cash equivalents | -572 | -2 239 | |
| Cash and cash equivalents at the beginning of the year | 1 429 | 3 665 | |
| Exchange gains (+) / losses (-) | 37 | 3 | |
| Cash and cash equivalents at the end of the year | 22 | 894 | 1 429 |
| Attributable to equity holders of the Company |
Note | Share capital | The invested unrestricted equity fund |
Revaluation reserve |
Treasury shares | Translation differences |
Retained earnings |
Total equity |
|---|---|---|---|---|---|---|---|---|
| EUR 1 000 | ||||||||
| Equity at January 1, 2015 | 23, 28.5 | 6 314 | 14 407 | -170 | -108 | 34 | -2 317 | 18 160 |
| Total comprehensive result for the year | 31 | 67 | -3881 | -3 783 | ||||
| Transactions with owners | ||||||||
| Share option scheme | 32 | 32 | ||||||
| Equity at December 31, 2015 | 6 314 | 14 407 | -139 | -108 | 101 | -6 166 | 14 409 | |
| Equity at January 1, 2016 | 6 314 | 14 407 | -139 | -108 | 101 | -6 166 | 14 409 | |
| Total comprehensive result for the year | 40 | 55 | -2132 | -2 037 | ||||
| Transactions with owners | ||||||||
| Share option scheme | 25 | 25 | ||||||
| Equity at December 31, 2016 | 6 314 | 14 407 | -99 | -108 | 156 | -8 273 | 12 397 |
The parent company is Tulikivi Corporation (Business ID 0350080-1) and it is domiciled in Juuka, Finland. Its registered address is 83900 Juuka, Finland.
A copy of the consolidated financial statements is available on the Internet at www.tulikivi.com or at the parent company's head office, located at the above address.
Tulikivi Corporation's Board of Directors has approved these financial statements for publication at its meeting held on February 7, 2017. Under the Finnish Limited Liability Companies Act, shareholders may approve or reject the financial statements at the Annual General Meeting held after publication. The Annual General Meeting also has the right to decide on making changes to the financial statements..
These are the financial statements of the Group, that have been prepared in accordance with International Financial Reporting Standards (IFRS) and in compliance with the IAS and IFRS standards as well as the SIC and IFRIC interpretations in force as at December 31, 2016. The term IFRS refers to the standards and interpretations that are approved for adoption in the Finnish Accounting Act and regulations issued by virtue to it and endorsed in the EU in accordance with the procedure defined in the EU Regulation (EY) No 1606/2002. The notes to the consolidated financial statements also
comply with the additional requirements under the Finnish accounting and company legislation. The consolidated financial statements have been prepared under the historical cost
convention except for financial assets and financial liabilities (including derivatives) carried at fair value through profit or loss. The consolidated financial statements are presented in thousands of euros.
Tulikivi Group has applied as from 1 January 2016 the following new and amended standards that have come into effect.
•Annual Improvements to IFRSs (2012-2014 cycle) (effective for financial years beginning on or after 1 January 2016): The annual improvements process provides a mechanism for minor and non-urgent amendments to IFRSs to be grouped together and issued in one package annually. The cycle contains amendments to four standards. Their impacts vary standard by standard but are not significant.
•Amendment to IAS 1 Presentation of Financial Statements: Disclosure Initiative (effective for financial years beginning on or after 1 January 2016). The amendments clarify the guidance in IAS 1 in relation to applying the materiality concept, disaggregating line items in the balance sheet and in the statement of profit or loss, presenting subtotals and to the structure and accounting policies in the financial statement. The amendments have had a minor impact on presentation in Tulikivi Group´s consolidated financial statements.
•Other standards had no impact on Tulikivi Group's consolidated financial statements.
Adoption of new and amended standards and interpretations applicable in future financial years
Tulikivi Group has not yet adopted the following standards or interpretations that the IASB has issued. The Group will adopt them as from their effective dates, or if the effective date is different from the beginning of the financial year as from the beginning of the following financial year.
•IFRS 15 Revenue from Contracts with Customers (effective for financial years beginning on or after 1 January 2018): The new standard replaces current IAS 18 and IAS 11 -standards and related interpretations. In IFRS 15 a five-step model is applied to determine when to recognise revenue, and at what amount. Revenue is recognised when (or as) a company transfers control of goods or services to a customer either over time or at a point in time. The standard introduces also extensive new disclosure requirements. The impacts of IFRS 15 on Tulikivi Group's consolidated financial statements have been assessed as follows: Contracts with Customers have been reviewed through a five step model, promises to customers have been identified, key concepts of IFRS 15 are analyzed for different revenue streams through a five-stage model. Cumulative effect approach has been selected i.e. cumulative effect is recognized at the initial application January 1, 2018. Standard will not have any significant effect on revenue recognition.
•Amendments to IFRS 15 - Clarifications to IFRS 15 Revenue from Contracts with Customers* (effective for financial years beginning on or after 1 January 2018). The amendments include clarifications and further examples on how to apply certain aspects of the five-step recognition model. The impact assessment of the clarifications has been included in the IFRS 15 impact assessment described above.
•IFRS 9 Financial Instruments* (effective for financial years beginning on or after 1 January 2018): IFRS 9 replaces the existing guidance in IAS 39. The new standard includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. The impacts of IFRS 9 on Tulikivi Group's consolidated financial statements have been assessed and the amendments have had no impact on Tulikivi Group´s consolidated financial statements.
• IFRS 16 Leases* (effective for financial years beginning on or after 1 January 2019): The new standard replaces the current IAS 17 –standard and related interpretations. IFRS 16 requires the lessees to recognise the lease agreements on the balance sheet as a right-of-use assets and lease liabilities. The accounting model is similar to current finance lease accounting according to IAS 17. There are two exceptions available, these relate to either short term contacts in which the lease term is 12 months or less, or to low value items i.e. assets of value USD 5 000 or less. The lessor accounting remains mostly similar to current IAS 17 accounting. The preliminary impact assessment of the standard has been started in the group. The amendments have no impact on Group's consolidated financial statements.
* = not yet endorsed for use by the European Union as of 31 December 2016
The preparation of the consolidated financial statements in conformity with IFRS requires the management make certain estimates and judgements. Information about the areas where the management has exercised judgment in the application of the Group's accounting principles is presented under "Critical management judgments in applying the entity's accounting principles and major sources of estimation uncertainty".
The consolidated financial statements include the parent company, Tulikivi Corporation, and all its subsidiaries. Subsidiaries are companies, over which the Group has control. Control exists when the Group owns more than half of the voting rights, or it has otherwise control. Also the existence of potential voting rights is considered when assessing the conditions of control if the instruments entitling to potential voting rights are currently exercisable. Control means the power to govern financial and operating policies of an entity so as to obtain benefits from its activities.
Intragroup share holdings are eliminated using the acquisition method. The consideration
transferred and the identifiable assets acquired and liabilities assumed in the acquired company are measured at fair value at the acquisition date. Subsidiaries are consolidated from the date on which control is transferred to the Group, and the disposed subsidiaries until the control
ceases. Intragroup transactions, balances and
unrealized gains on transactions between group companies, and intragroup distribution of profits are eliminated. Unrealized losses are also eliminated unless the loss is due to impairment. Tulikivi Corporation owns its subsidiaries in full, therefore the Group's profit for the year or equity do not include non-controlling interests. All business combinations of the Group have taken place before the effective date of the revised IFRS 3(2008).
Associated companies are all entities over which the Group has significant influence. Significant influence mainly arises when the
Group holds over 20 per cent of the voting rights or otherwise has significant influence, but no control. Investments in associates are accounted for using the equity method. When the Group's proportionate share of losses in an associate exceeds the book value of the interest, the investment is recognized in the balance sheet to zero value and further losses are not recognized unless the Group has committed to fulfil the associates' obligations. The investment in an associate includes goodwill identified on acquisition. Unrealized gains between the Group and an associate are
eliminated according to the ownership interest of the Group.The Group's share of the associate's profit or loss for the year is separately disclosed below operating profit. Respectively, the Group's share in the changes recognized in other comprehensive income of an associate is recognized in other comprehensive income of the Group. The shares of accociate Rakentamisen Mall were sold in June 2015.
The results and financial positions of subsidiaries are measured using the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in euros, which is the parent company's functional and presentation currency.
Transactions in foreign currencies are translated into the functional currency using the foreign exchange rate prevailing at the transaction date. In practice, exchange rates close to the rates prevailing at the dates of the transactions are usually used. Monetary items are translated into functional currency using the exchange rates prevailing at the reporting date. Non-monetary items are translated using the exchange rate at the transaction date.
Exchange differences of transactions in foreign currencies and translation of monetary items are recognized in profit or loss. Exchange differences resulting from business operations are recognized in the respective items in the income statement as part of the operating profit. Gains or losses arising from borrowings and cash in bank are recognized in finance income and expenses.
Income and expenses in the statements of comprehensive income of the foreign Group companies are translated at exchange rates at the dates of the transactions and the statements of financial position are translated at closing rates at the reporting date. Exchange differences arising from translation of comprehensive income with different exchange rates in the statement of comprehensive income and in the statement of financial position are recorded within equity and this change is recognised in other comprehensive income. Translation differences arising from eliminating the cost of foreign subsidiaries and from translating the foreign subsidiaries' accumulated post-acquisition equity are recognised in other comprehensive income. When a subsidiary is disposed of, in part or in full, the accumulated translation difference is transferred to profit or loss as part of the gain or loss on disposal. The Group has not acquired, nor sold any foreign subsidiaries during the financial year ended or in the previous financial year.
Goodwill arisen from the acquisitions of foreign entities and related fair value adjustments to the assets and liabilities of the acquired entities are recognized as assets and liabilities of the said foreign entities and are translated to euro using the exchange rates at the reporting date. The fair value adjustments and goodwill arisen from the acquisitions occurred prior to January 1, 2004, have been recognized in euro.
Property, plant and equipment assets are
measured in the balance sheet at cost less accumulated depreciation and impairment charges.
Cost includes expenditure directly attributable to the acquisition of an item of property, plant and equipment. Cost of a self-constructed asset includes material costs, direct employee benefit costs and other direct costs attributable to the cost of preparing the asset for its
intended use. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as a part of the cost of the asset.
A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
When the asset consists of several items with different useful lives, each item will be dealt and 2015.
with as a separate asset. In this case the replacement costs of the item are capitalized and any remaining part of the asset is derecognised. Otherwise subsequent costs are included in the book value of an item of property, plant and equipment only when it is and equipment are recognised in profit or loss price and the residual value.
probable that the future economic benefits
associated with the item will flow to the Group and that the cost can be measured reliably. Other repair and maintenance costs are charged to the income statement when they occur. Depreciation is calculated using the straight-line method based on the useful lives of the assets. Land areas are not depreciated except for mining areas, where depreciations are recognised based on the consumption of the rock material and stacking area filling time. The useful lives are as follows:
Buildings 25 to 30 years Constructions 5 years
| Process machinery | 3 to 15 years |
|---|---|
| Motor vehicles | 5 to 8 years |
| Other property | 3 to 5 years |
| Equipment | 3 to 5 years |
investment property(buildings) 10 to 20 years The assets' residual values and useful lives are reviewed,assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year-end.
Depreciation of property, plant and equipment is discontinued when the item of property, plant and equipment is classified as being held for sale in accordance with the IFRS 5
Non-Current Assets Held for Sale and Discontinued Operations. The Group had no items of property, plant and equipment
classified as held for sale during the years 2016
Gains and losses on disposal of property, plant
and presented in other operating income and expenses. Gain/loss on sale is determined based on the difference between the disposal
Government Grants
Government grants, for example grants from the state, related to the purchase of property, plant and equipment or intangible assets are deducted from the carrying amount of the asset when there is a reasonable assurance that the grant will be received and the group will comply with attached conditions. The grants are recognised in profit or loss through the depreciation/amortisation made over the useful life of the asset. Grants received as compensation for expenses already incurred are recognised in profit or loss of the period in which they become
receivable. Such government grants are presented within other operating income.
Investment properties are properties held in order to earn rental income or capital appreciation. Investment properties are measured at cost less accumulated depreciation.
Goodwill arising on business combinations taking place after January 1, 2010 is recognised as the excess of the aggregate of the consideration transferred, the recognised amount of noncontrolling interests and previously held equity interest in the acquired company, over the Group's share of the fair value of the net identifiable assets acquired. No business combinations have taken place in the Group since January 1, 2010.
Business combinations taken place between January 1, 2004 and December 31, 2009 have been accounted for in accordance with the previous IFRS standard (IFRS 3(2004)). The goodwill arisen from the acquisitions occurred before January 1, 2004 represents the carrying amount of goodwill at the date of transition to IFRSs based on the previous accounting principles. The cost includes expenditure that is directly attributable to the acquisition, such as professional fees. Goodwill is not amortised but tested annually for impairment. For this purpose the goodwill has been allocated to cash-generating units or, if an associate is in question, goodwill is included in the cost of the associate. The goodwill is measured at historical cost less impairment.
Research costs are expensed in the income statement as incurred. Development costs arising from planning of new or improved products are capitalized as intangible assets in the balance sheet when costs arising from the development phase can be reliable measured, the entity can demonstrate the technological and commercial feasibility of the product and the Group has the intention and resources to complete the development work. Capitalised development costs comprise material, labour and test costs incurred in bringing the assets capable of operating in the manner intended by management. Development costs previously expensed cannot be capitalized later.
Amortisation of an asset begins as soon as the project commences. Assets not available for use are tested annually for impairment. Subsequent to initial recognition, intangible assets are carried at cost less accumulated amortisation and any accumulated impairment losses. The useful life of the capitalized development costs is 5 years during which the capitalized costs are expensed using the straight-line method.
Costs of exploration and evaluation of soapstone are mainly capitalised. However, costs of exploration and evaluation of soapstone are expensed in statement of comprehensive income when there is significant uncertainty related to commercial viability. Elements of cost of exploration and evaluation are geographical studies, exploration drilling, trenching, sampling and activities in relation to evaluating the technical feasibility and commercial viability of extracting mineral resources. After initial recognition Group applies the cost model and the assets are amortised over 5 to 10 years. The exploration and evaluation assets are classified as a separate intangible asset category until technical feasibility and commercial viability is demonstrable. Afterwards the exploration and evaluation assets are reclassified to other intangible assets. The exploration and evaluation activities start when the Ministry of Employment and the Economy has granted a right of appropriation.
Intangible assets are recognized in the balance sheet only if the cost of the item can be measured reliably and it is probable that the future economic benefits associated with the asset will flow to the Group.
Costs arising from establishing the soapstone quarries and construction of roads, dams and other site facilities related to the quarry are also capitalised. It can take years to establish a quarry. Amortisation of quarry lands, basins and other auxiliary structures begins when the quarry is ready and taken into production use, and the amortisation is allocated over the useful life of the quarry, that is, over the extraction period using the unit of production method. The extraction periods vary by quarries and can reach tens of years. The amount of amortisation in unit of production method is the portion of the cost equalling to the portion of extracted rock during the reporting period from the estimated total extractable amount of rock of the quarry. The amortisation period of quarries in
production phase varies from ten to twenty years. The amortisation of construction expenses of roads and dams begins in the construction year.
Intangible assets with a finite useful life are recognised as expenses on a straight-line basis over the known or estimated useful life of the asset. Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Amortisation periods of other intangible assets are as follows:
| Patents and trademarks | 5 to 10 years |
|---|---|
| Development costs | 5 years |
| Distribution channel | 10 years |
| Mineral resource exploration | |
| and evaluation costs | 5 to 10 years |
| Quarrying areas | |
| and basins = | unit of production method |
| Quarrying area roads and dams 5 to 15 years | |
| Computer software | 3 to 10 years |
| Others | 5 years |
The useful life of the trademark related to Kermansavi Fireplaces has been assessed to be indefinite, because there is no foreseeable limit to the period which this asset is expected to generate net cash inflows.
Inventories are measured at the lower of cost and net realisable value. The cost is determined using the weighted average cost method. The cost of quarried blocks is affected by the stone yield percentage. The cost of acquiring finished products includes all costs of purchase, including
direct transportation, handling and other costs. The cost of own finished goods and work in
progress consists of raw materials, direct labor, other direct costs and related variable and fixed production overheads systematically allocated on a reasonable basis on a normal capacity of the production facilities. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
The leases of the Group are agreements under which substantially all the risks and rewards incidental to the leased assets are retained by the lessor and the agreements are therefore classified as operating leases. Payments made under operating leases are charged to the income statement as rental expenses on a straight-line basis over the lease term. When a lease includes both land and buildings elements, the classification of each element as either a finance lease or an operating lease is assessed separately. The Group has no leases classified as finance leases.
Assets leased out by the Group are leased under operating leases. The assets are included in property, plant and equipment or investment properties in the balance sheet. They are depreciated over their useful lives consistent with the Group's normal depreciation policy. Part of the leased assets is subleased. Lease income from operating leases is recognized on a straight-line basis over the lease term.
The Group assesses at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the recoverable amount of the asset is assessed. The recoverable amount is annually tested for impairment for the following assets independent of the existence of indicators of impairment: goodwill, indefinite-lived intangible assets and intangible assets not yet available for use. Mineral resource exploration and evaluation assets are tested always before reclassification of the assets in question. For the purpose of assessing criteria for recognising an impairment loss assets are grouped at the lowest levels for which there are separately identifiable cash-generating units with separately identifiable cash flows. The Group's corporate assets, which contribute to several cash-generating units and which do not generate separate cash flows, have been allocated to cash-generating units in a reasonable and consistent manner and they are tested as a part of each cash-generating unit. The recoverable amount of an asset is the higher of the fair value less costs to sell and value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or a cash-generating unit. A pre-tax rate, which reflects the market view on the time value of money and asset-specific risks is used as the discount rate.
An impairment loss is recognized when the carrying amount exceeds the recoverable amount. The impairment loss is immediately recognized in profit or loss. If an impairment loss is allocated to a cash-generating unit, it is first recognised as a deduction of the goodwill allocated to the unit and then on pro-rata basis to unit's other assets. By recognition of an impairment loss the useful life of the asset to be depreciated / amortised is reassessed. For other assets except for goodwill, the impairment loss is reversed in case there is a change in those estimates that were used when the recoverable amount of the asset was determined. The increased carrying amount must not, however, exceed the carrying amount that would have been determined if no impairment loss had been recognized in prior years. Previously recognized impairment loss on goodwill is not reversed under any conditions.
