Annual Report • Apr 27, 2021
Annual Report
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Annual report 2020 (Translation of the Estonian original)
Beginning of the financial year: 1.01.2020 End of the financial year: 31.12.2020 Business name: Nordic Fibreboard AS Registry code: 11421437 Address: Suur-Jõe 48, Pärnu 80042, Estonia Phone: +372 44 78 323 E-mail: [email protected] Homepage: www.nordicfibreboard.com Auditor: AS PricewaterhouseCoopers
Main activity: Production and wholesales of fibreboards
| CONTENTS | |
|---|---|
| INTRODUCTION 3 | |
| MANAGEMENT REPORT 4 | |
| MANAGEMENT BOARD'S CONFIRMATIONS 19 | |
| CONSOLIDATED FINANCIAL STATEMENTS 20 | |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION 20 | |
| CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 21 | |
| CONSOLIDATED STATEMENT OF CASH FLOWS 22 | |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 23 | |
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24 | |
| NOTE 1 GENERAL INFORMATION 24 | |
| NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 24 | |
| NOTE 3 FINANCIAL RISK MANAGEMENT 40 | |
| NOTE 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 46 | |
| NOTE 5 RECEIVABLES AND PREPAYMENTS 48 | |
| NOTE 6 INVENTORIES 48 | |
| NOTE 7 INVESTMENT PROPERTY 49 | |
| NOTE 8 PROPERTY PLANT EQUIPMENT, RIGHT-OF-USE ASSETS & INTANGIBLE ASSETS 50 | |
| NOTE 9 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 51 | |
| NOTE 10 BORROWINGS AND FINANCIAL LEASE 52 | |
| NOTE 11 PAYABLES AND REPAYMENTS 54 | |
| NOTE 12 PROVISIONS 54 | |
| NOTE 13 EQUITY 55 | |
| NOTE 14 EARNINGS PER SHARE 57 | |
| NOTE 15 COST OF GOODS SOLD 57 | |
| NOTE 16 DISTRIBUTION COSTS 58 | |
| NOTE 17 ADMINISTRATIVE AND GENERAL EXPENSES 58 | |
| NOTE 18 LABOUR EXPENSES 58 | |
| NOTE 19 OTHER OPERATING INCOME 58 | |
| NOTE 20 OTHER OPERATING EXPENSES 59 | |
| NOTE 21 FINANCIAL INCOME AND EXPENSES 59 | |
| NOTE 22 OPERTING SEGMENTS 59 | |
| NOTE 23 RELATED PARTIES 61 | |
| NOTE 24 CONTINGENT LIABILITIES 62 | |
| NOTE 25 STATEMENT OF PROFIT OR LOSS OF DISCONTINUED OPERATIONS 63 | |
| NOTE 26 SUPPLEMENTARY DISCLOSURES ON THE GROUP'S PARENT 64 | |
| INDEPENDENT AUDITOR'S REPORT 68 | |
| PROPOSAL FOR PROFIT ALLOCATION 74 | |
| SIGNATURES OF THE MANAGEMENT BOARD AND SUPERVISORY BOARD TO THE 2020 ANNUAL REPORT 75 | |
| REVENUE OF THE PARENT COMPANY BY EMTAK CLASSIFICATORS 76 |
Nordic Fibreboard AS main activity is production and sale of building materials. Nordic Fibreboard AS is a holding company with subsidiaries Nordic Fibreboard Ltd OÜ, Pärnu Riverside Development OÜ (was established by the demerger of subsidiary in 2019) and Skano Furniture OÜ, herewith in turn Nordic Fibreboard Ltd OÜ owns a subsidiary Suomen Tuulileijona OY and Skano Furniture OÜ owns a subsidiary Skano LT UAB.
The Group, as of 31.12.2020, therefore consists of the following companies, all 100% owned:
| Subsidiary | Location | Activity |
|---|---|---|
| Nordic Fibreboard Ltd OÜ | Estonia | Production and sales |
| Suomen Tuulileijona OY | Finland | Marketing |
| Skano Furniture OÜ | Estonia | Retail (operations ended) |
| UAB Skano LT | Lithuania | Retail (operations ended) |
| Pärnu Riverside Development OÜ | Estonia | Rental and property development |
Nordic Fibreboard Ltd OÜ produces and distributes softboard products for use in many different applications, the main categories being within construction (insulation, soundproofing, and interior finishing panels for walls and ceilings) and industry (packaging, door cores, expansion joint filler, pin and notice boards, acoustic reduction, cake boards, firelighters). Suomen Tuulileijona OY is the marketing company of Nordic's fibreboard products in Finland.
