Tulikivi Oyj

Quarterly Report • Apr 20, 2011

Interim report 1-3/2011

• The Tulikivi Group's net sales were EUR 12.6 million (EUR 10.7 million, 01-03/2010).

• The Group posted an operating loss of EUR -1.5 million (-1.7). Earnings per share amounted to EUR -0.04 (-0.04). The result was lowered by EUR 0.5 million in non-recurring additional expenses arising from product launches in the new Sauna Business and the expansion of the distribution channel in Finland. The distribution channel was expanded in Finland by opening 35 new sales points.

• Cash flow from operating activities before investments was EUR -2.2 (-2.4) million.

• Order books were at EUR 9.7 million (EUR 8.2 million 31 March 2010) on 31 March.

• Future outlook: The full-year consolidated net sales are expected to increase over 10 per cent. As a result of improved cost efficiency the operating result for the year is expected to improve significantly and to be profitable. The project concentrating on core businesses will allow improvement of Group profitability as of the 2012 financial year, but it will also cause non-recurring expenses during the current financial year, the amount of which will become known once codetermination negotiations are concluded.

Managing Director's comments:

"During the first quarter, there was favourable development in demand for Tulikivi products.

In fireplace exports demand has improved on last year. Improving consumer confidence and higher energy prices have increased demand for fireplaces in Central Europe.In the case of Lining Stones, demand has remained good but growth in net sales will be more moderate than before during the remainder of the year. Demand for lining stone is boosted by heater manufacturers' increasing interest in improving the heat retention capacity of their products.

In the Sauna Business, sales have been launched in Tulikivi showrooms and sales points. In the next few months, our goal is to expand distribution and launch new products on the market. Investments in launching the Sauna Business were made as planned.

We also set up more than 50 new service points in Finland and the neighbouring countries during the first half of the year, which decreased profitability during the early months of the year.

Stronger order books in all business areas will improve net sales and profitability in the next few months. Thanks to the expanded distribution channel, brisk new construction and our new products, demand will be high in the remaining part of the year.

By concentrating on our core businesses we will improve profitability and streamline our operations in the long term."

Net sales and result

The Group's net sales were EUR 12.6 million (Jan-March/2010: EUR 10.7 million). The net sales of the Fireplaces Business were EUR 11.4 (9.5) million and of the Natural Stone Products Business EUR 1.2 (1.2) million.

Net sales in Finland accounted for EUR 6.8 (5.3) million, or 54.0 (49.9) per cent, of total net sales. Exports amounted to EUR 5.8 (5.4) million in net sales. The principal export countries were Sweden, Germany and France. The growth in export net sales was from increased lining stone sales.

The consolidated operating result was EUR -1.5 (-1.7) million. In accordance with the Group's segment reporting, the Fireplaces Business had an operating loss of EUR -0.9 (-1.1) million, and the Natural Stone Products Business an operating loss of EUR -0.2 (-0.2) million, while other items' expenses were EUR -0.4 (-0.4) million. The result was lowered by non-recurring additional costs from market launches of electric sauna heaters, the expansion of the distribution channel in Finland and the new corporate image, amounting to EUR 0.5 million in total.

Consolidated result before taxes was EUR -1.7 (-1.9) million and net losses were EUR 1.3 million (1.4) million. Earnings per share amounted to EUR -0.04 (-0.04).

Expansion of the Finnish distribution channel

A network of 35 Tulikivi showrooms forms the framework for Tulikivi's Finnish distribution channel which provides consumers with Tulikivi's full product range and comprehensive services. This network is complemented by a network of Tulikivi sales points in hardware stores that operate in cooperation with the Tulikivi showrooms.

During the first quarter, distribution was expanded with 35 new sales points, taking the number of sales points up to 150. Fireplace sales through the S Group will be launched during the second quarter.

Sauna product sales will be launched first in the Tulikivi showroom and sales point network. Tulikivi is also in the process of starting a new method of distribution of sauna products to professional builders following the signing of distribution agreements with Onninen and Elektroskandia.