Pension plans are classified either as defined benefit plans or defined contribution plans. In defined contribution plans the group makes fixed contributions into a separate entity. The group has no legal or constructive obligation to pay any further contributions if the receiver of payments is not able to pay the pension benefits in question. All other pension plans that do not meet these conditions are defined benefit plans. The contributions made to defined contribution plans are recognised in profit or loss in the period, which they are due. Group's pension plans are defined contribution plans.
The Tulikivi Group operates a stock option scheme for management and key personnel. As the EBITDA goal set for 2016 was not achieved, no incentive pay was paid and no options were distributed for 2016.
A provision is recognized when the Group has a
present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. A provision is measured at the present value of the expenditure required to settle the obligation. The discount factor used in the calculation of the present value is determined so that it reflects the current market assessment of the time value of money and risks related to the obligation. The amount of provisions is assessed at each reporting date and
adjusted to correspond to the current best estimate. Changes in provisions are recognised in income statement in the same item as the provision was originally recognised.
A warranty provision is recognized when the product subject to the warranty is sold. The amount of the warranty provision relies on the statistical information of historical warranty realization.
A provision for restructuring is recognised when the Group has prepared a detailed restructuring plan and the restructuring either has commenced or communicated the restructuring plan to those affected by it. No provisions are recognised on expenses related to the Group's continuing operations.
A provision of onerous contracts is recognized when the incremental costs exceed the benefits received from the contract. Based on environmental legislation the group has restoration obligations related to the factory and quarry areas. A provision is recognised in the consolidated financial statements for the estimable environmental obligations.
A contingent liability is a contingent obligation
as a result of a past event and its existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. An existing obligation which probably does not require settling the payment obligation or which can not be reliably estimated is also considered a contingent liability. A contingent liability is disclosed in the notes.
Income tax expense comprises current tax based on taxable income for the period and deferred tax. Taxes are recognised in profit or loss, except when they relate to items recognised directly in equity or in other comprehensive income. In this case, also tax is recognised within the item in question. Current tax is the amount of income taxes payable in respect of the taxable profit for the period and is calculated on the basis of the local tax legislation.
Deferred taxes are calculated on temporary differences between the carrying amounts of balance sheet items and their taxable values. However, the deferred tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business
combination or that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax is recognised for investments in subsidiaries and associates, with the exception that the Group is able to control the timing of the reversal of the temporary difference and it
is not probable that the temporary difference will reverse in the foreseeable future.
The Group´s most significant temporary
differences arise from depreciation of property, measuring derivatives at fair value, tax losses carried forward and fair value measurement associated to business combinations.
Deferred tax is determined using the tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. The recognition criteria of a deferred tax asset in this respect are assessed at each reporting date.
For the sake of comparability between reporting periods the Group classifies certain income and expense items as non-recurring in its financial reporting. The following items are presented as non-recurring items: income and expenses arising from Group's restructuring plans, one-time impairment losses on goodwill and other assets as well as other exceptional non-recurring items, which materially skew the comparability of profitability of Group's business functions over time.
Revenue includes the consideration received from sale of goods and services rendered measured at fair value adjusted with indirect taxes, rebates, and exchange rate differences from sales in foreign currencies.
Revenues of sold goods are recognized when the risks, rewards and control have been transferred to the buyer. Generally this coincides with the delivery of products in accordance with the terms of a contract. Revenue from installing and services is recognised in the period when the service is rendered and it is probable that economic benefits are received for the services.
Lease income is recognised on a straight-line basis over the lease term.
The Group did not have any construction contract revenues in 2016 and 2015.
Interest income is recognized according to the effective interest rate method and dividend income when the right to the dividend is arisen.
The Group did not have non-current assets classified as held for sale nor discontinued operations during in 2016 or 2015.
The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the financial asset was acquired and is made at initial recognition. Transaction costs are included in the initial
value of all the financial assets not carried at
fair value through profit or loss. Regular purchases and sales of financial assets are recognised on the trade date, which is the date when the Group commits to purchase or sell the financial asset.
Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are financial assets held for trading or financial assets which are classified at initial recognition in this category. The classification can only be changed under extremely rare conditions. The financial assets measured at fair value through profit or loss include the financial assets held for trading or financial assets that include one or more embedded derivatives that alter significantly the cash
flows under a contract, when the compound financial instrument as a whole is measured at
fair value. Assets classified as held for trading have been acquired principally for the purpose of short-term profit taking from market price changes. Derivatives that are not financial guarantee contracts or that do not qualify for hedge accounting are classified as held for trading. Derivatives and financial assets with maturities less than 12 months are included in current assets. The Group had no embedded derivatives or financial guarantee contracts in
2016 or 2015. Financial assets at fair value through profit or loss are measured at fair value based on quoted market prices at the reporting date. Fair values of interest rate swaps are determined based on the present value of future cash flows and fair values of forward exchange agreements based on forward exchange rates at the reporting date. The Group applies commonly accepted valuation methods in measuring derivatives and other financial instruments that are not held for sale. Unrealized and realized gains and losses from changes in fair value are recognized in the income statement when they arise.
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and a maturity date, and the Group has the positive intent and ability to hold the financial assets to the maturity. They are measured at amortised cost using the effective interest method, and they are included in the non-current assets. The Group had no held-to-maturity financial assets in 2016 or 2015.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and the Group does not hold them for trading or does not explicitly designate them as available for sale at initial recognition. They are recognised at amortised cost using the effective interest method. Loans and receivables are included in trade and other receivables and are classified as current or non-current based on their maturity, to the latter if they have a maturity of more than 12 months.
Financial assets available for sale are non-derivative financial assets, that are specifically designated this category or that are not classified into any other category. They
when the management intends to dispose of the investment within 12 months from the reporting date. In this case the investment is classified as a current asset. Available-for-sale financial assets can contain investments in shares and interest-bearing securities. Available-for-sale financial assets are carried at fair value, or when the fair value can not be measured reliably, at cost. The fair value of financial assets is determined based on market bid prices. If no quoted market prices are
available for the available-for-sale financial assets, the Group applies other methods of measurement. These can include, for example, recent transactions between independent parties, discounted cash flows and measurements of similar instruments. Market information is mainly applied in measurement minimising the application of factors determined by the Group itself.
The changes in fair value of available-for-sale financial assets are recognised in other comprehensive income, net of tax, and presented within equity in the revaluation reserve. When securities classified as available for sale are sold or they are impaired, the accumulated fair value adjustments recognised in equity are transferred to the income statement as a reclassification adjustment. Interest income from available-for-sale interest securities are recognised in finance income using the effective interest method. The Group had no available-for-sale financial assets in 2016 or 2015.
are recognized as non-current assets except Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments which are readily convertible to known amounts of cash and for which the risk of changes in value is insignificant. Cash and cash equivalents mature in three months or less.
The Group assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If the fair value of an equity investment is significantly lower compared to the cost and for a time period defined by the Group, this is indication of impairment. If there is indication of impairment, the loss accumulated in the revaluation reserve is transferred in profit or loss. Impairment losses on equity instruments classified as available for-sale financial assets are not reversed through profit or loss, whereas, subsequent reversal of impairment losses on interest instruments is rec ognised in profit or loss.
The group recognises an impairment loss when there is objective evidence that the trade receivables are not collectible in full. Significant financial difficulties of a debtor, probability of bankruptcy or delay of payments exceeding 90 days are considered as evidence of an impairment of trade receivables. An impairment loss to be recognised in the income statement is determined as the difference between the carrying amount of a receivable less the present value of the estimated future cash flows discounted with the effective interest rate. If, in a subsequent period, the amount of the
Financial liabilities are initially recognized at fair value. Transaction costs are included in the initial carrying amount for those financial liabilities carried at amortised cost. Subsequently financial liabilities, except for derivative liabilities, are measured at amortized cost using the effective interest rate method. Financial liabilities may comprise of current and non-current items. Financial liabilities are classified as current liabilities unless the Group has an unconditional right to postpone the settlement of the liability at least 12 months from the reporting date.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as a part of the
cost of that asset when it is probable that they will result in future economic benefits and the costs can be measured reliably. Other borrowing costs are recognised as an expense in the period in which they are incurred. Fees related to the establishment of loan facilities are recognised as transaction costs to the extent that it is probable that some or all of the loan facility will be drawn down. In these cases, the fees are deferred (capitalised) until the draw-down occurs. As the loan is drawn down, any related transaction fees are recognised as part of transaction expenses. To the extent that it is probable that the loan facility will not be drawn down, the fees are capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. The principles applied in determination of fair values of all financial assets and financial liabilities are presented in note 29. Carrying amounts of financial assets and financial liabilities by categories and their fair values.
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Gains and losses from the fair value measurement are recognized following the purpose of use of the underlying derivative. Changes in the fair value of derivatives that are designated and qualify as effective hedges are presented in the income statement, together with any changes in the hedged item. When the group enters into a derivative contract, it is accounted for either as a hedge of the fair value of receivables or liabilities or firm commitments (fair value hedge), or in respect of foreign currency risk, hedges of cash flows related to highly probable forecast transaction or as a derivative not qualifying for hedge accounting.
At the inception of hedge accounting the group documents the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The group also documents its assessment, both at hedge inception and at least each reporting date, of whether the derivatives that are used in hedging relationships are highly effective in
offsetting changes in fair values or cash flows of hedged items.
The fair value changes of derivatives satisfying the criteria of fair value hedges are recognised in profit or loss. The fair value changes of the hedged asset or liability are treated in a similar manner in respect of the hedged risk. The Group held no derivative contracts meeting the criteria of fair value hedges in 2016 or 2015.
The effective portion of changes in the fair values of derivatives designated and qualifying as cash flow hedges are recognised in other comprehensive income and presented in the revaluation reserve in equity. The cumulative gain or loss in equity is transferred to profit or loss in the same period as the hedged cash flows affect profit or loss. Gains or losses on derivatives hedging forecast foreign currency denominated sales are recognised as sales adjustments when those sales are realised. The ineffective portion of the changes in fair values is recognised in profit or loss in finance income or finance expenses. If the forecast transaction that is hedged results in the recognition of a non-financial asset, such as an item of property, plant and equipment, the gains and losses recognised in equity are accounted for as a cost adjustment of the item in question.
When a hedging instrument designated as a cash flow hedge expires or is sold or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss remains in equity until the forecast transaction realizes. However, if the forecast transaction is no longer expected to occur, the cumulative gain or loss deferred in equity is immediately transferred to the profit or loss.
The fair values of hedging instruments are presented in Note 29 Commitments. Changes in the revaluation reserve are shown in note 10. Other comprehensive income.
If Tulikivi Corporation repurchases its own equity instruments the cost of these instruments is deducted from equity.
The IAS 1 Presentation of Financial Statements does not define the concept of operating profit. The Group has defined it as following: The operating profit is the net amount attained when the sales are added by other operating income, deducted by purchase expenses adjusted with changes in finished goods and work in progress and costs of production for own use, by employee benefit expenses, by depreciation and amortisation, by possible impairment charges and by other operating expenses. All other items are presented below operating profit in the income statement. Exchange rate differences and the fair value changes of derivatives are included in operating profit if they result from business operations, otherwise they are recognised in the financial items. Negative operating profit is referred to as Operating result in the reporting.
Critical Management Judgments in Applying the Entity's Accounting Principles and Major
In preparing the consolidated financial statements estimates and assumptions about the future are made, the actual outcome of which might differ from the assumptions and estimates made previously. In addition, judgment is exercised in applying the accounting principles.
Judgments and assumptions are based on the Directors best estimate as at the reporting date. The estimates are based on earlier experience and assumptions of the future considered to be most probable at the reporting date, relating to i.a. expected development of the economic environment in which the Group operates affecting the sales volumes and expenses. The Group follows realisation of the estimates, the assumptions and the changes in the underlying factors regularly in co-operation with business units by using various, both internal and external sources of information. Possible revisions to estimates and assumptions are recognized in the period in which the estimates and assumptions are revised and in any future periods affected.
In Tulikivi the key assumptions about the future and major sources of estimation uncertainty as at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are related to, amongst others, deferred tax assets, measurement of inventories, property, plant and equipment related to quarries, fair value measurement and impairment testing of assets acquired in business combinations, that are described in detail below. The Group management believes that these are the key areas in the financial statements, since they include the most complex accounting policies and require most significant estimates and assumptions. In addition, changes in the estimates and assumptions used in these areas of financial statements are estimated to have the most extensive effects.
The Group tests goodwill, intangible assets not yet available for use and indefinite-lived intangible assets annually for potential impairment and assesses indications of impairment of property, plant and equipment and intangible assets at each reporting date. In addition, in respect of mineral resource exploration and evaluation assets, impairment tests are performed when the assets are reclassified. The recoverable amounts of the cash-generating units are assessed based on their value in use. The preparation of such calculations requires the use of estimates, especially in respect of future growth estimates of the cash-generating units and changes in profitability.
Further information on the sensitivity of the recoverable amount to the changes in the assumptions used is in Note 16.3 Impairment testing.
In connection with the performance improvement programme, the organisation has been streamlined and the Fireplace and Interior Stone businesses have been integrated. Therefore, as of the beginning of 2014, the company is no longer reporting these segments saparately.
| 2.1. Geographical information 2016 |
Finland | Rest of Europe |
USA | Group Total |
|---|---|---|---|---|
| Sales | 15 520 | 14 263 | 702 | 30 485 |
| Assets | 25 519 | 63 | 0 | 25 582 |
| 2015 | ||||
| Sales | 15 087 | 16 070 | 794 | 31 951 |
| Assets | 26 738 | 137 | 0 | 26 875 |
Non-current assets exclude financials instruments and deferred tax assets.
Geographical segments' sales are presented based on the country in which the customer is located and assets are presented based on location of the assets.
Group's revenue was distributed so that no one external client generated over 10 per cent of the company's total revenue in 2016 (2015).
| 3. Net sales per goods and services | 2016 | 2015 |
|---|---|---|
| Sales of goods | 28 251 | 29 717 |
| Rendering of services | 2 234 | 2 234 |
| Sales, total | 30 485 | 31 951 |
| 4. Other operating income | ||
| Proceeds from sale of PPE | 23 | 234 |
| Rental income from investment properties | 0 | 13 |
| Other income | 314 | 338 |
| Other operating income, total | 337 | 585 |
| 5. Employee benefit expense | ||
| Wages and salaries | -8 989 | -9 403 |
| Pension costs - defined contribution plans | -1 481 | -1 659 |
| Other social security expenses | -654 | -712 |
| Share-based compensation | -25 | -32 |
| Employee benefit expense, total | -11 149 | -11 806 |
The restructuring provision, note 25, includes unpaid personnel costs caused by enployee benefit expence amountig to EUR 372 (572) thousand. Information on key management personnel compensation is disclosed in note 35.3. Key management compensation.
| 5.1. Group's average number of personnel for the financial period | ||
|---|---|---|
| Group's average number of personnel for the financial period, total | 209 | 219 |
| Group's personnel at 31 December. | 269 | 276 |
| 1 000 euro | 2016 | |
|---|---|---|
| 6. Depreciation, amortisation and impairment | ||
| Depreciation and amortisation by class of assets | ||
| Intangible assets | ||
| Trademarks | -91 | |
| Capitalised development costs | -502 | |
| Other intangible assets | -366 | |
| Amortisation on quarries based on the unit of production method *) | -108 | |
| Amortisation of intangible assets, total | -1 067 | |
| Tangible assets | ||
| Buildings | -482 | |
| Machinery and equipment | -774 | |
| Motor vehicles | -24 | |
| Depdeciation on land areas based on the unit of production method *) | -36 | |
| Other tangible assets | -89 | |
| Depreciation of tangible assets, total | -1 405 | |
| Investment property | ||
| Buildings | 0 | |
| Total depreciation, amortisation and impairment | -2 472 |
*) The Group applies the unit of production method based on the usage of stone in calculating the amortisation for quarries, precipitation basins and mining rights. Land areas are depreciated on a unit-of-use basis based on the consumption of the rock material or stacking area filling time.
| Losses on sales of tangible assets | -18 | -30 |
|---|---|---|
| Operating expenses of investment properties | 0 | -4 |
| Rental expenses | -1 261 | -1 496 |
| Real estates costs | -388 | -383 |
| Marketing expenses | -1 638 | -2 050 |
| Other variable production costs | -2 139 | -2 032 |
| Other expenses | -2 182 | -2 518 |
| Other operating expenses, total | -7 626 | -8 513 |
Research costs expensed totalled EUR 484 thousand (712 thousand in 2015).
| 7.2. Auditors' fees | ||
|---|---|---|
| Audit fees | 58 | 63 |
| Tax advice | 0 | 3 |
| Other fees | 8 | 8 |
| Audit fees, total | 66 | 74 |
| EUR 1 000 |
|---|
| 8. Finance income |
| Dividend income on available for sale financial assets |
| Foreign exchange transaction gains |
| Interest income on trade receivables |
| Other interest income |
| Finance income, total |
| 9. Finance expense |
| 9.1. Items recognised in profit or loss |
| Interest expenses on financial liabilities at amortised cost and other liabilities |
| Foreign exchange transactions losses |
| Other finance expense |
| Finance expense, total |
Exchange rate differences recognised in sales and purchases totalled EUR 8 thousand (loss) in 2016 (2015: loss of EUR 13 thousand).