Skano Furniture OÜ is a retail company, whose activity was the sale of home furnishing furniture. The company finished its activities on 31.01.2020, when it closed the last two furniture showrooms. As of September 2019 UAB Skano LT has no operations.
Pärnu Riverside Development OÜ was established by the demerger of Skano Furniture Factory OÜ on 24.04.2019, during which Pärnu Riverside Development OÜ became the owner of real estate and its buildings in Suur-Jõe street 48 in Pärnu city and the company`s area of activity is the management of such real estate and buildings. Skano Furniture Factory OÜ was a subsidiary of Nordic Fibreboard AS, which produced original premium price level wooden home furnishing furniture and which was sold out of the Group on 05.09.2019.
The principal markets of the company are the Nordic, Russia and Baltic region. Nordic Fibreboard's customers and partners are well recognized parties within their field of expertise, and value long-term relations with Nordic Fibreboard.
From 5 June 1997, Nordic Fibreboard AS (with previous names Viisnurk AS and Skano Group AS) was listed on the Tallinn Stock Exchange. The company was established as a result by the demerger of AS Trigon Property Development (with previous name Viisnurk AS) listed on 19 September 2007. The shares of the spin-off manufacturing company were relisted in the Main List of the Tallinn Stock Exchange pursuant to the resolution of the Listing Committee of the Tallinn Stock Exchange on 20 September 2007 and trading in the shares of Nordic Fibreboard AS was launched on 25 September 2007. In September 2013, a restructuring process of Nordic Fibreboard AS was conducted, where current fibreboard and furniture factory divisions were transferred to newly established subsidiaries Nordic Fibreboard Ltd OÜ (with previous name Skano Fibreboard OÜ) and Skano Furniture Factory OÜ. On 2nd of April 2018 Nordic Fibreboard shares trading was moved on Tallinn Stock Exchange from primary list to secondary list.
Consolidated net sales for 2020 were € 10.27 million from continuing operations, being a 23% decrease compared to 2019 (2019: € 13.33 million from continuing operations). Fibreboard sales for year 2020 were € 10.00 million, which is 15% decrease from year 2019 sales of € 11.75 million. The main reason for the decrease in sales revenue was the loss of customers in the display board segment as a result of the COVID-19 pandemic. All production in this sector was produced at the Püssi factory, which was closed in March 2020.
Furniture retail sales in 2020 were € 56 thousand (2019: € 1,515 thousand). The retail sale of furniture has ended with the closure of the last shop on 31.01.2020 and the sales recorded in 2020 was from some remaining stock.
The sales revenue in 2020 from real estate management was € 212 thousand (2019: € 111 thousand), one of the reasons for the increase in sales revenue is that in 2020 the real estate management company operated throughout the financial year, but in 2019 it started operations in May.
Nordic Fibreboard AS recorded positive EBITDA of € 540 thousand for full year 2020 from continuing operations (vs positive € 325 thousand in 2019 from continuing operations). The EBITDA result for 2019 includes one-off operating income of € 324 thousand from revaluation of its property subsidiary Pärnu Riverside Development, while the EBITDA result for the 2020 includes one-off expense in the Group's fibreboard subsidiary of € 38 thousand for the removal of previously used office building located at the fibreboard site in Pärnu. The main reason for such a large change in EBITDA are the improved efficiency of Nordic Fibreboard Ltd OÜ. The closure of the Püssi fibreboard factory enabled us to switch the Püssi factory construction sector orders to our Pärnu factory, and we started a 4th shift in Pärnu in April 2020 as a result thereof. The Pärnu factory is now running continuously, except for a one-shift maintenance stop every month. This has led to increased machine utilisation, and gross margin for Nordic Fibreboard Ltd OÜ has therefore increased substantially, being 25% in 2020 (from being 15% in 2019). Furniture retail EBITDA for 2020 was negative € 40 thousand (2019: negative € 200 thousand). Real Estate Management EBITDA for 2020 was € 0 (2019: positive € 352 thousand).