Financing and investments

Cash flow from operating activities before investments was EUR -2.2 (-2.4) million. Working capital increased by EUR 1.5 million in the period and came to EUR 8.8 (7.2 on March, 31 2010) million. Interest-bearing debt was EUR 25.9 (26.1) million. Financial income for the period was EUR 0.1 (0.1) million and financial expenses EUR 0.3 (0.3) million. The equity ratio was 35.6 (37.3) per cent. The ratio of interest-bearing net debt to equity, or gearing, was 88.6 (76.5) per cent. The current ratio was 1.9 (2.0). Equity per share was EUR 0.56 (0.60).

The Group has a solid financial position. At the end of the period, the Group's cash and other liquid assets came to EUR 7.5 (9.0) million, and the total of undrawn credit facilities and unused credit limits amounted to EUR one million.

The Group's debt financing includes covenants which are tied to the Group's equity. All covenant conditions were met on the balance sheet date.

The Group's investments in production, quarrying and development were EUR 1.0 (0.7) million. Research and development costs were EUR 0.7 (0.5) million, i.e. 5.2 (4.2) per cent of net sales. A total of EUR 0.2 (0.1) million of this figure after subsidies had been deducted was capitalized. In March, the Group launched its range of electric sauna heaters. Development of heaters and sauna products continues and new products will be introduced later in the year.

Other large development projects include the development of the Group's processes and renewal of the enterprise resource planning system.

Personnel

The Group employed an average of 412 (361) people during the report period. Salaries and bonuses during the review period totalled EUR 3.9 (3.5) million.

The Tulikivi Group has an incentive plan that includes an incentive pay scheme for all personnel. The incentive pay scheme is based on the Group's result and on the improvement in productivity. The Managing Director and key personnel also have personal targets in addition to this.

Treasury shares

The company did not purchase or assign any of its own shares during the report period. At the end of the period, the total number of Tulikivi shares held by company was 124 200 A series shares, which corresponds to 0.3 per cent of the company's share capital and 0.1 per cent of all voting rights.

Near-term risks and uncertainties

The Group's risks in the near future include unexpected negative fluctuations in the economy in some market areas. Consumer demand driven solely by price and not the qualities of the product is also a risk.

The renewal of the enterprise resource planning system is being launched. A schedule and cost risk is often associated with such projects. More information on risks can be found in the 2010 Board of Directors' report and the notes to the financial statements.

Events following the end of the period

Tulikivi has issued its plan to concentrate on its core business to improve profitability. Under the plan, the utility ceramics business and building stone manufacturing will be divested by the end of 2011. Also, the aim is to divest the earth-moving and loading equipment used in soapstone quarry-

ing and to increase outsourcing in quarrying. The goal is also to concentrate the production of the Natural Stone Products Business. The focus of the Group's growth strategy is in the manufacture of fireplaces and sauna and interior stone products, development of related product concepts and their marketing to consumers. By concentrating on the core business, we can increase our investment in growth in new product groups and in distribution in accordance with our strategy. The effect on personnel will involve roughly 50 persons. Because of the arrangements, Tulikivi will initiate codetermination negotiations in the Natural Stone Products Business, quarrying and at the Heinävesi factory.

Resolutions of the Annual General Meeting

Dividends

Tulikivi Corporation's Annual General Meeting, held on 14 April 2011, resolved to pay a dividend of EUR 0.0250 on Series A shares and EUR 0.0233 on Series K shares. The dividend will be paid out on 28 April 2011.

Board of Directors, Managing Director and auditor

Tulikivi Corporation's Annual General Meeting elected the following persons to the Board of Directors of the parent company and domestic business subsidiaries: Juhani Erma, Olli Pohjanvirta, Markku Rönkkö, Pasi Saarinen, Maarit Toivanen-Koivisto, Heikki Vauhkonen and Matti Virtaala. The Board of Directors elected from among its members Matti Virtaala as Chairman. KPMG Oy Ab, Authorized Public Accountants, was selected as the auditor.

Authorisation to repurchase the company's own shares

The Annual General Meeting authorised the Board to acquire the company's own shares as proposed by the Board.

Authorisation to decide on share issues and on the transfer of Tulikivi Corporation shares held by the company, and on the right to issue special rights giving entitlement to shares as defined in Chapter 10, section 1, of the Limited Liability Companies Act.

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 as proposed by the Board. The authorisation also includes the right to issue special rights, as defined in Chapter 10, section 1, of the Limited Liability Companies Act, which give entitlement to subscribe shares against payment or by setting off the receivable.