Financial items recognised in other comprehensive income:
| 2016 | 2015 | ||||||
|---|---|---|---|---|---|---|---|
| Before taxes |
Tax effects |
After taxes |
Before taxes |
Tax effects |
After taxes |
||
| Cash flow hedges | 75 | -35 | 40 | 39 | -8 | 31 | |
| Translation differences | 55 | 0 | 55 | 67 | 0 | 67 | |
| Other comprehensive income, total | 130 | -35 | 95 | 106 | -8 | 98 | |
| 11. Income taxes | 2016 | 2015 | |||||
| Current tax | 14 | 9 | |||||
| Transfer of income taxes to the revaluation reserve | 0 | -8 | |||||
| Deferred tax | 0 | -1 | |||||
| Income taxes, total | 14 | 0 | |||||
| The reconciliation between the tax expense in the income statement and the tax calculated based on the Group's domestic tax rate (20 per cent in 2016). | |||||||
| Profit before tax | -2 118 | -3 881 | |||||
| Tax calculated at domestic tax rates 20 per cent | 424 | 776 | |||||
| Effect of foreign subsidiaries different tax bases | -7 | 2 | |||||
| Income not subject to tax | 0 | ||||||
| Unrecognised taxes of previous losses | -313 | -750 | |||||
| Unrecognized deferred taxes on provisions | -95 | -10 | |||||
| Expenses not deductible for tax purposes | -11 | -60 | |||||
| Other | -12 | 41 | |||||
| Income statement tax expense | -14 | 0 |
| EUR 1 000 | 2016 | 2015 | |
|---|---|---|---|
| -- | ----------- | ------ | ------ |
Earnings per share is calculated by dividing the profit attributable to equity holders of the parent company by the weighted average number of ordinary shares in issue during the year.
| Profit attributable to equity holders of the parent company (EUR 1 000) | -2 132 | -3 881 | |||||
|---|---|---|---|---|---|---|---|
| Weighted average number of shares for the financial period | 59 747 043 | 59 747 043 | |||||
| Basic/diluted earnings per share (EUR) | -0.03 | -0.06 | |||||
| 13. Property, plant and equipment 2015 |
Land | Buildings | Vehicles and machinery |
Motor vehicles | Other tangible assets |
Advances | Total |
| Cost January 1 | 1 288 | 15 272 | 35 989 | 1 880 | 2 984 | 0 | 57 413 |
| Additions | 0 | 0 | 192 | 21 | 0 | 160 | 373 |
| Disposals | 0 | -185 | -20 651 | -385 | -1 187 | -22 408 | |
| Translation differences and other adjustments | 0 | 0 | 0 | 0 | 10 | 0 | 10 |
| Exchange rate differences and other adjustments | 1 288 | 15 087 | 15 530 | 1 516 | 1 807 | 160 | 35 388 |
| Cost December 31 | -436 | -10 492 | -32 971 | -1 840 | -1 942 | 0 | -47 681 |
| Accumulated depreciation and impairment January 1 | -36 | -482 | -774 | -24 | -89 | 0 | -1 405 |
| Depreciation | 0 | 0 | 0 | -8 | 0 | 0 | -8 |
| Depreciation related to the disposals | 0 | 185 | 20 645 | 385 | 1 177 | 0 | 22 392 |
| Accumulated depreciation and impairment December 31 | -472 | -10 789 | -13 100 | -1 487 | -854 | 0 | -26 702 |
| Property, plant and equipment, Net book amount January 1, 2016 | 852 | 4 780 | 3 018 | 40 | 1 042 | 0 | 9 732 |
| Property, plant and equipment, Net book amount December 31, 2016 | 816 | 4 298 | 2 430 | 29 | 953 | 160 | 8 686 |
The Group's production machinery within property, plant and equipment has carrying amount of EUR 2 216 (2 740) thousand.
Disposals of machinery and equipment and accumulated depreciation on disposals include EUR 2 557 thousand (13 thousand 2015). The Group is starting to use a new fixed asset register software in 2017. Part of fully depreciated assets have been scrapped in order to clarify accounting. Scrapping does not have a significant impact on carrying amount of property, plant and equipment.
The Group did not obtain government grants in 2016 or 2015 to acquisitions of plant and equipment. Government grants are deducted in arriving at the carrying amount of the related assets.
| 2015 | Land | Buildings | Vehicles and machinery |
Motor vehicles | Other tangible assets |
Advances | Total |
|---|---|---|---|---|---|---|---|
| Cost January 1 | 1 288 | 15 302 | 41 801 | 2 173 | 2 988 | 12 | 63 564 |
| Additions | 0 | 0 | 272 | 34 | 0 | 306 | |
| Disposals | 0 | -30 | -6 084 | -293 | -38 | -12 | -6 457 |
| Exchange rate differences and other adjustments | 1 288 | 15 272 | 35 989 | 1 880 | 2 984 | 0 | 57 413 |
| Cost December 31 | -400 | -10 021 | -38 050 | -2 076 | -1 839 | 0 | -52 386 |
| Accumulated depreciation and impairment January 1 | -36 | -501 | -947 | -43 | -136 | 0 | -1 663 |
| Depreciation | 0 | 0 | -4 | 0 | -5 | 0 | -9 |
| Depreciation related to the disposals | 0 | 30 | 6 030 | 279 | 38 | 0 | 6 377 |
| Accumulated depreciation and impairment December 31 | -436 | -10 492 | -32 971 | -1 840 | -1 942 | 0 | -47 681 |
| Property, plant and equipment, Net book amount January 1, 2015 | 888 | 5 281 | 3 751 | 97 | 1 149 | 12 | 11 178 |
| Property, plant and equipment, Net book amount December 31, 2015 | 852 | 4 780 | 3 018 | 40 | 1 042 | 0 | 9 732 |
| 2016 | 2015 |
|---|---|
| Buildings | Buildings |
| 28 | 44 |
| 0 | -16 |
| 28 | 28 |
| -28 | -34 |
| 0 | -1 |
| 0 | 7 |
| -28 | -28 |
| 0 | 10 |
| 0 | 0 |
| Land | Land |
| 92 | 166 |
| 0 | -74 |
| 92 | 92 |
| 92 | 92 |
| 92 | 92 |
| 0 | 34 |
*) The value of the real estates, that have market value on active markets, is based on the opinions of real estate agents.
The Group has categorised the fair value measurement for all of its investment properties as a Level 3 fair value since observable market data was not comprehensively available when fair value was determined.
| 15.1. Goodwill and other intangible assets 2016 |
Goodwill | Patents and trademarks |
Development costs |
Internally generated capitalised intangible assets |
Mineral resource exploration and evaluation assets |
Quarry lands and mining patents |
Other intangible assets |
Total |
|---|---|---|---|---|---|---|---|---|
| Cost January 1 | 4 174 | 3 512 | 4 188 | 6 547 | 388 | 4 253 | 7 554 | 30 616 |
| Additions | 0 | 0 | 269 | 0 | 10 | 92 | 371 | |
| Capitalised development costs | 0 | 0 | 538 | 0 | 0 | 0 | 0 | 538 |
| Disposals | -12 | -126 | -153 | -1 217 | -265 | -1 029 | -2 477 | -5 279 |
| Cost December 31 | 4 162 | 3 386 | 4 573 | 5 599 | 123 | 3 234 | 5 169 | 26 246 |
| Accumulated amortisation and impairment January 1 | 0 | -747 | -3 384 | -4 366 | -348 | -1 951 | -6 054 | -16 850 |
| Amortisation related to the disposals | 0 | -91 | -502 | -105 | -14 | -77 | -278 | -1 067 |
| Depreciation related to the disposals | 0 | 126 | 153 | 1 217 | 265 | 1 029 | 2 477 | 5 267 |
| Accumulated amortisation and impairment December 31 | 0 | -712 | -3 733 | -3 254 | -97 | -999 | -3 855 | -12 650 |
| Goodwill and other intangible assets, Net book amount January 1, 2016 |
4 174 | 2 765 | 804 | 2 181 | 40 | 2 302 | 1 500 | 13 766 |
| Goodwill and other intangible assets, Net book amount December 31, 2016 |
4 162 | 2 674 | 840 | 2 345 | 26 | 2 235 | 1 314 | 13 596 |
Internally generated intangible assets are costs incurred from opening new quarries and construction of basins. The carrying amount of intangible assets includes costs incurred from opening quarries EUR 4 606 (4 536) thousand in total. Costs from opening quarries are a few €/m3 for the total stone reserves of the quarry in question. Book value is the carrying amount of each quarry at the balance sheet date. Carrying amount includes the cost of opening a quarry, concession fees, coagulation basin and the attributable carrying amounts of roads.
Other intangible assets consist of licences, software, connection fees as well as of expenditures arisen from gates and asphalting works.
The group did not receive public grants in 2016 andin 2015 for development costs and other intangible assets. The public grants have been recognised as deduction of the carrying amount.
There were no classification changes relating to the mineral resources exploration and evaluation assets, that is, there were no transfers to other intangible assets during the reporting period or comparative period. There haven't been recognised any expenditures relating to mineral resources exploration and evaluation directly as an expense in the income statement.
In 2016 deductions of intangible assets / accumulated amortisations on deductions amounted to EUR 5 115 thousand (EUR 20 thousand).
At the end of the current financial year, there were no under construction under other intangible assets.
| 2015 | Goodwill | Patents and trademarks |
Development costs |
Internally generated capitalised intangible assets |
Mineral resource exploration and evaluation assets |
Quarry lands and mining patents |
Other intangible assets |
Total |
|---|---|---|---|---|---|---|---|---|
| Cost January 1 | 4 174 | 3 796 | 3 915 | 6 287 | 388 | 4 154 | 8 142 | 30 856 |
| Additions | 0 | 1 | 0 | 260 | 0 | 99 | 221 | 581 |
| Capitalised development costs | 0 | 0 | 273 | 0 | 0 | 0 | 0 | 273 |
| Disposals | 0 | -285 | 0 | 0 | 0 | 0 | -809 | -1 094 |
| Cost December 31 | 4 174 | 3 512 | 4 188 | 6 547 | 388 | 4 253 | 7 554 | 30 616 |
| Accumulated amortisation and impairment January 1 | 0 | -1 012 | -2 927 | -4 256 | -319 | -1 878 | -5 934 | -16 326 |
| Amortisation related to the disposals | 0 | -20 | -457 | -110 | -29 | -73 | -909 | -1 598 |
| Depreciation related to the disposals | 0 | 285 | 0 | 0 | 0 | 0 | 789 | 1 074 |
| Accumulated amortisation and impairment December 31 | 0 | -747 | -3 384 | -4 366 | -348 | -1 951 | -6 054 | -16 850 |
| Goodwill and other intangible assets, Net book amount January 1, 2015 |
4 174 | 2 784 | 988 | 2 031 | 69 | 2 276 | 2 208 | 14 530 |
| Goodwill and other intangible assets, Net book amount December 31, 2015 |
4 174 | 2 765 | 804 | 2 181 | 40 | 2 302 | 1 500 | 13 766 |
16.1. Goodwill allocation The Group's goodwill totals EUR 4.2 (4.2) million. Of that amount EUR 3.5 million has been allocated to Ceramic fireplaces unit and EUR 0.6 million to Interior stones , which form separate cash-generating units. Of the value of the Kermansavi trademark acquired in the acquisition of Kermansavi Oy, amounting to EUR 3.2 million, EUR 2.7 million has been allocated to Ceramic fireplaces unit and EUR 0.5 million to Utility ceramics unit. The amount has been derecognised in full as impairment losses transpired in impairment testing during previous years. The useful life of the trademark has been estimated to be indefinite. Beacause of its established brand, the management believes that the trademark will generate net cash inflows for the group for an undefined period of time.
| The carrying amounts of goodwill and trade mark were allocated as follows: | Interior stone products | Kermansavi fireplaces |
|---|---|---|
| 2015 | ||
| Goodwill | 632 | 3 542 |
| Trademark | 2 712 | |
| Total | 632 | 6 254 |
| 2014 | ||
| Goodwill | 632 | 3 542 |
| Trademark | 2 712 | |
| Total | 632 | 6 254 |
No impairment losses were recognised during the financial period.
For impairment testing purposes the recoverable amounts of the business operations are determined based on value-in-use calculations. The cash flow projections are based on the forecasts approved by management co- vering a five-year period. The pre-tax discount rate applied was 11.0 per cent (10.1 per cent in 2015) for Kermansavi fireplaces, and 10.8 per cent (9.9 per cent in 2015) for Interior Stone unit, which equal the weighted average cost of capital, including the risk premium. The estimated 5 per cent growth in revenue in Kermansavi stoves is based on agreements with prefabricated house companies and on the new collection. Sales margin is improved through switch to purchased ceramic tiles and through invitation to tender for fireplace doors and other parts. Initiated restructuring and performance improvement plan significantly will reduce variable and fixed costs both for Kermansavi stoves and Interior Stones. The growth rate of net sales applied to the Interior Stone unit in the forecast period is on average 1 per cent and is based on the actual long-term growth of the unit.
Sales margin -Operating result of Kermansavi fireplaces is assumed to slightly improve resulting from the renewed product collection and efficiency measures under the performance improvement programme being carried out. Opera- ting result of Interior Stone unit is assumed to improve resulting from the optimization of operations through restructuring.
Discount rate: determined as the weighted average cost of capital (WACC) where the cost of capital is the weighted average cost of equity and liability components including the adjustment for risk.
The growth rate of net sales applied to the Interior Stone unit in the forecast period is on average 1 per cent and is based on the actual long-term growth of the unit.
| EUR 1 000 | |||||
|---|---|---|---|---|---|
| The discount rate and growth rate | Interior stone | Kermansavi fireplaces | |||
| 2016 | 2015 | 2016 | 2015 | ||
| Discount rate | 10.8 | 9.9 | 10.1 | 10.1 | |
| Growth rate (average for the forecast period) | 5.0 | 5.0 | 5.0 | 5.0 | |
| With the assumptions, the recoverable amount exceeded the carrying amount as follows: | 2016 | 2015 | |||
| Interior stone | 507 | 1642 | |||
| Kermansavi fireplaces | 575 | 849 | |||
| Sensitivity analysis of impairment tests |
Effects of potential changes in the variables on other factors have not been taken into account in the sensitivity analysis. The change in result has been tested on the operating profit level.
| Effect of changes in discount rate, in thousands of euro |
Effect of changes in profit, in thousands of euro |
||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| Interior stone | - | - | - | - | |
| Kermansavi fireplaces | -502 | -354 | -1 485 | -1 259 |
Increase of 0.47 ( 0.64) per cent -point in the interest rate would result in recognition of impairment loss for Kermansavi stoves. Increase of 4.81 (8.36) per cent -point in the interest rate would result in recognition of impairment loss for Interior stone. Decrease of 0.76 (1.06) percent -point and of 2.26 (3.96) per cent -point in operating margin would result in recognition of impairment loss for Kermansavi stoves and Interior Stones respectively.
Mineral resource exploration and evaluation assets belong to the Fireplaces business segment. The carrying amount of capitalised exploration and evaluation expenditure is EUR 26 (39) thousand. Impairment tests are per- formed always when theclassification of assets in question changes and if there is an indication of impairment. Change in classification is dealt with more thoroughly in the accounting principles, section Mineral resource ex- ploration and evaluation assets.
| 17. Investments in associates | 2016 | 2015 |
|---|---|---|
| Shares and interest in associates | ||
| Balance sheet value December 31 | 0 | 0 |
| Share of the loss/profit of associates | 0 | -8 |
| 18. Other financial assets | ||
| Financial assets available for sale | ||
| Balance sheet value January 1 | 26 | 34 |
| Additional/disposal | 0 | -8 |
| Balance sheet value December 31 | 26 | 26 |
Financial assets available for sale are investments in unquoted shares. They are measured at cost, since their fair values can not be determined reliably.
| EUR 1 000 | ||||||
|---|---|---|---|---|---|---|
| 19. Deferred tax assets and liabilities | ||||||
| 19.1. Changes in deferred taxes during year 2016: | Jan. 1, 2016 | Recognised through profit and loss |
Recognised in other comprehensive income |
Recognized in equity |
Translation differences |
Dec. 31, 2016 |
| Deferred tax assets: | ||||||
| Provisions | 143 | -143 | 0 | 0 | 0 | 0 |
| Unused tax losses | 1 548 | -137 | 0 | 0 | 3 | 1 413 |
| Accumulated depreciation / amortisation not yet deducted in taxation | 1 307 | 249 | 0 | 0 | 1 556 | |
| Change in the revaluation reserve | 35 | 0 | -35 | 0 | 0 | 0 |
| Other items | 211 | 0 | 0 | 0 | 0 | 211 |
| Deferred tax assets, total | 3 244 | -31 | -35 | 0 | 3 | 3 180 |
| Deferred tax liabilities: | ||||||
| Capitalisation of intangible assets | -28 | 18 | 0 | 0 | 0 | -10 |
| The effect of the business combinations | -658 | 15 | 0 | 0 | 0 | -643 |
| Other items | -109 | -2 | 0 | 0 | 0 | -111 |
| Deferred tax liabilities, total | -795 | 31 | 0 | 0 | 0 | -764 |
| Changes in deferred taxes during year 2015: | Jan. 1, 2015 | Recognised through profit and loss |
Recognised in other comprehensive income |
Recognized in equity |
Translation differences |
Dec. 31, 2015 |
| Deferred tax assets: | ||||||
| Provisions | 201 | -58 | 0 | 0 | 0 | 143 |
| Unused tax losses | 1 810 | -260 | 0 | 0 | -1 | 1 548 |
| Accumulated depreciation / amortisation not yet deducted in taxation | 1 069 | 238 | 0 | 0 | 1 307 | |
| Change in the revaluation reserve | 42 | 0 | -7 | 0 | 0 | 35 |
| Other items | 214 | -3 | 0 | 0 | 0 | 211 |
| Deferred tax assets, total | 3 336 | -83 | -7 | 0 | -1 | 3 244 |
| Deferred tax liabilities: | ||||||
| Capitalisation of intangible assets | -61 | 33 | 0 | 0 | 0 | -28 |
| The effect of the business combinations | -717 | 59 | 0 | 0 | 0 | -658 |
| Other items | -109 | 0 | 0 | 0 | 0 | -109 |
| Deferred tax liabilities, total | -887 | 92 | 0 | 0 | 0 | -795 |
The Group has recognized deferred tax assets for the part of deductible temporary differences. Deferred tax assets are recognized for some unused tax losses as well as depreciation and amortization charges not yet deducted in taxation to the extent that it is probable that future taxable profit will be available against which the deferred tax assets can be utilized. The losses in question expire gradually over 2021 - 2025. Deferred tax assets have not been recognized in respect of losses for the financial period 2016. The valuation of deferred tax assets for previously recognized losses has been defined 0.2 million euros. Due to the completed performance improvement programme in 2013 - 2016, the cost structure of the company has been improved significantly. Consequently, it is considered that the financial performance of the company will be positive during the following strategy period 2016 - 2019.
The company has been reorganized significantly in all personnel groups during the last two years. The performance improvement programme caused non-recurring expenses for 2013-2016. However, this program increased the competitiveness of the company. Due to the changes that have been mainly structural, fixed expenses have been reduced from 15 million euros to 9 million euros.
During the performance improvement programme, the production has been centralized in Juuka, the office in Germany has been terminated, the distribution channels in Sweden have been changed, the Kermansavi-col- lection has been renewed and several new prefabricated house contracts have been signed. The difficult situation in the markets and big changes in the company reduced the sales in 2013-2016. However, when the situation in the markets improves and the sales will increase, the current cost structure are likely to better the result.