Net profit for full-year 2020 was € 1,074 thousand from continuing operations (2019: net loss of € 1,127 thousand from continuing operations).
| € thousand | % of net sales | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| Continued operations | ||||
| Fibreboards production and sales | 10,001 | 11,745 | 97% | 81% |
| Furniture retail | 56 | 1,515 | 1% | 10% |
| Real Estate Management | 212 | 111 | 2% | 1% |
| Group transactions | (0) | (38) | (0%) | (0%) |
| Total | 10,269 | 13,333 | 100% | 92% |
| Discontinued operations | 0 | 1,215 | 0% | 8% |
| TOTAL | 10,269 | 14,548 | 100% | 100% |
| € thousand | % of net sales | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| European Union | 8,594 | 10,244 | 84% | 70% |
| Russia | 1,240 | 1,545 | 12% | 11% |
| Asia | 189 | 544 | 2% | 4% |
| Africa | 96 | 523 | 1% | 4% |
| Other | 85 | 245 | 1% | 2% |
| Middle East | 65 | 232 | 0% | 1% |
| Total | 10,269 | 13,333 | 100% | 92% |
| Discontinued operations | 0 | 1,215 | 0% | 8% |
| TOTAL | 10,269 | 14,548 | 100% | 100% |
The main decrease in the Group`s sales revenue was caused by the closure of the Püssi factory, when orders from customers in Southern Europe, the Middle East and Asia decreased significantly due to the coronavirus pandemic.
| € thousand | 2020 | 2019 |
|---|---|---|
| Continued operations | ||
| EBITDA by business units: | ||
| Fibreboards production and sales | 597 | 68 |
| Furniture retail | (40) | (200) |
| Real Estate Management | 0 | 352 |
| Group transactions | (18) | 104 |
| TOTAL EBITDA | 540 | 325 |
| Depreciation | (558) | (669) |
| TOTAL OPERATING PROFIT/ LOSS | (19) | (343) |
| Net financial income/ costs | 1,092 | (784) |
| Income tax | 0 | 0 |
| NET PROFIT/ LOSS | 1,074 | (1,127) |
| Discontinued operations | 0 | (271) |
| TOTAL | 1,074 | (1,398) |
As of 31.12.2020 the total assets of Nordic Fibreboard AS were € 7.7 million (31.12.2019: € 9.1 million). The liabilities of the company as of 31.12.2020 were € 5.0 million (31.12.2019: € 7.5 million), of which Nordic Fibreboard has borrowings of € 3.2 million as at 31.12.2020 (31.12.2019: € 4.6 million).
Receivables and prepayments amounted to € 0.8 million as at 31.12.2020 (31.12.2019: € 1.4 million). Inventories were € 0.5 million as of 31.12.2020 (31.12.2019: € 0.9 million). The fair value of financial assets (i.e. Trigon Property Development shares) increased from € 397 thousand as of 31.12.2019 to € 450 thousand as of 31.12.2020. As of 31.12.2020 and 31.12.2019, Real Estate Investments amounted
to € 1.1 million, property, plant, equipment and intangibles were € 4.7 million as of 31.12.2020 (€ 5.2 million as of 31.12.2019).
In 2020, the Group's cash flows from operating activities totalled € 150 thousand € (2019: € 516 thousand). Investment activities resulted in cash outflows in amount of € 56 thousand in 2020, compared to outflows in amount € 153 thousand in 2019. Financing activities also resulted in cash outflows of € 75 thousand in 2020 (2019: € outflow 410 thousand). Net cash effect in 2020 € was positive 19 thousand, which is € 66 thousand more cash inflow compared to the cash outflow in the amount of € 47 thousand in 2019.
In 2020, investments in non-current assets totalled € 110 thousand. In 2019, the investments totalled € 133 thousand.
Fibreboard sales for 2020 were € 10.00 million, which is 15% decrease from year 2019 sales of € 11.75 million. We sold our products to customers in 28 countries during the year 2020. The main reason for the drop in sales was the loss of display board customers, boards for this sector was produced in the Püssi factory, which we closed in March 2020. However, sales to our customers within the construction sector in our main Northern European and Russian markets have been stable. Finland, our largest market accounted for 26% of total fibreboard sales in 2020 year (up from being 22% of total sales in 2019), Denmark is our second largest market, accounting for 22% of sales in the 2020 (it has also increased compared to year 2019 when it accounted for 14% of sales). Sales in Estonia and Russia have remained at the same level as previous year, while we recorded sales decline in markets further afield mainly due to the negative effect in many such markets caused by the corona virus.
Fibreboard recorded EBITDA of € 597 thousand for full year 2020 (2019: € 68 thousand). The main reason for the improvement in EBITDA were due to increased efficiency by achieving full machine utilisation in the Pärnu factory in 2020.
| € thousand | % of net sales | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| European Union | 8,327 | 8,656 | 83% | 74% |
| Russia | 1,240 | 1,545 | 12% | 13% |
| Asia | 189 | 544 | 2% | 5% |
| Africa | 95 | 523 | 1% | 4% |
| Other | 85 | 245 | 1% | 2% |
| Middle East | 65 | 232 | 1% | 2% |
| Total | 10,001 | 11,745 | 100% | 100% |
Nordic Fibreboard Ltd.'s products are divided into the following product groups: construction boards, interior finishing panels, door cores, packaging and for use in display boards.