Future outlook

In Finland, the outlook for fireplace products is good as a result of increasing new construction and rising consumer energy prices. In exports, the revival in new construction and increasing consumer confidence will improve the demand for fireplaces during the financial year. The demand for lining stone products will remain good.

The new sauna and fireplace products and expanding distribution network will all increase net sales.

The full-year consolidated net sales are expected to increase over 10 per cent. As a result of improved cost efficiency the operating result for the year is expected to improve significantly and to be profitable.

Due to the seasonal nature of the industry, profit is mostly accumulated in the second half of the year.

The project concentrating on core businesses will allow improvement of Group profitability as of the 2012 financial year, but it will also cause non-recurring expenses during the current financial year, the amount of which will become known once codetermination negotiations are concluded.

The order books at the end of the report period amounted to EUR 9.7 million (EUR 8.2 million on 31 March 2010 and EUR 6.3 million on 31 December 2010).

Segment reporting

The Group's operating segments are the Fireplaces Business and the Natural Stone Products Business. The Fireplaces Business includes soapstone and ceramic fireplaces sold under the Tulikivi and Kermansavi brands, their accessories, utility ceramics, sauna heaters and fireplace lining stones. The Natural Stone Products Business includes interior design stone products for households and stone deliveries to construction sites. Expenses not allocated to a segment are recognised under 'Other items' in segment reporting. These expenses include expenses of the Group administration and expenses pertaining to financial administration, and also financial expenses and taxes.

Strategy

The strategy covers all key operating and financial targets to the end of 2015. Under the strategy, the company targets an annual organic growth of over 10 per cent over the next few years,and the target for profit before taxes is to attain 10 per cent of net sales within the next five years. The target for return on

equity is to exceed 20 per cent. Corporate acquisitions in support of the strategy are also possible.

INTERIM REPORT January March 2011, SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME MEUR

	1-3/11	1-3/10	Change,	1-12/10
			%
Sales	12.6	10.7	17.1	55.9
Other operating income	0.1	0.1		0.7
Increase/decrease in inventories

CONSOLIDATED STATEMENT OF FINANCIAL POSITION MEUR		3/2011	3/2010		12/2010
Earnings per share attributable to the equity holders of the parent company, EUR basic and diluted	-0.04	-0.04	0.0	-0.02
Total comprehensive income for the period	-1.3	-1.4	2.0	-0.7
Other comprehensive income Interest rate swaps Translation differences	0.1 -0.1	0.0 0.1		0.1 0.0
Profit/loss for the period	-1.3	-1.5	11.9	-0.8
Profit before tax Percentage of sales Change in deferred tax	-1.7 -13.5 0.4	-1.9 -17.8 0.4	10.4	-1.0 -1.8 0.2
Share of the profit of associated company	0.0	0.0		0.0
Operating profit/loss Percentage of sales Finance income Finance expense	-1.5 -11.9 0.1 -0.3	-1.7 -16.0 0.1 -0.3	11.7	-0.3 -0.5 0.3 -1.0
External services Personnel expenses Depreciation Other operating expenses	1.9 4.9 1.0 3.8	1.6 4.4 1.2 3.4		9.2 19.7 4.7 12.8
Raw materials and consumables	2.6	2.2		11.5
in work in progress Production for own use	-0.2 0.2	0.0 0.1		0.8 0.4
in finished goods and

ASSETS
Non-current assets
Property, plant and equipment
Land	1.0	1.0	1.0
Buildings	6.9	7.3	7.0
Machinery and equipment	6.2	7.7	6.5
Other tangible assets	1.3	1.0	1.3
Intangible assets
Goodwill	4.2	4.2	4.2
Other intangible assets	11.1	10.7	10.8
Investment properties	0.2	0.2	0.2
Available-for-sale investments	0.1	0.1	0.1
Receivables
Deferred tax assets	2.0	2.0	1.6
Total non-current assets	33.0	34.2	32.7
Current assets
Inventories	11.1	10.2	10.9
Trade receivables	5.6	4.9	5.1
Current income tax receivables	0.0	0.5
Other receivables	1.3	1.1	0.9
Cash and cash equivalents	7.5	9.0	10.2
Total current assets	25.5	25.7	27.1
Total assets	58.5	59.9	59.8
EQUITY AND LIABILITIES
Equity
Share capital	6.3	6.3	6.3
Share premium fund		7.4
Treasury shares	-0.1	-0.1	-0.1
Translation difference	-0.1	0.0	-0.1
Revaluation reserve		-0.1	-0.1
Invested unrestricted equity	7.4		7.4
Retained earnings	7.3	8.8	8.7
Total equity	20.8	22.3	22.1
Non-current liabilities
Deferred income tax liabilities	1.6	1.8	1.6
Provisions	1.0	1.0	1.0
Interest-bearing debt	21.6	21.6	20.4