The Group has euros 4 524 (3 864) thousand tax losses carried forward, of which no deferred tax asset was recognized, as it is unlikely that the Group will generate taxable profit, before the expiration of the tax losses against which tax losses can be utilized. The losses expire as follows: 2021: EUR 239 thousand; 2022: EUR 25 thousand; 2023: EUR 474 thousand; 2024: EUR 693 thousand; and 2025: EUR 1 thousand.
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 20. Inventories | ||
| Raw materials and consumables | 3 277 | 3 733 |
| Work in progress | 2 049 | 2 519 |
| Finished goods | 2 537 | 2 414 |
| Inventories, total | 7 863 | 8 666 |
In 2016 raw materials, consumables and changes in finished goods and in work in progress recognized as an expense amounted to EUR 18 353 (18 206) thousand. Furthermore, a write-down of inventories to net realisable value was made, amounting to EUR 176 (191) thousand.
| 21. Trade and other receivables | ||
|---|---|---|
| 21.1. Current trade and other receivables | ||
| Trade receivables | 2 615 | 1 871 |
| Current tax assets based on the taxable income for the financial period | 0 | |
| Accrued incomes | ||
| Grant receivables | 0 | |
| Prepayments | 11 | |
| Other accrued income | 322 | |
| Other receivables | 135 | |
| Current receivables, total | 3 083 | 2 426 |
| 2016 | Gross | Impairment | Net |
|---|---|---|---|
| Not past due | 2 067 | 2 067 | |
| Past due 1-30 days | 395 | 395 | |
| Past due 31-60 days | 78 | 78 | |
| Past due 61-90 days | 38 | 26 | 12 |
| Past due over 90 days | 135 | 72 | 63 |
| Total | 2 713 | 98 | 2 615 |
| 2015 | Gross | Impairment | Net |
| Not past due | 1 405 | 1 405 | |
| Past due 1-30 days | 238 | 238 | |
| Past due 31-60 days | 65 | 65 | |
| Past due 61-90 days | 62 | 26 | 36 |
| Past due over 90 days | 167 | 40 | 127 |
| Total | 1 937 | 66 | 1 871 |
| EUR 1000 | |||
|---|---|---|---|
| 21.3. Trade receivables by risk categories | |||
| 2016 | Gross | Impairment | Net |
| Largest customers by customer groups | |||
| Stove producers | 185 | 185 | |
| Distributors of fireplaces in foreign countries | 792 | 63 | 729 |
| Construction companies | 101 | 2 | 99 |
| Distributors in home country | 1 240 | 29 | 1 211 |
| End users | 395 | 4 | 391 |
| Trade receivables, total | 2 713 | 98 | 2 615 |
| 2015 | |||
| Largest customers by customer groups | Gross | Impairment | Net |
| Stove producers | 89 | 89 | |
| Distributors of fireplaces in foreign countries | 688 | 44 | 644 |
| Construction companies | 114 | 114 | |
| Distributors in home country | 813 | 8 | 805 |
| End users | 233 | 14 | 219 |
| Trade receivables, total | 1 937 | 66 | 1 871 |
| The carrying amount of trade receivables for which the terms have been renegotiated | 0 | 0 | |
| Trade and other receivables |
The carrying amounts of trade and other receivables equal with their fair values, since discounting has not material effect owing to short maturities.
Credit risk related to receivables is presented in note 28.3. Credit risk.
| 22. Cash and cash equivalents | 2016 | 2015 |
|---|---|---|
| Cash in hand and at bank | 894 | 1 429 |
| 23. Notes to shareholders' equity | |
|---|---|
| Share series | Number of shares |
% of shares |
% of voting rights |
Share, EUR of share capital |
|---|---|---|---|---|
| K shares (10 votes) at December 31,2016 | 7 682 500 | 12.8 | 59.5 | 810 255 |
| A-shares (1 vote) total at December 31, 2016 | 52 188 743 | 87.2 | 40.5 | 5 504 220 |
| Shares total at December 31, 2016 | 59 871 243 | 100.00 | 100.00 | 6 314 475 |
| Effect of changes in the number of shares | Number of shares |
Share capital, EUR |
Treasury shares, EUR |
Total, EUR |
| January 1, 2011 | 37 143 970 | 6 314 475 | -108 319 | 6 206 156 |
| Acquisition of own shares | -124 200 | |||
| December 31, 2011 | 37 019 770 | 6 314 475 | -108 319 | 6 206 156 |
| December 31, 2012 | 37 019 770 | 6 314 475 | -108 319 | 6 206 156 |
| Issue of shares | 22 727 273 | 0 | ||
| Shares total at December 31, 2016, December 31, 2015 and December 31, 2014 | 59 747 043 | 6 314 475 | -108 319 | 6 206 156 |
According to the articles of association the company shall distribute from distributable profit EUR 0.0017 per share more to the company's series A shares than for the company's series K shares. Tulikivi Corporation's series A share is listed in the NASDAQ OMX Helsinki Ltd. Shares do not have nominal value. Maxium share capital was EUR 10 200 in 2016 and 2015.
Payments for share subscriptions under the old Companies Act (29.9.1978/734) have been recognised in share capital and share premium fund in accordance with the terms of the share issues. As decided by the Annual
general meeting the funds of the share premium account, EUR 7 334 thousand, has been transfered to the invested unrsetricted equity fund in 2010. The proceeds received from the share issued carried out in 2013, amounting to EUR 7 500 thousand, are recognised in the invested unrestricted equity fund. The related transaction costs, totalling EUR 427 thousand, are
debited to the invested unrestricted equity fund. The invested unrestricted equity fund amounted to EUR 14 407 thousand at December 31, 2013. Tulikivi Corporation's directed rights issue of up to approximately EUR 7.5 million was on 17 October 2013. According to the final result, a total of 22 920 917 of the company's Series A shares were subscribed, correspon- ding to some 101 per cent of the offered 22 727 273 shares. On 21 October 2013 the company's Board of Directors approved the subscriptions of 22 727 273 Series A shares under the terms of the share issue. All shares subscribed in the share issue have been paid in full. Shares subscribed in the share issue were registered in the Trade Register on October 22, 2013 and are traded on the NASDAQ OMX Helsinki Ltd exchange together with the company's existing Series A shares as of October 23, 2013. As a result of registering the new shares in the Trade Register, the number of the company's Series A shares is 50 331 243 and the number of the company's
Series K shares is 9 540 000. The lead manager of the share issue was Pohjola Corporation Finance Ltd. On March 4, 2014 the company received a request to convert 397 500 Series (1 460 000 in 2013) K shares into Series A shares. This conversion was registered in the Trade Register on March 14, 2014, following which the number of Tulikivi Series A shares is 52 188 743 and the number of Series K shares 7 682 500.
Translation differences consist of translation differences related to translation of the financial statements of foreign entities into Group reporting currency.
The revaluation reserve includes the effective portion of changes in the fair value of derivatives that qualify as cash flow hedges.
Treasury shares include the cost of own shares held by the Group. It is presented as a deduction from equity.
During the reporting period, Tulikivi Oyj has neither acquired nor disposed any own shares in 2016 (2015). At the reporting date, the company held 124 200 (124 200) own A shares, which represents 0.2 per cent of the share capital and 0.1 per cent of the voting rights. The acquisition price is EUR 0.87 /share on average. The acquisition of own shares has not had any significant effect on the distribution of ownership or voting rights of the company.
Terms of share-based payments / Option rights
Option rights are used to encourage the key employees to work on a long-term basis to increase shareholder value. The option rights also aim at committing the key employees to the employer. The option program is targeted to approximately 14 key employees, including the members of the Management Group. The Board of Directors decides on the distribution of the option rights annually. For all key employees, the prerequisite for receiving stock options is share ownership in the company.
The management of Tulikivi Group and the key employees are entitled to subscribe the company shares if the separately established vesting criteria are met, as follows:
The maximum total number of stock options issued is 1,800,000, and they entitle their owners to subscribe for a maximum total of 1,800,000 new A shares in the company or existing A shares held by the company. The option rights are divided into three classes. The share subscription period, for the stock option 2013A will be 1 May 2016—31 May 2018, for the stock option 2013B, 1 May 2017—31 May 2019, and the for stock option 2013C, 1 May 2018—31 May 2020. The share subscription price for all stock options is EUR 0.33 per share. The basis for the subscription price is the subscription price used in the share issue of Tulikivi Corporation carried out in October 2013. Each year dividends and equity returns will be deducted from the share subscription price. Dividends and equity returns paid annually will be deducted from the subscription price.
The theoretical market value of one stock option has been calculated through the use of Black & Scholes stock option pricing model with the following input factors:
The Board of Directors will determine separate financial targets based on the company's performance improvement programme for each option type, which must be met in order to the option to be granted. The number of stock options 2013A is 500 000, 2013B is 650 000 and 2013C is 650 000. As the EBITDA goal set for 2014 to 2016 was not achieved, no incentive pay was paid and no options were distributed for 2016, 2015 and 2014.
The Board decided to extend the monitoring period to the 2017 reporting period for all each option types.
| 25. Provisions | Environmental provision | Warranty provision | Restructuring provision | |||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Provisions January 1 | 190 | 404 | 135 | 195 | 572 | 535 |
| Increase in provisions | 7 | 0 | 65 | 1 | 0 | 172 |
| Effect of discounting, change | -2 | -24 | 0 | 0 | 0 | 0 |
| Used provisions | -7 | -13 | -100 | -61 | -200 | -135 |
| Discharge on recerves | 0 | -177 | 0 | 0 | 0 | 0 |
| Provisions December 31 | 188 | 190 | 100 | 135 | 372 | 572 |
A provision for Tulikivi Group's estimable environmental obligations has been recognised. The provision covers the costs from future closure of quarries related to monitoring waters, security arrangements and stacking area lining work. For the quarries open at the moment, the costs are estimated to incur on average in ten years from now. The discount rate used in determining the present value is 4 (4) per cent. The undiscounted amount of environmental provision was EUR 348 (468) thousand.
There is a warranty period of five years related to certain products of Tulikivi Group. During the warranty period faults consistent with the warranty contract are fixed at company's expense. Warranty provision is based on previous years experience on the faulty products, taking into consideration improvements.
The restructuring provision includes the continued unemployment allowance component for terminations in 2011-2013, as well the provisions for the employer's compensation fee related to the increase of the disability component of the Finnish Employees Pension Act (TyEl) 372 thousand euros (520 thousand euros) and the compensation for the termination of employment of the management 52 thousand euros in 2015.
| 2016 | 2015 | |
|---|---|---|
| Non-current provisions | 654 | 839 |
| Current provisions | 6 | 58 |
| Proviosions, total | 660 | 897 |
| 26. Interest-bearing liabilities | ||
| Balance sheet value | 16 393 | 17 766 |
| 26.1. Non-current | ||
| Bank borrowings | 10 385 | 12 527 |
| TyEL pension loans | 2 623 | 3 239 |
| Total | 13 008 | 15 766 |
| EUR 1000 | 2016 | 2015 |
|---|---|---|
| Interest bearing loans expire as follows: | ||
| 2016 | 2 000 | |
| 2017 | 3 385 | 3 000 |
| 2018 | 3 242 | 3 000 |
| 2019 | 9 766 | 9 766 |
| Total | 16 393 | 17 766 |
| 26.2. Current | ||
| Current portion of non-current bank borrowings and of TyEL pension loans | 3 385 | 2 000 |
Debt obligations are denominated in euro.
The Company signed a finance agreement with the creditor in December 11, 2015. This agreement covers contracts for the proportional loan payments in 2016-2018 including additional collaterals and covenants. This arrangement caused a non-recurring expense of 0.15 million euros in the last quarter of 2015. December 20, the company agreed with lenders that repayment maturing December 31, 2016 will be postponed to year 2017. The finance agreement includes covenants related to EBITDA, equity ratio and the ratio between the interest-bearing debt and EBITDA. During 2017, the covenant related to EBITDA, the covenant related to solvency ratio, the covenant related to the ratio between the interest-bearing debt and EBITDA are reviewed every six months in 2017 . The company estimates that these covenant terms will be met in 2017. The finance agreement includes also a restriction concerning dividend distribution and the acquisition of own shares leading to breach of covenants. Assessment of the management of the company is that company's financing is secured and the company meets the financial covenants in finance agreement in 2017, if the company's business is developing in line with forecasts. Management's opinion is, that if the sales does not develop as forecasted, arrangements for funding can be negotiated with lenders. The weighted average of effective interest rates on long-term financial loans was 3.3% (3.2%) in December 31, 2016.
The total debt of the group include loans of 16.4 million euros (17.8 million euros) which comprise loan covenants related to Group's equity ratio, EBITDA or the ratio between the interest-bearing debt and EBITDA. Breaches in covenants may require negotiations with the creditor or the arrangement of additional collaterals for the loans.
| 27. Trade and other payables | 2016 | 2015 |
|---|---|---|
| 27.1. Non-current | ||
| Trade payable | 3 295 | 1 720 |
| Advances received | 274 | 317 |
| Accrued expenses | ||
| Wages and social security expenses | 2 507 | 2 161 |
| Discounts and marketing expenses | 194 | 266 |
| External services | 276 | 299 |
| Interest liabilities | 117 | 349 |
| Other accrued expenses | 162 | 96 |
| Accrued expenses, total | 3 257 | 3 171 |
| Other liabilities | 380 | 314 |
| Current trade and other payables, total | 7 206 | 5 522 |
Other accrued expenses comprise accrued interest expenses and accruals related to other operating expenses.
The Group's activities expose it to various financial risks. The objective of the Group's financial risk management is to minimisize the unfavourable effects of the changes in the finance market to its profit for the period. The main financial risks to which the Group is exposed are foreign exchange risk, interest rate risk, credit risk and liquidity risk. The Group finance has been centralised in parent company, and the financing of the subsidiaries is mainly taken care of by internal loans. The liquidity of the Group companies is centralised by consolidated accounts. The finance department is responsible for investing the liquidity surplus and for financial risk management in accordance with the policies approved by the Board of Directors.
The group's currency risks arise from commercial transactions, monetary items in the statement of financial position and net investments in foreign subsidiaries. The most important currencies in respect of the Group's foreign currency risk are US Dollar (USD) and Russian Rouble (RUB). Over 90 per cent of the Group's cash flows are denominated in euro, thus, the Group's exposure to foreign currency risk is not significant. Foreign cur- rency risk can be hedged with forward contracts. The Group did not have any open forward contracts at the year-end 2015. The group does not apply hedge accounting as defined in IAS 39 on forward contracts.
The functional currency of the parent company is Euro. Foreign currency assets and liabilities translated to euro using the balance sheet rate are as follows:
| 2016 | 2015 | |||
|---|---|---|---|---|
| Nominal values, EUR 1 000 | USD | RUB | USD | RUB |
| Non-current assets | 0 | 100 | 0 | 100 |
| Current assets | 261 | 544 | 315 | 442 |
| Non-current liabilities | 0 | 2 | 0 | 0 |
| Current liabilities | 1 | 354 | 9 | 277 |
| Position | 260 | 251 | 306 | 265 |
| Net position | 260 | 251 | 306 | 265 |
The equity-related foreign currency translation position, which mainly pertains to the foreign subsidiaries, was minor at the balance sheet date 2016 and 2015. The Group does not hedge the foreign equity exposure.
The table below analyses the effect of strengthening or weakening of Euro against the currencies below assuming that all other variables remain constant. The sensitivity analysis is based on assets and liabilities denomi- nated in foreign currencies at the balance sheet date. The sensitivity analysis takes into account the effect of the foreign currency forwards.
| 2016 | 2015 | |||
|---|---|---|---|---|
| Income | Share capital | Income | Share capital | |
| +/- 10 per cent change in EUR/USD | ||||
| exchange rate, before income taxes | +/- 26 | +/- 0 | +/- 45 | +/- 0 |
| +/- 10 per cent change in EUR/RUB | ||||
| exchange rate, before income taxes | +/- 25 | +/- 0 | +/- 14 | +/- 0 |
The Group's short-term money market investments expose Tulikivi to interest rate risk but their effect as a whole is not material. The Group's result and cash flows from operating activities are mainly independent from changes in interest rates.
The Group is exposed to cash flow interest rate risk, which largely relates to the loan portfolio. The Group can borrow funds with fixed or floating rates and use interest rate swaps in order to hedge against risks arising from fluctuation of interest rates. The share of the loans with floating rates amounted to EUR 13.8 (14.8) million representing 84.0 per cent (83.4 per cent) for the interest-bearing liabilities at the year end. At the balance sheet date the Group had open interest rate swaps denominated in Euro with a nominal value of EUR 6.3 (6.4) million. Due to these interest rate swaps the Group receives floating rate interest based on Euribor rates (EUR 6.3 million / 3 months) and pays fixed interest on average 2.93 (2.98) per cent. The Group applies hedge accounting to those interest rate swaps which result in effective hedging. The fair value changes of these interest rate swaps, resulting in a loss of EUR 101 (175) thousand at the balance sheet date, are recognized in consolidated comprehensive income and the revaluation reserve under equity.
The gains from the fair value changes of other interest rate swops, amounting to EUR 0 thousand (0), are recognized in profit or loss. The cumulative interest rate risk of the borrowings is negative EUR 260 thousand (355 thousand), assuming 1 per cent point change in market interest rates, and the cumulative impact on equity is EUR 28 thousand (negative). Here the impact of the derivatives on the interest rate risk and equity has been taken into account.
| Interest rate risk | 2016 | 2015 |
|---|---|---|
| Balance sheet value | Balance sheet value | |
| Fixed rate instruments | ||
| Financial liabilities | 2 630 | 2 948 |
| Floating rate instruments | ||
| Financial liabilities | 13 763 | 14 817 |
| Interest rate derivatives | ||
| Accrued interest costs payable | 101 | 175 |
The Group has no significant concentration of credit risk since it has a large clientele and receivables of single costumer or a group of customers is not material for the Group. The aggregate amount of the credit losses and the impairment losses on trade receivables recognised in the income statement during the financial year totalled EUR 48 (gain in impairment losses 3) thousand. Credit risk related to commercial activities has been reduced by customer credit insurances. These covered 47.3 (55.6) per cent of the outstanding accounts at balance sheet date. Business units are responsible for credit risk related to trade receivables. The aging analysis of trade receivables is presented in note 21.2. The group's maximum credit risk exposure for trade receivables is their carrying amount at the year-end less any compensation received from customer credit insurances.
Financial instruments involve a risk of the counterparty not being able to meet its obligations. Liquid assets are invested in objects with good credit rating. Derivative contracts are entered only with banks with good credit rating.
The maximum credit risk related to group's other financial assets than trade receivables equals their carrying amounts at the balance sheet date.
The group strives to continuously asses and monitor the amount of capital needed for business operations in order to ensure that the group has adequate liquid funds for financing its operations and repayment for loans due. The Group aims at ensuring the availability and flexibility of financing is ensured, in addition to liquid funds, by using credit limits and different financial institutions for raising funds. There were no unused credit limits and undrawn credit facilities in 2016 at the balance sheet date.
The following table summarises the maturity profile of the group. The undiscounted amounts include interests and capital repayments.
| December 31, 2016 | |||||||
|---|---|---|---|---|---|---|---|
| Type of credit | Balance sheet value |
Total cash flows |
0-6 months |
6-12 months |
1-2 years |
3-5 years |
Later than 5 years |
| Loans from credit institution and TyEL pension loans | 16 393 | 17 350 | 691 | 3 130 | 3 595 | 9 934 | 0 |
| Cash flows from derivatives | 101 | 77 | 47 | 30 | 0 | 0 | 0 |
| Trade and other payables | 3 949 | 3 949 | 3 949 | 0 | 0 | 0 | 0 |
| Total | 20 443 | 21 376 | 4 687 | 3 160 | 3 595 | 9 934 | 0 |
| December 31, 2015 | |||||||
| Type of credit | Balance sheet value |
Total cash flows |
0-6 months |
6-12 months |
1-2 years |
3-5 years |
Later than 5 years |
| Loans from credit institution and TyEL pension loans | 17 766 | 19 289 | 298 | 2 311 | 3 446 | 13 231 | 0 |
| Cash flows from derivatives | 175 | 149 | 41 | 41 | 67 | 0 | 0 |
| Trade and other payables | 2 351 | 2 351 | 2 351 | 0 | 0 | 0 | 0 |
| Total | 20 292 | 21 789 | 2 690 | 2 352 | 3 513 | 13 231 | 0 |
| EUR 1 000 | ||
|---|---|---|
| Derivatives, nominal value Interest rate swaps |
2016 | 2015 |
| Arrive at maturity 2017 | 4 395 | 4 395 |
| Arrive at maturity 2018 | 1 936 | 1 936 |
| Arrive at maturity 2019 | 0 | 0 |
| Total Interest rate swaps | 6 331 | 6 331 |
The fair values of interest rate swaps are determined using a method based on the present value of future cash flows, supported by market interest rates at the balance sheet date and other market information. Financial assets at fair value are discloded in Note 29.
The objective of the Group's capital management is through an optimal capital structure to support the business operations by ensuring the normal operating conditions and increase shareholder value by striving at the best possible return. The capital structure is effected i.a. through dividend distribution and share issues. The Group may change and adjust the dividends distributed and capital repaid to the shareholders or the number of new shares issued or decide on sales of assets in order to repay liabilities. The equity presented in the consolidated statement of financial position is managed as capital.
The group monitors the develoment of capital on the basis of the equity ratio, for which 40 per cent is set as the lowest limit for dividend distribution by the Board Directors.
The group calculates equity ratio using the following formula:
100*Equity / (Balance sheet total - Advances received)
| 2016 | 2015 | |
|---|---|---|
| Equity | 12 397 | 14 409 |
| Balance sheet total | 37 422 | 39 396 |
| Advances received | 0 | 317 |
| Solvency ratio, % | 33.4 | 36.9 |
According to the credit rating byBishope D & B Finland Oy the Group's credit rating is A.
| Balance sheet, 2016 | Financial assets or liabilities at fair value through profit or loss |
Loans and receivables |
Available-for- -sale financial assets |
Financial liabilities at amortised cost |
Carrying amounts of balance sheet items |
Fair value | Hierarchy of fair value |
|---|---|---|---|---|---|---|---|
| Long-term assets | |||||||
| Other receivables | 0 | 2 | 0 | 0 | 2 | 2 | |
| Other financial assets | 0 | 0 | 26 | 0 | 26 | 26 | 2 |
| Short-term assets | |||||||
| Trade and other receivables | 0 | 2 750 | 0 | 0 | 2 750 | 2 750 | |
| Cash and cash equivalents | 0 | 894 | 0 | 0 | 894 | 894 | |
| Carrying amounts of financial assets by categories | 0 | 3 646 | 26 | 0 | 3 672 | 3 672 | |
| Long-term liabilities | |||||||
| Interest bearing liabilities | 0 | 0 | 0 | 13 008 | 13 008 | 13 106 | 2 |
| Derivatives | 101 | *) 0 |
0 | 0 | 101 | 101 | 2 |
| Short-term liabilities | |||||||
| Interest bearing liabilities | 0 | 0 | 0 | 3 385 | 3 385 | 3 414 | 2 |
| Trade and other payables | 0 | 0 | 0 | 3 675 | 3 675 | 3 675 | 2 |
| Carrying amounts of financial liabilities by categories | 101 | 0 | 0 | 20 068 | 20 169 | 20 296 |
*) Includes cash flow hedging instruments recognized in the revaluation reserve, amounting to EUR 90 (170) thousand.
The levels in a fair value hierarchy are as follows:
Level 1: fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values are based on inputs other than quoted prices included within level 1. However, the fair values are based on information that is ob- servable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of these instruments is measured on the basis of generally accepted valuation techniques which primarily use inputs based on observable market data.
Level 3: fair values are not based on observable market data (non-observable inputs) but to large extent on management estimates and application of those in generally accepted valuation models. There were no transfers between levels of the fair value hierarchy during the financial year ended and the comparative financial year.
Carrying amounts of financial assets and financial liabilities by categories and their fair values
| Balance sheet, 2015 | Financial assets or liabilities at fair value through profit or loss |
Loans and receivables |
Available-for- -sale financial assets |
Financial liabilities at amortised cost |
Carrying amounts of balance sheet items |
Fair value | Hierarchy of fair value |
|---|---|---|---|---|---|---|---|
| Long-term assets | |||||||
| Other receivables | 0 | 15 | 0 | 0 | 15 | 15 | |
| Other financial assets | 0 | 0 | 26 | 0 | 26 | 26 | 2 |
| Short-term assets | |||||||
| Trade and other receivables | 0 | 2 089 | 0 | 0 | 2 089 | 2 089 | |
| Cash and cash equivalents | 0 | 1 429 | 0 | 0 | 1 429 | 1 429 | |
| Carrying amounts of financial assets by categories | 0 | 3 533 | 26 | 0 | 3 559 | 3 559 | |
| Long-term liabilities | |||||||
| Interest bearing liabilities | 0 | 0 | 0 | 15 766 | 15 766 | 15 876 | 2 |
| Derivatives | 175 | *) 0 |
0 | 0 | 175 | 175 | 2 |
| Short-term liabilities | |||||||
| Interest bearing liabilities | 0 | 0 | 0 | 2 000 | 2 000 | 2 035 | 2 |
| Trade and other payables | 0 | 0 | 0 | 2 034 | 2 034 | 2 034 | 2 |
| Carrying amounts of financial liabilities by categories | 175 | 0 | 0 | 19 800 | 19 975 | 20 120 |
*) Includes cash flow hedging instruments recognized in the revaluation reserve, amounting to EUR 170 (77) thousand.
The levels in a fair value hierarchy are as follows:
Level 1: fair values are based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values are based on inputs other than quoted prices included within level 1. However, the fair values are based on information that is observable for the asset or liability either directly (i.e. as prices) or indi- rectly (i.e. derived from prices). The fair value of these instruments is measured on the basis of generally accepted valuation techniques which primarily use inputs based on observable market data.
Level 3: fair values are not based on observable market data (non-observable inputs) but to large extent on management estimates and application of those in generally accepted valuation models. There were no trans- fers between levels of the fair value hierarchy during the financial year ended and the comparative financial year.
| 2015 | |
|---|---|
| Derivatives | |
| Interest rate swaps, nominal value | 6 331 |
| Interest rate swaps, fair value | -101 |
| EUR 1 000 | |||
|---|---|---|---|
| 30. Adjustments of cash generated from operations | 2016 | 2015 | |
| Non-cash transactions: | |||
| Depreciation and amortisation | 2 472 | 3 271 | |
| Change in provisions | -237 | -238 | |
| Impairment | 12 | 44 | |
| Exchange differences | 59 | -169 | |
| Other | 24 | 0 | |
| Non-cash transactions, total | 2 330 | 2 908 |
Operating leases
| Future aggregate minimum lease payments under non-cancellable operating leases: | |||
|---|---|---|---|
| Not later than 1 year | 404 | ||
| Later than 1 year and not later than 5 years | 245 | ||
| Later than 5 years | 0 | ||
| Total | 649 |
The Group has leased several production and office facilities. The agreements are mainly made for the time being. Fixed-term leases include an option to continue the agreement after the initial date of expiration. The income statement for 2016 includes expensed lease rentals EUR 875 (983) thousand.
| The future lease payments for machinery and equipment | ||
|---|---|---|
| Due not later than 1 year | 208 | 221 |
| Due later | 270 | 78 |
| Leasing commitments, total | 478 | 299 |
Leasing agreements are three to six years in duration and do not include redemption clauses.
The Group has leased commercial spaces and offices from its own properties under cancellable operating leases.
| Minimum lease payment under non-cancellable operating leases | ||
|---|---|---|
| Not later than 1 year | 52 | 35 |
| Later than 1 year and not later than 5 years | 8 | 8 |
| Later than 5 years | 23 | 25 |
| Total | 83 | 68 |
| EUR 1 000 | 2016 | |
|---|---|---|
| 32. Commitments | ||
| Loans with related mortgages and pledges | ||
| Loans from financial institutions and loan guarantees | 16 393 | |
| Real estate mortgages given | 15 780 | 14 864 |
| Company mortgages given | 19 996 | |
| Total given mortgages and pledges | 35 776 | |
| Other own liabilities for which guarantees have been given | ||
| Real estate mortgages given | 534 | |
| Pledges given | 3 | |
| Total given guarantees on behalf of other own liabilities | 537 | |
| Obligation to repay VAT deductions made in earlier periods | 76 |
Tulikivi group has landscaping obligations based on the Mining Act and other environmental legislation, which must be met during operations and when the quarries are shut down in the future.
Actions demanded by the environmental obligations are continuously performed besides normal production processes. Handling of water, arrangements for soil and rock material stacking areas, vibration and noise measurement, dust prevention and the monitoring the measurement result belong to these tasks. The costs relating to these activities are mainly recognised in the income statement as expense. Transport of soil material to stacking areas by opening new quarries is capitalised to other long-term expenses and depreciated during the useful life of the quarry. Lining work of stacking areas is based on long-term quarrying plans, according to which surface material of new opened quarries will be used in lining work. However, the lining work cannot be done until the point when there are finished sectors in the stacking area. The landscaping is not estimated to increase the costs of normal quarrying work.
After a factory or a quarry is shut down, the final lining work of the stacking areas, water arrangements, establishing of check points, bringing to safety condition and planting and seeding the vegetation will take place. For that part of these costs which are estimable, a provision is recognised.
Based on the environmental authorisations, the Group has given quarantees to the effect of EUR 570 000 in total. For other environmental obligations, the Group has given real estate mortgages for EUR 34 thousand. In accordance with the permit obligations, environmental monitoring of these areas is continued for the time being.
| EUR 1 000 | |||
|---|---|---|---|
| 34. Indicators relating to environmental obligation | 2016 | 2015 | 2014 |
| Use of energy, electricity MWh | 8 477 | 8 220 | 9 199 |
| Use of oil, m3 | 146 | 150 | 150 |
| District and wood chips heating, MWh | 1 274 | 1 222 | 1 041 |
| Liquid gas, tonne | 91 | 84 | 123 |
| Fuel for vehicles, tonne. | 146 | 173 | 179 |
| Exsplosives, tonne | 21 | 34 | 12 |
| Stone material extracted in quarrying, 1 000 fixed-m3 | 112 | 150 | 110 |
| Quarrying of soap stone, 1 000 fixed-m3 gross | 65 | 82 | 90 |
| Stacked soil material, 1 000 net-m3 | 1 | 0 | 22 |
| The lubricant used for saw chains, for soap stone extraction sawing, is rapeseed oil which binds permanently with fine soap stone powder. During the year 2016 45 tonne rapeseed and pine oil was spent. |
45 | 71 | 53 |
The amount of soapstone used is affected by factory-specific capacity as well as yield of stone in the quarry and the factory in a given time.
| Acquired natural stone, 1 000 tonne | 1 | 1 | 1 |
|---|---|---|---|
| ------------------------------------- | --- | --- | --- |
Leftover clippings from production are partly used as filling for earthwork sites, the rest is stacked in stacking areas or is transferred to a waste disposal site. The natural stone is purchased from external suppliers.
The ceramic fireplace production uses mainly recycled porcelain fracture, feldspar and various kinds of cements as raw material for concrete products. The amount of ceramic materials used annually is approximately 2 250 tonnes. The amount of surface tiles used in coating of ceramic fireplaces supplied annually is approximately 53 tonnes and waste from cutting of ceramic tile slabs is directed to the sedimentation basin. Normal washing wa- ter and waste from the ceramic and concrete production is directed to the sedimentation basin on the factory area from which the solids are carried to the dumping ground.
In 2016, 5 588 cubic meter new process water was taken in Group's production processes. Soapstone manufacturing uses a closed process water cycle. In the Espoo plant part of process waters is recyclable, in the Heinä- vesi production plant process waters are treated in sedimentation basins. In Heinävesi process waters are led through sedimentation basins to the water system as overflow to drainage network or they absorb into ground. Quarry waters are led to the water system through sedimentation basins. Domestic waste water is led to the municipal waste water system or in absence of such a system, in filted fields.
Group's related parties comprise the parent company, subsidiaries, associates, Board members, Managing Director and the Management Group as well as the managing directors of the foreign subsidiaries. In addition Finnish Stone Research Foundation is included in the relate parties.
| 35.1 The Group's parent company and subsidiaries have the following relation: | Ownership interest (%) | Share of voting right (%) | ||
|---|---|---|---|---|
| Tulikivi Corporation, Juuka, parent company, factory | ||||
| Tulikivi U.S. Inc., USA, marketing company | 100 | 100 | ||
| OOO Tulikivi, Russia, marketing company | 100 | 100 | ||
| Tulikivi GmbH, Germany, marketing company | 100 | 100 | ||
| AWL-Marmori Oy, Turku, Merger registration of AWL-Marmori was on November 7, 2016 | 100 | 100 | ||
| The New Alberene Stone Company Inc., USA | 100 | 100 | ||
| 35.2. Related party transactions: | Sales | Purchases | Receivables | Liabilities |
| 2016 | ||||
| Associated companies | 0 | 0 | 0 | 0 |
| 2015 | ||||
| Associated companies | 0 | 18 | 0 | 0 |
| Transactions with key management | 2016 | 2015 | ||
| Sales to related parties | 2 | 1 |
The Group companies had no receivables from the key management personnel at the end of the current or the previous financial year.
Tulikivi Corporation is a founder member of Finnish Stone Research Foundation.
In addition, the company has leased offices and storages from the property owned by the foundation and North Karelian Educational Federation of Municipalities. The rent paid for these facilities was EUR 41 (48) thousand. The rent corresponds to the market level of rents. The service charges by Tulikivi Corporation where 10 thousand in 2016 (13 thousand) and rent charges on land EUR 2 (2) thousand. The Foundation did not charge any services from Tulikivi Corporation. The Company did not have receivables from Foundation at the reporting date.
| EUR 1 000 | ||
|---|---|---|
| 35.3. Key management compensation | 2016 | 2015 |
| Salaries and other short-term employee benefits of the Board of Directors and the Managing Director. | 350 | 343 |
| Post-employment benefits (pension benefits) | ||
| Contributions to statutory pension plan | 32 | 31 |
| Share-based payments | 5 | 4 |
| Total | 387 | 378 |
| Managing Director | ||
| Salaries and fees | ||
| Vauhkonen Heikki | ||
| Salaries | 183 | 176 |
| Post-employment benefits (pension benefits) | ||
| Contributions to statutory pension plan | 32 | 31 |
| Contributions to voluntary supplementary pension plan | 0 | 0 |
| Share-based payments | 5 | 4 |
| Total | 220 | 211 |
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| Members of the Board of Directors | ||
| Aspara Jaakko | 18 | 0 |
| Rönkkö Markku | 37 | 37 |
| Suutari Harri | 0 | 16 |
| Svanborg Reijo | 19 | 19 |
| Tähtinen Jyrki | 73 | 57 |
| Vauhkonen Heikki | 20 | 20 |
| Vauhkonen Reijo | 0 | 18 |
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| Members of the Board of Directors | ||
| Aspara Jaakko | 18 | 0 |
| Rönkkö Markku | 37 | 37 |
| Suutari Harri | 0 | 16 |
| Svanborg Reijo | 19 | 19 |
| Tähtinen Jyrki | 73 | 57 |
| Vauhkonen Heikki | 20 | 20 |
| Vauhkonen Reijo | 0 | 18 |
| Total | 167 | 167 |
Key management personnel comprises the members of the Management Group as well as the managing directors of the foreign subsidiaries.
The Managing Director is a member of the Management Group.
| Key management personnel compensation | ||
|---|---|---|
| Salaries and fees | 782 | 684 |
| Termination benefit paid | 0 | 211 |
| Post-employment benefits (pension benefits) | 0 | 211 |
| Contributions to statutory pension plan | 137 | 157 |
| Share-based payments | 20 | 16 |
| Total | 939 | 1 068 |
| 684 | 782 |
|---|---|
| 211 | 0 |
| 211 | $\circ$ |
| 157 | 137 |
| 16 | 20 |
| 1068 | 939 |
Anything that may prevent or hinder the Group from achieving its objectives is designated as a risk. Risks may constitute threats, uncertainties or lost opportunities related to current or future operations. The Group's risks are divided into strategic and operational risks, damage, casualty and financial risks and loss risks. In the
assessment of risks, their probability and impact are taken into account.
Strategic risks are related to the nature of business operations and concern, but are not limited to, the changes in Group's business environment, financial markets, market situation and market position as well as consumer habits and demand factors, allocation of resources, raw material reserves, changes in legislation and regulations, business operations as a whole, reputation of the company and the raw materials, and large investments.