Other debt	0.0	0.1	0.1
Total non-current liabilities	24.2	24.5	23.1
Current liabilities
Trade and other payables	9.1	8.3	9.6
Current income tax liabilities	0.0	0.0
Current provisions	0.1	0.2	0.1
Short-term interest-bearing debt	4.3	4.6	4.9
Total current liabilities	13.5	13.1	14.6
Total liabilities	37.7	37.6	37.7
Total equity and liabilities	58.5	59.9	59.8
CONSOLIDATED STATEMENT OF CASH FLOWS
	1-3/	1-3/	1-12/
MEUR	2011	2010	2010
Cash flows from operating activities
Profit/loss for the period	-1.3	-1.5	-0.8
Adjustments:
Non-cash transactions	1.0	1.2	4.7
Interest expenses
and interest income and taxes	-0.2	-0.2	-0.5
Change in working capital	-1.5	-1.6	-0.9
Interest paid and received
and taxes paid	-0.2	-0.3	-0.6
Net cash flow from operating
activities	-2.2	-2.4	2.9
Cash flows from investing activities
Investment in property, plant and
equipment and intangible assets	-1.1	-0.7	-3.2
Grants received for investments
and sales of property, plant and
equipment		0.1	0.2
Net cash flow from investing
activities	-1.1	-0.6	-3.0
Cash flows from financing activities
Proceeds from non-current and
current borrowings	1.5	3.0	8.0
Repayment of non-current and current

borrowings Dividends paid and	-0.9	-1.6	-7.4
treasury shares			-0.9
Net cash flow from financing
activities	0.6	1.4	-0.3
Change in cash and cash
equivalents	-2.7	-1.6	-0.4
Cash and cash equivalents at
beginning of period	10.2	10.6	10.6
Cash and cash equivalents at
end of period	7.5	9.0	10.2

STATEMENT OF CHANGES IN EQUITY

MEUR
Equity	Share capital	Share pre- mium- fund	The invested unre- stricted equity	Re- valua- tion re- serve	Trea- sury share	Trans- lation diff.	Re- tained earn- ings	Total
			fund
Jan. 1, 20110 Total comprehensive	6.3	0.0	7.4	-0.1	-0.1	0.0	8.7	22.1
income for the period			0.1	-7.4	-0.1	-1.3 7.4	-1.3
		0.0
Equity March 31,2011	6.3	0.0	7.4	0.0	-0.1	-0.1	7.3	20.8
Equity
Jan. 1, 2010	6.3	7.4		-0.1	-0.1	-0.1 -1.0	10.4 -1.0	23.8
Total comprehensive
income for the period Equity					0.1	-1.5	-1.4
March 31, 2010	6.3	7.4		-0.1	-0.1	0.0	8.8	22.3

(15)						10
Inter			Interim report April 20, 2011 at 16.30
SEGMENT REPORTING MEUR		1-3/ 2011	1-3/ 2010			1-12/ 2010
Operating segments Sales Fireplaces Natural Stone Products Other items		12.6 11.4 1.2	10.7 9.5 1.2			55.9 50.8 5.1 -
Operating profit/loss Fireplaces Natural Stone Products Other items		-1.5 -0.9 -0.2 -0.4	-1.7 -1.1 -0.2 -0.4			-0.3 2.2 -0.5 -2.0
OPERATING SEGMENTS QUARTERLY		Q1/	Q4/	Q3/	Q2/	Q1/
Operating segments Sales Fireplaces Natural Stone Products		2011 12.6 11.4 1.2	2010 16.6 15.5 1.1	2010 13.9 12.8 1.1	2010 14.7 13.0 1.7	2010 10.7 9.5 1.2
Operating profit/loss Fireplaces Natural Stone Products Other items		-1.5 -0.9 -0.2 -0.4	0.8 1.6 -0.2 -0.6	0.2 0.9 -0.2 -0.5	0.4 0.8 0.1 -0.5	-1.7 -1.1 -0.2 -0,4
ASSETS AND LIABILITIES BY SEGMENT ON MARCH 31, 2011	Fire- places	Products	Natural Stone	Other items		Total