An abrupt fall in consumer confidence may result in a quick, unexpected fall in demand. The recession and related uncertainty of consumers leads to decline in housing construction and in renovation which decreases the demand for products and thereby profitability. Recession may also affect consumers' choices by making price the dominant factor instead of product features. Changing competitive environment and substitute products entering the market and changes in consumer habits may adversely affect the demand for Group's products. Operations in several market areas, active monitoring of industry development and flexibility of capacity and cost structure even out the sales risks arising
from economic fluctuation. The downturn may also have a negative impact on customers' solvency and subcontractors' operations. Keeping the product cost structure competitive is a prerequisite for maintaining demand and growth.
In Tulikivi's market areas, the fireplace cultures vary from areas with conventional heat-preserving ovens to countries where stoves have strong traditions. As markets become more uniform, also fireplace cultures change in the target countries. When the market becomes uniform changes in consumer habits may affect the demand for certain products or production materials and thereby impact on profitability. Tulikivi focuses on understanding the needs of customers and meets them by, for instance, continuously developing products for new customer segments. Following trend and standard changes enhance the ability to forecast customer demand. Right customer groups are reached by correctly targeted communication. Unsound price competition decrease demand for the products and thereby weaken profitability. Disturbance may arise in connection with renewal of distribution channels or owing to reasons relating to entrepreneurs which are part
of the distribution channel or competing products entering the same distribution channel. Distribution network and product range are developed so that the distribution of the Group's products remains profitable and interesting for the entrepreneurs.
Volume of the fireplace market is partly dependent on the coldness of the winter season, thus, exceptionally warm winter may reduce demand for fireplaces. In addition, public authority regulation may affect the demand for fireplaces.
Soapstone is a natural material whose integrity, texture and yield percentage vary by quarry. The quality of the raw materials affects manufacturing costs. Tulikivi seeks to determine the quality of the materials on a quarry-specific basis by taking core samples and through test excavations before opening the quarry. Risks are also posed by potential competitors in raw materials on a global scale and soapstone deposits held by parties other than Tulikivi. Tulikivi's strategic objective is to further increase the reserves of soapstone. We continuously seek and explore new deposits.
The adequacy of the stone is increased by using the raw material as precisely as possible and by accounting for the special requirements of the stone in product development. Tulikivi Group manages the competition risks of its raw materials with continuous product development, a strong total concept and the Tulikivi brand, as well as with long-term stone reserve and excavation planning.
Changes in legislation and environmental issues About half of the fireplaces manufactured by Tulikivi are exported, primarily to continental Europe, Russia and the United States. Exceptional changes in the product approval process in these countries, sudden changes in product approval, such as in the case of particulate emission limits or restrictions on use, might affect the sales potential of Tulikivi products and restrict their use. Other legislative risks are the tightening of the requirements of environmental permits for quarrying and the lengthening of permit processes. Environmental legislation and regulations may cause the
company to incur costs that will affect sales margins and the earnings trend.
Tulikivi keeps abreast of the development and preparation of regulations and exercise an influence on them both directly and through regional fireplace associations. The burning technology of the products is constantly developed and product development takes a long-term approach to ensuring that Tulikivi products measure up to local regulations. We secure product approval for our products in all our business countries. Group's products have long life cycles and carbon emissions of fireplace production are extremely low.
The management of Tulikivi's business operations accounts for development opportunities, new products and customer groups and new technological solutions. New business opportunities, new markets and new product groups involve risks that may affect not only profitability, but also the Tulikivi brand. Strong fluctuations in exchange rates may hinder reaching market-specific gross margin targets.
The Tulikivi Group's strategic objective is to seek growth through acquisitions as well. Successful acquisitions and mergers have a bearing on the implementation of growth plans. If an acquisition or merger fails, the company's competitiveness might suffer and financial position may deteriorate. On the other hand, acquisitions can change the company's risk profile. However, the Group only carries out acquisitions on the basis of precise business and financial analyses. Alternative business models are actively surveyed. The Group has cut down the non-core businesses accumulated through business combinations.
Business risks are related to products, distribution channels, personnel, operations and processes.
Tulikivi Group reduces potential product liability risks by developing the products for optimal user safety. We ensure that the product and service chain spanning from Tulikivi to the customer is hitch-free and knowledgeable by providing training for retailers and installers as well as ensuring that the terms and conditions of sale are precise. We also seek to protect ourselves against product liability risks by taking out product and business liability insurance policies.
Operational risks are related to the consequences of human activities, failures in internal company processes or external events. The operational risks of factory operations are minimized by means such as compliance with the company's operating manual, by developing occupational safety consistently and with systematic development efforts. Manufacturing and introduction of new products involve risks. Careful planning and training of personnel are used as protection against these risks.
Dependence on key goods supplies might increase the Group's material costs or the costs of machinery or their spare parts or affect production. Failures in the distribution network can affect the Group's ability to deliver products timely to its customers. Energy procurements from external suppliers might influence the Group's energy costs or energy supply. On the other hand, the high price of energy supports demand for products. Changes in distribution
channels and logistics systems might also disturb operations. Contractual risks are part of operational risks.
The Group's business relies on functional and reliable information systems. The utilization of the ERP system involves risks if new practices
are not adopted in business processes and the potential provided by the new system utilized promptly. The Group aims to manage the risks related to data applicability by duplicating the critical information systems, among other things. Steps taken to manage their risks include setting up backups for critical information systems and telecom connections, selecting cooperation partners carefully and standardizing the workstation configurations and software used in the Group as well as
consistent information security practices.
In line with the nature of the Group's business, trade receivables and inventories are major balance sheet items. The credit loss risk of trade receivables is managed by means of a consistent credit granting policy, insuring receivables and effective collection.
The Group's core expertise involves its core business processes, including sales, product development, quarrying, manufacture, procurements and logistics, as well as the
necessary support functions, which include information administration, finance, HR and communications. An unforeseen drain in the core expertise or decrease in personnel's development ability or disadvantageous development in population structure in current operation locations would pose risks. Core competence conservation and availability are secured with planning the need of personnel and knowledge and engaging personnel to constant change and growth. The Group continuously seeks to step up the core expertise and other significant competence of its personnel by offering opportunities for on-the-job learning and training and to complete the expertise needed for strategy implementation in those areas where it has not existed before. Sufficient core competencies can be partly secured through networking. Boosting operational efficiency, controlled change and effective internal communications serve as means of managing operational and process risks.
The Group's business exposes it to a variety of financial risks. Risk management seeks to minimize the potential adverse effects of changes in the financial markets on the Group's result. The main financial risks are liquidity risk, capital management risk, interest rate risk and foreign exchange risk. Financial risks and their management are presented in greater detail in Note 28 to the consolidated financial statements. Any major downturn that might be caused by the euro area crisis could decrease the demand for the company´s products and the company's profitability and equity. The company's balance sheet assets include goodwill, the value of which is based on the management's estimates. If these estimates fail to materialise, it is possible that impairment losses would have to be recognised in connection with the impairment testing processes. Weakened profitability and a drop in equity could lead to deterioration in the company´s financial position. In order to meet the covenant requirements contained in the Group's bank borrowings the company's profitability should improve.
Most of the Group's production is capital-intensive and a large share of the Group's capital is committed to its production plants. A fire or serious machinery break¬down, for instance, could therefore cause major damage to assets or loss of profits as well as other indirect adverse impacts on the Group's operations. The Group seeks to protect itself against such risks by evaluating its production plants and processes from the perspective of risk management. Damage, casualty and loss risks also include occupational health and protection risks, environmental risks and accident risks. The Group regularly reviews its insurance coverage as part of overall risk management. Insurance policies are taken out to cover the risks that it is prudent to insure for business or other reasons.
There are no pending legal proceedings and the Board of Directors is not aware of any other legal risks involved in the company's operations that would have a significant effect on its result of operations.
| MEUR | ||||||||
|---|---|---|---|---|---|---|---|---|
| Q4/2016 | Q3/2016 | Q2/2016 | Q1/2016 | Q4/2015 | Q3/2015 | Q2/2015 | Q1/2015 | |
| Sales | 8.0 | 7.7 | 7.9 | 6.3 | 9.0 | 8.3 | 8.5 | 6.2 |
| Operating result | -0.1 | 0.1 | 0.0 | -1.3 | 0.1 | 0.3 | -0.8 | -2.5 |
| Key Figures Describing Financial Development and Earnings per Share | ||||||||
| EUR 1 000 | ||||||||
| Income statement | 2012 | 2013 | 2014 | 2015 | 2016 | |||
| Sales | 51 191 | 43 724 | 39 293 | 31 951 | 30 485 | |||
| Change, % | -12.9 | -14.6 | -10.1 | -18,7 | -4,6 | |||
| Operating result | 59 | -4 259 | -2 439 | -2 931 | -1 361 | |||
| % of turnover | 0.1 | -9.7 | -6.2 | -9,2 | -4,5 | |||
| Finance incomes and expenses and share of loss of associated companies |
-839 | -1 000 | -837 | -950 | -756 | |||
| Result before income tax | -779 | -5 259 | -3 276 | -3 881 | -2 132 | |||
| % of turnover | -1.5 | -12 | -8.3 | -12,1 | -7,0 | |||
| Income taxes | 155 | 854 | 671 | 0 | -14 | |||
| Result for the year | -642 | -4 405 | -2 633 | -3 783 | -2 037 | |||
| Balance sheet | ||||||||
| Assets | ||||||||
| Non current assets | 31 857 | 30 131 | 29 282 | 26 875 | 25 582 | |||
| Inventories | 11 366 | 10 258 | 10 119 | 8 666 | 7 863 | |||
| Cash and cash equivalents | 3 357 | 10 704 | 3 665 | 1 429 | 894 | |||
| Other current assets | 5 154 | 3 558 | 4 121 | 2 426 | 3 083 | |||
| Equity and liabilities | ||||||||
| Equity | 18 162 | 20 779 | 18 160 | 14 409 | 12 397 | |||
| Interest bearing liabilities | 23 785 | 17 981 | 19 981 | 17 766 | 13 008 | |||
| Non-interest bearing liabilities | 8 559 | 14 321 | 5 060 | 5 530 | 7 208 | |||
| Balance sheet total | 51 733 | 54 651 | 47 187 | 39 396 | 37 422 |
| 2012 | 2013 | 2014 | 2015 | 2016 | |
|---|---|---|---|---|---|
| Return on equity, % | -3.4 | -22.6 | -13.5 | -23.8 | -15,9 |
| Return on investments, % | 0.3 | -9.8 | -5.4 | -7.7 | -4,3 |
| Solvency ratio, % | 35.2 | 38.1 | 39.0 | 36.9 | 33,4 |
| Net indebtness ratio, % | 112.9 | 59.3 | 89.8 | 113.4 | 125 |
| Current ratio | 1.7 | 1.8 | 1.6 | 1.7 | 1,1 |
| Gross investments, EUR 1 000 | 2 665 | 1 618 | 2 382 | 1 149 | 1 282 |
| % of turnover | 5.2 | 3.7 | 6.1 | 3.6 | 4,2 |
| Research and development costs, EUR 1 000 | 1 648 | 1 574 | 1 380 | 985 | 484 |
| % of turnover | 3.1 | 3.6 | 3.5 | 3.1 | 1,6 |
| Development costs (net), capitalised, EUR 1 000 | 613 | 233 | 232 | 272 | 538 |
| Order book, EUR million | 4.6 | 4.4 | 4.2 | 3.9 | 3,2 |
| Average personnel | 351 | 293 | 281 | 219 | 209 |
| Key indicators per share | |||||
| Earnings per share, EUR | -0.02 | -0.11 | -0.04 | -0.06 | -0,03 |
| Equity per share, EUR | 0.49 | 0.35 | 0.30 | 0.25 | 0,21 |
| Dividends | |||||
| Nominal dividend per share, EUR | |||||
| A share | - | - | - | - | - |
| K share | - | - | - | - | - |
| Dividend per earnings, % | - | - | - | - | - |
| Effective dividend yield, %/A shares | - | - | - | - | - |
| Price/earnings ratio, EUR | -33.8 | -4.6 | -4.5 | -2.7 | -6.2 |
| Highest share price, EUR | 0.92 | 0.63 | 0.36 | 0.3 | 0,29 |
| Lowest share price, EUR | 0.47 | 0.31 | 0.19 | 0.12 | 0,15 |
| Average share price, EUR | 0.60 | 0.44 | 0.28 | 0.18 | 0,20 |
| Closing price, December 31, EUR | 0.57 | 0.34 | 0.20 | 0.17 | 0,21 |
| Market capitalization, EUR 1 000 | 21 101 | 20 314 | 11 949 | 10 157 | 12 547 |
| (supposing that the market price of the K share is the same as that of the A share) Number of shares traded, (1 000 pcs) |
4 050 | 10 493 | 7 933 | 27 900 | 13 847 |
| % of the total amount | 14.7 | 33.5 | 15.3 | 53.9 | 26,7 |
| The average issue-adjusted number of shares for the financial year (1 000 pcs) |
37 020 | 41 378 | 59 747 | 59 747 | 59 747 |
| The issue-adjusted number of outstanding shares at December 31 (1 000 pcs) |
37 020 | 59 871 | 59 747 | 59 747 | 59 747 |
| Key figures describing financial development | |||
|---|---|---|---|
| Result for the year | |||
| Return on equity (ROE), % = | 100 x | Average shareholders' equity during the year | |
| Result before income tax + interest and other finance expenses | |||
| Return on investments (ROI), % = | 100 x | Shareholders' equity + financial loans with interest, average during the year | |
| Shareholders' equity | |||
| Solvency ratio, % = | 100 x | Balance sheet total - advance payments | |
| Net interest-bearing financial liabilities | |||
| Net indebtness ratio, % = | 100 x | Shareholders' equity | |
| Current ratio= | Current assets | ||
| Current liabilities | |||
| Key figures per share | |||
| Profit/loss attributable to owners of the parent company | |||
| Earnings per share = | Average issue-adjusted number of shares for the financial year *) | ||
| Equity per share = | Shareholders' equity | ||
| Issue-adjusted number of shares at balance sheet date *) | |||
| Dividend per share = | Dividend paid for the year | ||
| Issue-adjusted number of shares at balance sheet date *) | |||
| Dividend per earnings, % = | 100 x | Dividend per share | |
| Earnings per share | |||
| Effective dividend yield, % = | 100 x | Issue-adjusted dividend per share | |
| The closing price of A- share at balance sheet date | |||
| Price/ Earnings ratio (P/E)= | The closing price of A-share at balance sheet date | ||
| Earnings per share | |||
| *) own shares held by the company excluded |
| EUR 1 000 | Note | Jan. 1 - Dec. 31, 2016 | Jan. 1 - Dec. 31, 2015 |
|---|---|---|---|
| Net Sales | 1.1. | 29 095 | 30 618 |
| Increase (+) / decrease (-) in inventories | |||
| in finished goods and in work in progress | -394 | -732 | |
| Production for own use | 746 | 533 | |
| Other operating income | 1.2. | 548 | 402 |
| Materials and services | |||
| Purchases during the fiscal year | -5 994 | -6 140 | |
| Change in inventories, increase (-) / decrease (+) | -456 | -723 | |
| External charges | -4 537 | -4 536 | |
| Materials and services, total | -10 987 | -11 399 | |
| Personnel expenses | |||
| Salaries and wages | -8 616 | -9 081 | |
| Pension expenses | -1 429 | -1 610 | |
| Other social security expenses | -505 | -545 | |
| Personnel expenses, total | 1.3. | -10 550 | -11 236 |
| Depreciation, amortisation and value adjustments | 1.4. | -2 544 | -3 492 |
| Other operating expenses | 1.5. | -7 339 | -8 213 |
| Operating result | -1 425 | -3 519 | |
| Financial income and expenses | 1.6 | -737 | -1 161 |
| Result before untaxed reserves and income taxes | -2 162 | -4 680 | |
| Untaxed reserves | |||
| Change in accelerated depreciation | 795 | 306 | |
| Extraordinary income | 0 | 218 | |
| Untaxed reserves, total | 1.7. | 795 | 524 |
| Income taxes | -143 | -58 | |
| Income taxes in total | -143 | -58 | |
| Result for the year | -1 510 | -4 214 |
| EUR 1 000 | Note | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|---|
| Assets | |||
| Fixed asset and other non-current investments | |||
| Intangible assets | |||
| Capitalised development expenditure | 792 | 665 | |
| Intangible rights | 37 | 53 | |
| Goodwill | 1 166 | 1 458 | |
| Other long term expenditures | 7 294 | 7 440 | |
| Intangible assets, total | 2.1. | 9 289 | 9 616 |
| Tangible assets | |||
| Land | 908 | 944 | |
| Buildings and constructions | 4 298 | 4 780 | |
| Machinery and equipment | 2 408 | 3 009 | |
| Other tangible assets | 38 | 41 | |
| Advance payments | 160 | 0 | |
| Tangible assets, total | 2.2. | 7 812 | 8 774 |
| Investments | |||
| Shares in group companies | 2.3. | 15 | 23 |
| Group receivables | 2.4. | 40 | 0 |
| Other investments | 2.5. | 26 | 26 |
| Investments, total | 81 | 49 | |
| Fixed assets and other non-current investments, total | 17 182 | 18 439 |
Continues on next page.
| EUR 1 000 | Note | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|---|
| Current assets | |||
| Inventories | |||
| Raw material and consumables | 3 277 | 3 733 | |
| Work in progress | 2 049 | 2 519 | |
| Finished products/goods | 2 311 | 2 235 | |
| Inventories, total | 2.6. | 7 637 | 8 487 |
| Non-current receivables | |||
| Trade receivables | 2.7. | 2 | 15 |
| Deferred tax assets | 2.8. | 0 | 178 |
| Non-current receivables, total | 2 | 193 | |
| Current receivables | |||
| Trade receivables | 2 445 | 1 639 | |
| Receivables form group companies | 47 | 197 | |
| Other receivables | 45 | 133 | |
| Prepayments and accrued income | 272 | 274 | |
| Current receivables, total | 2.9. | 2 809 | 2 243 |
| Cash in hand and at banks | 643 | 1 188 | |
| Total current assets | 11 091 | 12 111 | |
| Total assets | 28 273 | 30 550 |
| EUR 1 000 | Note | Dec. 31, 2016 | Dec. 31, 2015 |
|---|---|---|---|
| Liabilities and shareholders' equity | |||
| Shareholders' equity | |||
| Capital stock | 6 314 | 6 314 | |
| Reserve for invested unrestricted equity | 14 834 | 14 834 | |
| Revaluation reserve | -99 | -139 | |
| Treasury shares | -108 | -108 | |
| Retained earnings | -15 608 | -11 394 | |
| Result for the year | -1 510 | -4 214 | |
| Total shareholders' equity | 2.10. | 3 823 | 5 293 |
| Untaxed reserves | |||
| Accelerated depreciation | 79 | 874 | |
| Provisions | 2.13. | 660 | 897 |
| Liabilities | |||
| Non-current liabilities | |||
| Bank borrowings | 10 385 | 12 527 | |
| TyEL pension loans | 2 623 | 3 239 | |
| Non-current liabilities, total | 2.14. | 13 008 | 15 766 |
| Current liabilities | |||
| Bank borrowings | 2 640 | 1 529 | |
| Pension loans | 745 | 471 | |
| Advances received | 55 | 83 | |
| Trade payable | 3 297 | 1 712 | |
| Liabilities to associates | 491 | 504 | |
| Other liabilities | 298 | 259 | |
| Accrued expenses | 3 177 | 3 162 | |
| Current liabilities, total | 2.15. | 10 703 | 7 720 |
| Total liabilities | 23 711 | 23 486 | |
| Total liabilities and shareholders' equity | 28 273 | 30 550 |
| EUR 1 000 | Jan. 1 - Dec. 31, 2016 | Jan. 1 - Dec. 31, 2015 |
|---|---|---|
| Cash flow from operating activities | ||
| Reuslt before extraordinary items | -2 162 | -4 680 |
| Adjustments for: | ||
| Depreciation | 2 544 | 3 492 |
| Unrealised exchange rate gains and losses | 19 | -25 |
| Other non-payment-related expenses | -267 | -238 |
| Financial income and expenses | 737 | 1 161 |
| Other adjustments | -18 | 29 |
| Cash flow before working capital changes | 853 | -261 |
| Change in net working capital: | ||
| Increase (-) / decrease (+) in current non-interest bearing receivables | -581 | 1 707 |
| Increase (-) / decrease (+) in inventories | 850 | 1 455 |
| Increase (+) / decrease (-) in current non-interest bearing liabilities | 1 856 | -945 |
| Cash generated from operations before financial items and income taxes | 2 978 | 1 956 |
| Interest paid and payments on other financial expenses from operations | -918 | -974 |
| Dividends received | 1 | 5 |
| Interest received | 8 | 10 |
| Income tax paid | 2 | 0 |
| Cash flow before extraordinary items | 2 071 | 997 |
| Net cash flow from operating activities | 2 071 | 997 |
| Cash flow used in investing activities | ||
| Investments in tangible and intangible assets, gross | -1 253 | -1 175 |
| Investment grants received | 0 | 50 |
| Proceeds from sale of tangible and intangible assets | 33 | 37 |
| Loans granted to subsidiaries | -40 | 0 |
| Repayments of loan receivables | 0 | 74 |
| Interest received | 15 | 5 |
| Net cash used in investing activities | -1 245 | -1 009 |
| Cash flow from financing activities | ||
| Long-term borrowing | 0 | 2 000 |
| Repayment of long-term loans | -1 372 | -4 216 |
| Received group contributions | 0 | 218 |
| Net cash flow from financing activities | -1 372 | -1 998 |
| Net increase (+) / decrease (-) in cash and cash equivalents | -546 | -2 010 |
| Cash and cash equivalents at the beginning of the financial year | 1 188 | 3 181 |
| Effect of changes in exchange rates | -1 | 17 |
| Received in merger | 2 | 0 |
| Cash and cash equivalents at the end of the financial year | 643 | 1 188 |
The financial statements have been prepared in accordance with the Finnish accounting law.
Fixed assets have been disclosed in the balance sheet at acquisition cost net of received investment grants and depreciation according to plan. Depreciation according to plan have been calculated on straight-line method based on the economic life time of the assets as follows:
| Depreciation period | |
|---|---|
| Intangible rights and other long-term expenditure | 5 to 10 years |
| Quarring areas and basins | unit of production method |
| Goodwill | 13 years |
| Buildings | 25 to 30 years |
| Constructions | 5 years |
| Process machinery | 3 to 15 years |
| Motor vehicles | 5 to 8 years |
| IT equipment | 3 to 10 years |
| Development expenditure | 5 years |
The acquisition cost of equipment is depreciated applying the maximum depreciation rates allowed by the corporate tax law, starting from the time of acquisition.
Quarrying areas, including the opening costs of quarries, basins and quarry land areas are depreciated using the unit of production method based on the amount of rock used and filling time of damping areas. Depreciation of quarry lands and basins and other auxiliary structures is commenced when the quarry is ready for production use.
Inventories have been presented in accordance with the average cost principle or the net realisable value, whichever is lower. The cost value of inventories includes direct costs and their proportion of indirect manufacturing and acquisition costs.
Net sales represents sales after the deduction of discounts, indirect taxes and exchange gains/losses on trade receivables. Revenue has been recognized at the time of the delivery of the goods. Revenue from installing and services is recognised in the period when the service is rendered.
Research cost has been recorded as annual costs when incurred. Costs incurred from drilling exploration in quarry areas have been capitalised for their main part and they are depreciated over their useful lives. However, drilling exploration costs are expensed when there is significant uncertainty involved in the commercial utilization of the soapstone reserves in question. Development costs related to sauna-product group, the renewal of enterprise resource planning system, the productisation of new ceramic collection and the design of new soapstone interiors have been activated.
Employee pension schemes have been arranged with external pension insurance companies. Pension costs are expensed for the year when incurred. Pension schemes for personnel outside Finland follow the local practices.
According to the Finnish corporate tax law untaxed reserves, such as accelerated depreciation, are tax deductible only if recorded in financial statements.
Income taxes include taxes corresponding to the Group companies' results for the financial period as well as the change in deferred tax asset. Deferred tax assets have been provided on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the financial statements, using the tax rate enacted at the balance sheet date for the following years.
The Board will propose to the Annual General Meeting that no dividend be paid.
The expense determined at the grant date of the stock options is based on the theoretical market value of the stock option which is calculated using the Black & Scholes stock option pricing model. The theoretical market value of the stock options has not been adjusted downward for the probability of not fulfilling the targets set for the vesting criteria. The stock options have been granted for the first time in 2013 and they can be used to subscribe shares earliest
Comparability of the result
Disclosures in the reporting period and the corresponding figures for the previous period are comparable over time.
Foreign currency balance sheet items have been valued at the average exchange rate prevailing on the balance sheet date as indicated by the European Central Bank.
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 1.1. Net sales | ||
| 1.1.1. Net sales per geographical area | ||
| Finland | 15 260 | 15 082 |
| Rest of Europe | 13 133 | 14 936 |
| USA | 702 | 600 |
| Total net sales per geographical area | 29 095 | 30 618 |
| 1.1.2. Net sales per goods and services | ||
| Sales of goods | 26 655 | 28 317 |
| Rendering of services | 2 440 | 2 301 |
| Total net sales per goods and services | 29 095 | 30 618 |
| 1.2. Other operating income | ||
| Rental income | 69 | 91 |
| Charges for intergroup services | 206 | 74 |
| Proceeds from sale of fixed and other non-current investments | 23 | 17 |
| Other income | 250 | 220 |
| Total other operating income | 548 | 402 |
| 1.3. Salaries and fees paid to Directors and number of employees | ||
| 1.3.1. Salaries and fees paid to Directors | ||
| Salaries and other short-term employee benefits of the Board of Directors and the Managing Directors |
350 | 343 |
| Post-employment benefits (pension benefits) | ||
| Contributions to statutory pension plan | 32 | 31 |
| Share-based payments | 5 | 4 |
| Total | 387 | 378 |
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| Managing Director | ||
| Salaries and fees | ||
| Vauhkonen Heikki | ||
| Salaries | 183 | 176 |
| Post-employment benefits (pension benefits) | ||
| Contributions to statutory pension plan | 32 | 31 |
| Share-based payments | 5 | 4 |
| Total | 220 | 211 |
| Annual fees to the Members ot the Board | ||
| Jaakko Aspara | 18 | 0 |
| Rönkkö Markku | 37 | 37 |
| Suutari Harri | 0 | 16 |
| Svanborg Reijo | 19 | 19 |
| Tähtinen Jyrki | 73 | 57 |
| Vauhkonen Reijo | 0 | 18 |
| Vauhkonen Heikki | 20 | 20 |
| Total | 167 | 167 |
Key management personnel comprises the members of the Management Group as well as the managing directors of the foreign subsidiaries.
| The Managing Director is a member of the Management Group. | ||
|---|---|---|
| Key management personnel compensation | ||
| Salaries and fees | 660 | 570 |
| Termination benefit paid | 0 | 211 |
| Post-employment benefits (pension benefits) | ||
| Contributions to statory pension plan | 116 | 137 |
| Share-based payments | 19 | 15 |
| Total | 795 | 933 |
| EUR 1 000 | 2016 | 2015 | EUR 1 000 | 2016 | 2015 |
|---|---|---|---|---|---|
| 1.3.2. Average number of empoyees durung the fiscal year | 1.5. Other operating expenses | ||||
| Clerical employees | 63 | 70 | Rental expenses | 1 208 | 1 430 |
| Workers | 143 | 139 | Maintenance of real estates | 388 | 386 |
| Total number of employees | 197 | 209 | Marketing expenses | 1 484 | 1 876 |
| 1.4. Depreciation according to plan | Other variable costs | 2 140 | 2 032 | ||
| Development expenditure | 411 | 292 | Other expenses | 2 119 | 2 489 |
| Intangible rights | 17 | 20 | Total | 7 339 | 8 213 |
| Other long-term expenditure | 409 | 817 | 1.5.1. Auditors' fees | ||
| Amortisation on quarries based on the unit of production method *) | 108 | 112 | Audit fees | 58 | 63 |
| Buildings and constructions | 482 | 501 | Tax advice | 0 | 3 |
| Machinery and equipment | 788 | 976 | Other fees | 8 | 8 |
| Other tangible assets | 1 | 1 | Audit fees, total | 66 | 74 |
| Depreciation on land areas based on unit of production method | 36 | 36 | 1.6. Financial income and expenses | ||
| Goodwill | 292 | 737 | Income from non-current investments | ||
| Depreciation according to plan in total | 2 544 | 3 492 | Didivends received from others | 1 | 5 |
*) The Group applies unit of production method based on the usage of stone in calculating the amortisation according to plan for quarries and mining rights. Land areas are depreciated on a unit-of-use basis based on the consumption of the rock material or stacking area filling time.
| Audit fees, total | 66 | 74 |
|---|---|---|
| 1.6. Financial income and expenses | ||
| Income from non-current investments | ||
| Didivends received from others | 1 | 5 |
| Other financial income | ||
| Interest income from Group companies | 19 | 11 |
| Interest income from others | 4 | 19 |
| Financial income, total | 24 | 35 |
| Reduction in value of investments held as non-current assets | ||
| Interest expenses and other financial expenses to Group companies | -1 | -231 |
| Impairment of investments in fixed assets | 0 | -4 |
| Interest expenses to others | -621 | -645 |
| Other finalcial expenses to others | -139 | -316 |
| Interest expenses and other financial expenses, total | -761 | -1 196 |
1.7. Extraordinary items
Financial income and expenses, total -737 -1 161
AWL-Marmori, group contribution 0 218
94
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 2.1. Intangible assets | ||
| 2.1.1. Capitalised development expenditure | ||
| Capitalised development expenditure January 1 | 1 760 | 1 488 |
| Additions | 538 | 272 |
| Disposals | -153 | 0 |
| Acquisition cost December 31 | 2 145 | 1 760 |
| Accumulated depreciation according to plan January 1 | -1 095 | -803 |
| Accumulated depreciation on disposals | 153 | 0 |
| Depreciation for the financial year | -411 | -292 |
| Accumulated depreciation December 31 | -1 353 | -1 095 |
| Balance sheet value of capitalised development expenditure December 31 |
792 | 665 |
| 2.1.2. Intangible rights | ||
| Acquisition cost January 1 | 706 | 705 |
| Additions | 1 | 1 |
| -223 | 0 | |
| Acquisition cost December 31 | 707 | 706 |
| Accumulated depreciation according to plan January 1 | -653 | -633 |
| Depreciation for the financial year | -17 | -20 |
| 223 | 0 | |
| Accumulated depreciation December 31 | -670 | -653 |
| Balance sheet value of intangible rights, December 31 | 37 | 53 |
| 2.1.3. Goodwill | ||
| Acquisition cost January 1 and December 31 | 8 713 | 8 713 |
| Accumulated depreciation according to plan January 1 | -7 255 | -6 518 |
| Depreciation for the financial year | -292 | -737 |
| Accumulated depreciation December 31 | -7 547 | -7 255 |
| Balance sheet value of goodwill, December 31 | 1 166 | 1 458 |
| The parent company's goodwill comprises merger losses. |
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 2.1.4. Other long term expenditures | ||
| Acquisition cost January 1 | 18 877 | 19 106 |
| Additions | 372 | 580 |
| Disposals | -5 859 | -809 |
| Acquisition cost December 31 | 13 390 | 18 877 |
| Accumulated depreciation according to plan January 1 | -11 437 | -11 297 |
| Accumulated depreciation on disposals | -517 | 789 |
| Depreciation for the financial year | 5 858 | -929 |
| Accumulated depreciation December 31 | -6 096 | -11 437 |
| Balance sheet value of long term expenditure, December 31 | 7 294 | 7 440 |
The balance sheet value of other long term expenditure includes EUR 4 522 (4 536) million for stone research and costs relating to the opening of new soapstone quarries and of quarries not yet taken into production use.
Decreases in other non-current expenditures and accumulated amortization on decreases in other non-current expenditures include disposals amounting to EUR 5 842 (20) thousand.
At the end of the current financial year there were no items in progress under other intangible assets.
| Total intangible assets | 9 289 | 9 616 |
|---|---|---|
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 2.2. Tangible assets | ||
| 2.2.1. Land | ||
| Acquisition cost January 1 | 1 381 | 1 381 |
| Acquisition cost December 31 | 1 381 | 1 381 |
| Accumulated depreciation January 1 | -437 | -400 |
| Depreciation based on the unit of production method for the financial year | -36 | -36 |
| Accumulated depreciation December 31 | -473 | -436 |
| Balance sheet value of land, December 31 | 908 | 945 |
| 2.2.2. Buildings and constructions | ||
| Acquisition cost January 1 | 15 289 | 15 319 |
| Disposals | -186 | -30 |
| Acquisition cost December 31 | 15 103 | 15 289 |
| Accumulated depreciation according to plan January 1 | -11 014 | -10 543 |
| Accumulated depreciation on disposals | 186 | 30 |
| Depreciation for the financial year | -482 | -501 |
| Accumulated depreciation December 31 | -11 310 | -11 014 |
| Revaluation | 505 | 505 |
| Balance sheet value of buildings and constructions, December 31 | 4 298 | 4 780 |
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 2.2.3. Machinery and equipment | ||
| Acquisition cost January 1 | 38 716 | 44 810 |
| Additions | 190 | 258 |
| Disposals | -21 024 | -6 352 |
| Acquisition cost December 31 | 17 882 | 38 716 |
| Accumulated depreciation according to plan January 1 | -35 707 | -41 047 |
| Accumulated depreciation on disposals | 21 021 | 6 316 |
| Depreciation for the financial year | -788 | -976 |
| Accumulated depreciation December 31 | -15 474 | -35 707 |
| Balance sheet value of machinery and equipment, December 31 | 2 408 | 3 009 |
Disposals of Machinery and equipment / Accumulated depreciation on disposals include EUR 20 899 thoudsand scrapped items (EUR 13 thousand in 2015).
| Amount of machinery and equipment included in balance sheet value | 2 216 | 2 740 |
|---|---|---|
| 2.2.4.Other tangible assets | ||
| Acquisition cost January 1 | 289 | 289 |
| Disposals | -251 | 0 |
| Acquisition cost December 31 | 38 | 289 |
| Accumulated depreciation according to plan January 1 | -248 | -247 |
| Depreciation for the financial year | -1 | -1 |
| Accumulated depreciation on disposals | 249 | 0 |
| Accumulated depreciation December 31 | 0 | -248 |
| Balance sheet value of other tangible assets, December 31 | 38 | 41 |
| 2.2.5. Advance payments | ||
| Advance payments 1.1. | 0 | 11 |
| Additions | 160 | 0 |
| Disposals | 0 | -11 |
| Advance payments, total | 160 | 0 |
| Total tangible assets | 7 812 | 8 775 |
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 2.3. Shares in Group Companies | % | % |
| Tulikivi U.S. Inc., USA | 100 | 100 |
| OOO Tulikivi, Russia | 100 | 100 |
| Tulikivi GmbH, Saksa | 100 | 100 |
| AWL-Marmori Oy, Turku | 100 | 100 |
| The New Alberene Stone Company Inc., USA | 100 | 100 |
| Associated companies | ||
| Rakentamisen MALL Oy, Helsinki | 0 | 25 |
| The shares of accociate were sold in June 2015 | ||
| 2.4. Receivables from Group companies | ||
| Capital loan, Tulikivi GmbH | 40 | 0 |
| Receivables from Group companies, total | 40 | 0 |
| 2.5. Other investments | ||
| Other | 26 | 26 |
| Total other investments | 26 | 26 |
| 2.6. Inventories | ||
| Raw material and consumables | 3 277 | 3 733 |
| Work in grogress | 2 049 | 2 519 |
| Finished products/goods | 2 311 | 2 235 |
| Total inventories | 7 637 | 8 487 |
| 2.7. Non-current receivables | ||
| Trade receivables | ||
| From others | 2 | 15 |
| Total non-current receivables | 2 | 15 |
| 2.8. Deferred tax assets | ||
| Provisions and accrued expenses | 0 | 178 |
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 2.9. Current receivables | ||
| Receivables form group companies | ||
| Trade receivables | 47 | 197 |
| Receivables form group companies, total | 47 | 197 |
| Receivables from others | ||
| Trade receivables | 2 445 | 1 639 |
| Other receivables | 45 | 133 |
| Accrued income | ||
| Other accrued income | 67 | 108 |
| Prepayments | 205 | 166 |
| Accrued income, total | 272 | 274 |
| Receivables from other, total | 2 762 | 2 046 |
| Total current receivables | 2 809 | 2 243 |
| 2.10. Shareholders' equity | ||
| Capital stock January 1 and December 31 | 6 314 | 6 314 |
| Revaluation reserve January 1 | -139 | -170 |
| Change | 40 | 31 |
| Revaluation reserve Decenber 31 | -99 | -139 |
| Treasury shares | -108 | -108 |
| Restricted equity | 6 107 | 6 067 |
| The invested unrestricted equity fund January 1 and December 31 | 14 834 | 14 834 |
| Retained earnings January 1 | -11 394 | -11 394 |
| Retained earnings December 31 | -15 608 | -11 394 |
| Result for the year | -1 510 | -4 214 |
| Eguity | -2 284 | -774 |
| Total shareholders' equity | 3 823 | 5 293 |
| 2.11. Statement of distributable earnings December 31 | ||
| Profit for the previous years | -15 608 | -11 394 |
| The invested unrestricted equity fund | 14 834 | 14 834 |
| Result for the year | -1 510 | -4 214 |
| Capitalised development costs | -792 | -665 |
| Total distributable earnings | -3 076 | -1 439 |
The invested unrestricted equity fund may not be distributed as dividend.