KEY FINANCIAL RATIOS AND SHARE RATIOS

Earnings per share, EUR	3/11	3/10	1-12/10
	-0.04	-0.04	-0.02
Equity per share, EUR	0.56	0.60	0.60
Return on equity, %	-24.6	-25.6	-3.6
Return on investments, %	-12.7	-13.8	-0.1
Equity ratio, %	35.6	37.3	37.0
Net indebtness ratio, %	88.6	76.5	68.1
Current ratio	1.9	2.0	1.9
Gross investments, MEUR	1.0	0.7	3.4
Gross investments, % of sales	7.8	6.5	6.0
Research and development costs, MEUR	0.7	0.5	2.2
%/sales	5.2	4.2	3.9
Outstanding orders (31 March), MEUR	9.7	8.2	6.3
Average number of staff	412	361	404
Rate development of shares, EUR Lowest share price, EUR Highest share price, EUR Average share price, EUR Closing price, EUR	1.06 1.40 1.22 1.17	1.07 1.38 1.25 1.35	1.07 1.79 1.31 1.16
Market capitalization at the end of period, 1000 EUR (Supposing that the market price of the K-share is the	43 313.1	49 976.7	42 942.9
same as that of the A-share) Number of shares traded, (1000 pcs) % of total amount of A-shares Number of shares average Number of shares 31 March	1 427 5.2 37019770 37019770	1 167 4.2 37019770 37019770	4 647 16.9 37019770 37019770

NOTES TO THE CONSOLIDATED FINANCIALS STATEMENTS

This financial statement release has been prepared in accordance with the IAS 34 Interim Financial Reporting standard.

In preparing of this interim report, Tulikivi has applied same accounting policies as in the 2010 financial statements, with the exception of the following new/amended standards that the group has adopted as from January 1, 2011:

• Amendments to IAS 32 Financial instruments: Presentation – Classification of Rights Issues (effective as of 1 February 2010).

• Revised IAS 24 Related Party Disclosures (effective as of 1 January 2011).

• Amendments to IFRIC 14 (IAS 19) The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

• Prepayments of a Minimum Funding Requirement (effective as of 1 January 2011).

• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective as of 1 July 2010). IFRIC 19 requires retrospective application.

• Improvements to IFRSs (April 2009, mainly effective as of 1 January 2010).

The key performance ratios and share ratios are calculated using the same methods as for the consolidated financial statements for 2010. The calculations rules can be found in the 2010 annual report, page 76.

Income taxes
EUR million	1-3/11	1-3/10	1-12/10
Taxes for the current and previous
reporting periods	0.0	0.0	0.0
Deferred taxes	0.4	0.4	0.2
Total	0.4	0.4	0.2
Collaterals given
EUR million	3/11	3/10	12/10
Loans from credit institutions and
other long term debts and loan
guarantees, with related mortgages
and pledges	26.3	22.7	25.6
Mortgages granted and
collaterals pledged	29.5	28.0	29.6
Other given guarantees and
pledges on behalf of own
liabilities	1.0	0.9	1.0
Derivatives
Interest rate swaps
Nominal value	3.2	7.1	5.8
Fair value	-0.1	-0.3	-0.1

Foreign exchange forward contracts
Nominal value		0.2	0.2	0.1
Fair value
The fair value of derivatives is the gain or loss for closing the contract based on market rates at the
balance sheet date.
Changes in tangible assets are classified as follows:
EUR million	1-3/11	1-3/10	1-12/10
Acquisition costs	0.3	0.2	1.6
Proceeds from sale	0.0		0.0
Total	0.3	0.2	1.6
Changes in intangible assets are classifies as follows:
EUR million	1-3/11	1-3/10	1-12/10
Acquisition costs	0.6	0.3	1.7

Provisions

(15)

The Group's non-current provisions are an environmental provision of EUR 0.6 million and a warranty provision of EUR 0.4 million. Current provisions include the latter part of in 2009 recognized restructuring provision of EUR 0.1 million.

Non-current provisions are itemized in greater detail in notes 26. Provisions and 34. Contingent liabilities in the consolidated financial statements in Annual Report 2010. Contingent liabilities have not changed after the end of the financial period.

Share capital Share capital by share series

	Number of	% of	% of	Share,
	shares	shares	voting	EUR of
			rights	share
				capital
K shares (10 votes)	9 540 000	25.7	77.6	1 621 800
A shares (1 vote)	27 603 970	74.3	22.4	4 692 675
Total March 31, 2011	37 143 970	100.0	100.0	6 314 475

There have been no changes in Tulikivi Corporation´s share capital during the period. According to the articles of association the dividend paid for Series A shares shall be 0.0017 EUR higher than the dividend paid on Series K shares. The Series A share is listed on the NASDAQ OMX Helsinki Ltd. No flagging notifications were made to the company during the review period.

The number of the shares in the company´s possession at the end of period was 124 000 series A shares.

Board authorizations

The Annual General Meeting of April 14, 2011 authorized the Board of Directors to acquire the company's own shares. A maximum of 2 760 397 Series A shares in the company and 954 000 Series K shares in the company can be bought back. The authorization is valid until the Annual General Meeting 2012.

The Board of Directors has further an authorization to decide on share issues and the conveyance of the company's own shares in the possession of the company.

New shares can be issued or own shares held by the company conveyed amounting to a maximum of 5 520 794 Series A shares and 1 908 000 Series K shares. The authorization is valid until the Annual General Meeting 2012.

Related party transactions
The following transactions with related parties took place:
EUR 1000	3/11	3/10	12/10
Sales to associated companies
and related parties	-	-	8
Purchases from associated
companies	52	63	240
Leases from related parties	27	27	111
Receivables from the related parties		12	1

Transactions with other related parties

Tulikivi Corporation is a founder member of the Finnish Stone Research Foundation. The company has leased offices and storages from the property owned by the Foundation and North Karelia Educational Federation of Municipalities. The rent paid for these facilities was EUR 33 thousand (33 thousand) in the period. The rent corresponds with the market rents.

Key management compensation
EUR 1000	3/11	3/10	12/10
Salaries and other short-term employee
benefits of the Board of Directors
and Managing Directors	82	81	421
Other long term employee
benefits	40	41	63
Largest shareholders on March 31, 2011
Name of shareholder		Shares		Pro-

		portion of total vote
Vauhkonen Reijo	4 191 827	24.3 %
Vauhkonen Heikki	3 014 724	24.1 %
Elo Eliisa	2 957 020	5.9 %
Virtaala Matti	2 429 887	12.6 %
Mutual Pension Insurance
Ilmarinen	1 902 380	1.5 %
Mutanen Susanna	1 643 800	7.2 %
Vauhkonen Mikko	782 310	3.5 %
Paatero Ilkka	718 430	0.6 %
Nuutinen Tarja	674 540	3.5 %
Investment Fond Phoebus	585 690	0.5 %
Other shareholders	18 243 362	16.3 %

The information in the interim report is unaudited.

The companies included in the Group are the parent company Tulikivi Corporation, Kivia Oy, AWL-Marmori Oy, Tulikivi U.S. Inc. and OOO Tulikivi. Group companies include also The New Alberene Stone Company, Inc., which is dormant. The parent company has a fixed place of business in Germany, Tulikivi Oyj Niederlassung Deutschland. The Group has interests in associated companies Stone Pole Oy, Leppävirran Matkailukeskus Oy and Rakentamisen MALL Oy.

TULIKIVI CORPORATION

Board of Directors Matti Virtaala Chairman of the Board

Distribution: NASDAQ OMX Helsinki Ltd Central Media www.tulikivi.com

Additional information: Tulikivi Corporation, 83900 Juuka, www.tulikivi.com

• Chairman of the Board of Directors Matti Virtaala, +358 207 636 666
• Managing Director Heikki Vauhkonen, +358 207 636 555