Stock options for management and key personnel
Terms of share-based payments / Option rights
Option rights are used to encourage the key employees to work on a long-term basis to increase shareholder value. The option rights also aim at commiting the key employees to the employer. The option program is targeted to approximately 14 key employees, including the members of the Management Group. The Board of Directors decides on the distribution of the option rights annually. For all key employees, the prerequisite for receiving stock options is share ownership in the company.
The management of Tulikivi Group and the key employees are entitled to subscribe the company shares if the separately established vesting criteria are met, as follows:
The maximum total number of stock options issued is 1,800,000, and they entitle their owners to subscribe for a maximum total of 1,800,000 new A shares in the company or existing A shares held by the company. The option rights are divided into three classes. The share subscription period, for the stock option 2013A will be 1 May 2016—31 May 2018, for the stock option 2013B, 1 May 2017—31 May 2019, and the for stock option 2013C, 1 May 2018—31 May 2020. The share subscription price for all stock options is EUR 0.33 per share. The basis for the subscription price is the subscription price used in the share issue of Tulikivi Corporation carried out in October 2013. Each year dividends and equity returns will be deducted from the share subscription price. Dividends and equity returns paid annually will be deducted from the subscription price.
The theoretical market value of one stock option has been calculated through the use of Black & Scholes stock option pricing model with the following input factors:
options 2013A, theoretical market value EUR 0.10: share price EUR 0.32, share subscription price EUR 0.33, risk free interest rate 0.89 per cent, validity of stock options approximately 4.5 years and volatility 37 per cent.
options 2013B, theoretical market value EUR 0.03: share price EUR 0.21, share subscription price EUR 0.33, risk free interest rate 0.13 per cent, validity of stock options approximately 4.5 years and volatility 33 per cent.
options 2013C, theoretical market value EUR 0.04: share price EUR 0.22, share subscription price EUR 0.33, risk free interest rate -0.24 per cent, validity of stock options approximately 4.2 years and volatility 38 per cent.
The theoretical market value of the stock options has not been adjusted downward for the probability of not fulfilling the targets established for the vesting criterion.
The Board of Directors will determine separate financial targets based on the company's performance improvement programme for each option type, which must be met in order to the option to be granted. The number of stock options 2013A is 500 000, 2013B is 650 000 and 2013C is 650 000. As the EBITDA goal set for 2014 to 2016 was not achieved and no options were distributed for 2016, 2015 and 2014.
The Board dicided to extend the monitoring period to the 2017 for all each option types.
Treasury shares include the cost of own shares held by the Group. It is presented as a deduction from equity.
During the financial year 2016 (2015), Tulikivi Oyj has neither acquired nor disposed any own shares. At the reporting date, the company held 124 200 (124 200) own A shares, which represents 0.2 % of the share capital and 0.1 % of the voting rights. The acquisition price is EUR 0.87/share on average. The acquisition of own shares has not had any significant effect on the distribution of ownership or voting rights of the company.
No dividend was paid in 2016 and 2015.
| EUR 1 000 | 2016 | 2015 |
|---|---|---|
| 2.13. Provisions | ||
| Warranty provision | 100 | 135 |
| Environmental provision (Present value) | 182 | 184 |
| Environmental provision, current | 6 | 6 |
| Restructuring provision, non-current | 0 | 52 |
| Restructuring provision, current | 320 | 520 |
| Total | 608 | 897 |
The undiscounted amount of environmental provision was EUR 423 (421) thousand. The discount rate used in determining the present value is 4.0 (4.0) per cent.
| 2.14. Non-current liabilities | ||
|---|---|---|
| Liabilities from others | ||
| Loans from credit institutions | 10 385 | 12 527 |
| TyEL pension loans | 2 623 | 3 239 |
| Total non-current liabilities | 13 008 | 15 766 |
| 2.15. Current liabilities | ||
| Liabilities to group companies | ||
| Trade payables | 491 | 504 |
| Liabilities to associates | ||
| Liabilities to others | ||
| Loans from credit institutions | 2 640 | 1 529 |
| Pension loans | 745 | 471 |
| Advances received | 55 | 83 |
| Trade payables | 3 297 | 1 712 |
| Other current liabilities | 298 | 259 |
| Accrued liabilities | ||
| Salaries, wages and social costs | 2 433 | 2 157 |
| Discounts and marketing expenses | 194 | 266 |
| External charges | 274 | 296 |
| Interest liabilities | 117 | 349 |
| Other accrued liabilities | 159 | 94 |
| Accrued liabilities, total | 3 177 | 3 162 |
| Liabilities to others, total | 10 212 | 7 216 |
| Total current liabilities | 10 703 | 7 720 |
| EUR 1 000 | 2 016 | 2 015 |
|---|---|---|
| 2.16 Given guarantees, contingent liabilities and other commitments | ||
| Loans and credit limit accounts with related mortgages and pledges | ||
| Loans from financial institutions and loan guarantees | 16 393 | 17 766 |
| Real estate mortgages given | 15 780 | 15 780 |
| Company mortgages given | 19 996 | 19 996 |
| Given mortgages and pledges, total | 35 776 | 35 776 |
| Other own liabilities for which guarantees have been given | ||
| Guarantees | 500 | 500 |
| Other commitments | 3 | 3 |
| Other own liabilities for which guarantees have been given, total | 503 | 503 |
| Other commitments | ||
| Rental commitments due | ||
| Rental obligations payable not later than 1 year | 383 | 324 |
| Rental obligations payable later | 245 | 30 |
| Rental commitments due, total | 628 | 354 |
| Leasing commitments | ||
| Due not later than 1 year | 208 | 221 |
| Due later | 270 | 78 |
| Leasing commitments, total | 478 | 299 |
| Leasing agreements are three to six years in duration and do not include redemption clauses. | ||
| Derivatives | ||
| Interest rate swaps , nominal value | 6 331 | 6 331 |
| Interest rate swaps , fair value | -101 | -175 |
| Obligation to repay VAT deductions made in earlier periods | 76 | 89 |
Tulikivi Corporation's environmental obligations, their management and recognition of environmental costs
Tulikivi group has landscaping obligations based on the Mining Act and other environmental legislation, which must be met during operations and when the quarries are shut down in the future.
Actions demanded by the environmental obligations are continuously performed besides normal production processes. Handling of water, arrangements for soil and rock material stacking areas, vibration and noise measurement, dust prevention and the monitoring the measurement result belong to these tasks. The costs relating to these activities are mainly recognised in the income statement as expense. Transport of soil material to stacking areas by opening new quarries is capitalised to other long-term expenses and depreciated during the useful life of the quarry. Lining work of stacking areas is based on long-term quarrying plans, according to which surface material of new opened quarries will be used in lining work. However, the lining work cannot be done until the point when there are finished sectors in the stacking area. No provision is recognised for the lining work, because it is not estimated to increase the costs of normal quarrying work.
After a factory or a quarry is shut down, the final lining work of the stacking areas, water arrangements, establishing of check points, bringing to safety condition and planting and seeding the vegetation will take place. For that part of these costs which are estimable, a provision is recognised.
Based on the environmental authorisations, the Company has given guarantees to the effect of EUR 570 thousand in total.
| 10 Major shareholders according to number of shares Shares registered in the name of a nominee are not included. |
K shares | A shares | Proportion, % |
|---|---|---|---|
| 1. Vauhkonen Heikki | 5 809 500 | 1 064 339 | 11.48 |
| 2. Elo Mutual Pension Insurance Company | 4 545 454 | 7.59 | |
| 3. Ilmarinen Mutual Pension Insurance Company | 3 720 562 | 6.21 | |
| 4. Elo Eliisa | 477 500 | 2 631 036 | 5.19 |
| 5. Varma Mutual Pension Insurance Company | 2 813 948 | 4.70 | |
| 6. Toivanen Jouko | 100 000 | 2 431 259 | 4.23 |
| 7. Finnish Cultural Foundation | 100 000 | 2 158 181 | 3.77 |
| 8. Mutanen Susanna | 797 500 | 846 300 | 2.75 |
| 9. Fennia Mutual Insurance Company | 1 515 151 | 2.53 | |
| 10.Nikkola Jarkko | 1 266 440 | 2.12 | |
| 10 Major shareholders according to number of votes Shares registered in the name of a nominee are not included. |
Votes/K shares | Votes/A shares | Proportion, % |
| 1. Vauhkonen Heikki | 58 095 000 | 1 064 339 | 45.86 |
| 2. Mutanen Susanna | 7 975 000 | 846 300 | 6.84 |
| 3. Elo Eliisa | 4 775 000 | 2 631 036 | 5.74 |
| 4. Elo Mutual Pension Insurance Company | 4 545 454 | 3.52 | |
| 5.Vauhkonen Mikko | 3 975 000 | 343 810 | 3.35 |
| 6. Ilmarinen Mutual Pension Insurance Company | 3 720 562 | 2.88 | |
| 7. Toivanen Jouko | 1 000 000 | 2 431 259 | 2.66 |
| 8. Finnish Cultural Foundation | 1 000 000 | 2 158 181 | 2.45 |
| 9. Varma Mutual Pension Insurance Company | 2 813 948 | 2.18 |
The members of the Board and Managing Director control 5 810 000 K shares and 1 557 056 A shares representing 46.24 % of votes.
| Breakdown of share ownership of December 31, 2016 Number of shares |
Shareholders pcs |
Proportion % |
Shares pcs |
Proportion % |
|---|---|---|---|---|
| 1 - 100 | 518 | 10.56 | 31 776 | 0.05 |
| 101 - 1000 | 2 076 | 42.33 | 1 173 591 | 1.96 |
| 1001 - 5000 | 1 468 | 29.94 | 3 926 147 | 6.56 |
| 5001 - 10000 | 395 | 8.06 | 3 100 003 | 5.18 |
| 10001 - 100000 | 396 | 8.07 | 10 402 134 | 17.37 |
| 100001 - | 51 | 1.01 | 41 237 592 | 68.88 |
| Total | 4 904 | 100.00 | 59 871 243 | 100.00 |
| The Company's shareholders were broken down by sector as follows Sector |
Holding % |
Votes % |
||
| Enterprises | 4.43 | 2.05 | ||
| Financial and insurance institutions | 5.10 | 2.23 | ||
| Public organisations | 18.51 | 8.59 | ||
| Non-profit organisations | 4.50 | 2.79 | ||
| Households | 66.91 | 83.94 | ||
| Foreign | 0.55 | 0.40 | ||
| Total | 100.00 | 100.00 |
Nominee-registered shares, 1 461 118 in total (2.44 per cent of the capital stock, 1.133 per cent of votes), are entered under financial and insurance institutions. Treasury shares owned by Tulikivi Corporation, in total 124 200 Series A shares, are included in section dealing with shareholding information.
Helsinki February 7, 2017
Jyrki Tähtinen Markku Rönkkö Reijo Svanborg
Jaakko Aspara Heikki Vauhjonen Managing Director
We have audited the financial statements of Tulikivi Corporation (business identity code 0350080-1) for the year ended 31 December 2016. The financial statements comprise the consolidated statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company's balance sheet, income statement, cash flow statement and notes.
• the consolidated financial statements give a true and fair view of the group's financial performance, financial position and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
• the financial statements give a true and fair view of the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of the financial statements. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.
HOW THE MATTER WAS ADDRESSED IN THE AUDIT
The Group's financial position has declined during the financial year. The consolidated cash and cash equivalents amounted to EUR 0.9 million at the end of the financial year.
The Group's finance agreement includes, among others, covenants related to EBITDA, equity ratio and the ratio between the interest-bearing debt and EBITDA. The creditor issued a waiver on the covenants related to EBITDA and the ratio between the interest-bearing debt and EBITDA on 19 December 2016.
Management estimates that the covenant terms are met and the funding has been secured during the financial year 2017.
We tested the financial forecast process and the related control environment.
In order to evaluate the sufficiency of funding, we analysed, among others, cash flow forecasts and sensitivity calculations prepared by the company, as well as the reliability of the data underlying the forecast.
We evaluated the sensitivity calculations prepared by the management to test the headroom, especially in relation to the covenant terms.
In addition, we considered the appropriateness and the adequacy of the notes relating to financing.
The carrying value of goodwill and trademark totaled EUR 6.9 million in the consolidated financial statements.
Goodwill and trademark are not amortised, but they are tested for impairment at least annually. Determining the key assumptions
for cash flow forecasts underlying impairment testing requires management judgement in respect of sales growth rate, profitability and , discount rate, for example.
Valuation of goodwill and trademark is considered a key audit matter due to high level of management judgement relating to forecasts used in impairment testing and the significance of the carrying amounts involved.
We considered key inputs in the calculations by reference to the budgets approved by the Board of Directors, data external to the Group and our own views. We assessed the historical accuracy of forecasts prepared by management by comparing the actual results for the year with the original forecasts.
We involved our own valuation specialists when assessing the technical accuracy of the calculations and comparing the assumptions used to market and industry information.
Furthermore, we considered the appropriateness of the Group's notes in respect of goodwill, trademark and impairment testing.
The carrying value of the deferred tax assets is EUR 3.2 million in the consolidated financial statements. The Group's deferred tax assets arise from parent company's carry forwarded unused tax losses and tax credits. Valuation of deferred tax assets is based on future taxable profits as estimated by management before the unused tax losses expire. Valuation of deferred tax assets is considered a key audit matter due to the high level of management judgement involved in preparation of forecasts of future taxable profits and the significant carrying amounts involved.
We tested the forecasting process and the related control environment. In addition, we assessed the historical accuracy of forecasts by comparing the actual results with the original forecasts. We analysed estimates of future taxable profits made by management and evaluated the underlying assumptions in the calculations supporting carrying amounts, taking into account the group company's performance and forecasts.
In addition, we considered the appropriateness of the notes relating to deferred tax assets.
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company's and the group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company's or the group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of the Board of Directors' and the Managing Director's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. • Obtain sufficient appropriate audit evidence
regarding the financial information of the entities or
business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises information included in the report of the Board of Directors and in the Annual Report, but does not include the financial statements and our auditor's report thereon. We obtained the report of the Board of Directors prior to the date of this auditor's report, and the Annual Report is expected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial
statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the report of the Board of Directors, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Helsinki 9 March 2017
KPMG OY AB
Kirsi Jantunen Authorised Public Accountant
PLANTS AND OFFICES
FI-83900 Juuka Tel. +358 403 063 100 Fax +358 206 050 711 www.tulikivi.com [email protected] [email protected]
Saarikyläntie 26 FI-89920 Ruhtinansalmi Tel. +358 403 063 100 Fax +358 260 050 711
Rasiahontie 3 FI-79700 Heinävesi Tel. +358 403 063 100 Fax +358 206 050 711
Lautamiehentie 1 FI-02770 Espoo Tel. +358 207 636 820 Fax +358 207 636 877
Find your nearest dealer at www.tulikivi.com
Tulikivi Germany GmbH FI-83900 Juuka, Finland Tel. +358 403 063 100 Fax +358 207 636 120
VA 22911 Charlottesville Tel. +1-800-843 3473
ul.Krasnyh Partizan -14 127229 St.Petersburg Russian Federation Tel. +7 495 799 3362 Fax: +7 812 334 1601
Benelux Dutry & Co. Jagershoek 10 B-8570 Vichte Belgium Tel. +32 56 776 090 Fax +32 56 774 294
Eurotrias S.R.L. – GMBH Via Max Planck 13 I-39100 Bolzano Tel. +39 0 471 201 616 Fax +39 0 471 201 689
Feuer im Stein GmbH & Co KG Gewerbepark 1 A-4861 Schörfling am Attersee Tel. +43 7662 290 61
SIA Akmens Kräsnis Pulkveža Brieža 43 LV-1045 Riga Tel. +371 6738 1149 Fax +371 2866 4916
Kad nebūtų šalta, UAB Bangų 22a LT-91250 Klaipėda Tel. +370 46 256 300 Fax +370 611 41 399
TECH PIEC ul.B.Chrobrego 44A PL 58-230 Niemcza Tel. +48 74 8376 032 Fax +48 74 8376 032
TULIKIVI OYJ FI-83900 Juuka, Finland Tel. +358 403 063 100 Fax +358 207 636 120
Tulikivi UK Limited Unit 14 Elliott Road Love Lane Industrial Estate GB - GL7 1YS Cirencester Tel. +44 1285 650 633
TULIKIVI OYJ FI-83900 Juuka, Finland Tel. +358 403 063 100 Fax +358 207 636 120
Magyar-Norveg KFT Nagy Lajos Kiraly ùtja 81 1148 Budapest Tel. +36 1 363 3058
TALC s.r.o. Štiavnička 77 97681 Podbrezova Tel. +421 904 945 888
Feliksbau d.o.o. Celovška cesta 317 1210 Ljubljana – Šentvid Tel. +386 1 421 61 80
Tiba AG Hauptstr. 147 CH-4416 Bubendorf Tel. +41 619 351 710 Fax. +41 619 311 161
Sumeru Company s.r.o. Anglicka 1 CZ-12000, Praha 2 Tel. +420 226 208 228
Tulikivi U.S., inc. 172 South Pantops Dr, Suite B VA 22911 Charlottesville Tel. +1-800-843 3473
OOO Tulikivi ul.Krasnyh Partizan -14 127229 St.Petersburg +7 495 799 3362
BALTIC TK GROUP OÜ Pihlaka 1 a 11216 Tallinn Tel. +372 6555 486 Fax +372 6555 487
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