The largest product groups of the Pärnu fibreboard factory continued to be general construction boards and door filling material. These products are produced without the addition of hazardous chemicals, which makes our products health-friendly and formaldehyde-free.
Interior finishing panels with a decorative surface under the trademark ISOTEX are manufactured from natural fibreboards produced on the main production line of the Pärnu fibreboard factory. The studs are applied at the edges of the fibreboard and the surface is covered with decorative paper. This technology allows us to produce easy-to-install interior finishing panels.
Furniture retail sales in 2020 were € 56 thousand (2019 € 1,515 thousand). The company finished its activities on 31.01.2020, when it closed the last two furniture showrooms. The sales recorded in 2020 was from some remaining stock.
| € thousand | % of net sales | Number of stores | |||||
|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 31.12.2020 | 31.12.2019 | ||
| Estonia* | 56 | 1 152 | 100% | 76% | 0 | 2 | |
| Latvia** | 0 | 137 | 0% | 9% | 0 | 0 | |
| Lithuania** | 0 | 226 | 0% | 15% | 0 | 0 | |
| Total | 56 | 1 515 | 100% | 100% | 0 | 2 |
* Estonian stores were closed on 31.01.2020.
**Latvian and Lithuanian stores were closed on 30.09.2019.
Total Furniture operations EBITDA for 2020 was negative € 40 thousand (in 2019 negative € 200 thousand).
Rental income, including the resale of utilities, was € 212 thousand in 2020 (2019 € 111 thousand). The reason for the increase sales revenue compared to the previous year, was the lease of Suur-Jõe 48 production premises to a subsidiary sold out of the Group as of September 2019. All sales revenue for 2020 and 2019 are within Estonia. The company's expenses consist of operating expenses and expenses related to the ongoing detail plan project. The company recorded EBITDA of € 0 thousand for 2020 (2019 € 352 thousand). The reason for such a large difference in EBITDA was the gain of € 327 thousand from the revaluation of investment property in 2019. Net profit in 2020 were € 0 thousand (2019: profit € 294 thousand).
The coronavirus pandemic, when arriving in our region early last year, did create a lot of uncertainty. The immediate impact on Nordic Fibreboard was the loss of customers from regions such as Asia, Middle East and southern Europe when the economies in these regions ground to standstill for a while, which led us to close down our Püssi fibreboard factory. As the year progressed, it became clear that manufacturing sectors, such as ours, were not substantially impacted by the pandemic. Due to travel restrictions, and part closure of the hospitality industry, consumers had more monies available to spend on their home environments, which for us meant increased demand for our products in segments such as construction/renovation and door cores. This trend has continued into the new year.
As the pandemic continues, there is concerns that various mutations of the virus could prove more dangerous so that the economic environment and consumer's behaviour change further, with
unknown consequences for the business of Nordic Fibreboard. Hopefully the roll out of the vaccine precludes such development, however it is impossible to foresee what developments could occur.
The order book from our traditional customers in our largest markets in northern Europe remains strong, with increased demand from many of these markets. This has had the effect of us having to postpone orders from customers from further afield. As a result of this improved demand picture, management is now considering measures for a possible reopening of Püssi factory during second half of this year.
On the other hand, we are much aware of the continuing uncertainty surrounding the COVID-19 pandemic. We expect to have a clearer picture of the demand situation and the pandemic within the next few months.
We will continue to manage and develop the property on Suur-Jõe Street 48, Pärnu. It is planned to find tenants for still vacant premises.
* There is no economic activity in the company
The General Meeting is the highest directing body of the Company. Annual General Meeting shall be called within six months after the end of the financial year at the latest at the company's registered place of business. An extraordinary General Meeting shall be called if it is required by law.
The General Meeting of Nordic Fibreboard AS for 2021 will be held on 21 June 2021 in the Company's head office in Pärnu.
The Supervisory Board plans the Company's (i.e. Nordic Fibreboard concern) activities, organises its management, supervises the activities of the Management Board and adopts resolutions in matters provided by law or the Articles of Association. According to the Articles of Association, the Supervisory Board consists of between three and seven members. Members of the Supervisory Board are elected by the General Meeting for a term of five years. The Supervisory Board of Nordic Fibreboard AS has three members since 23. December 2021. As at the balance sheet date, the Supervisory Board was comprised of the chairman of the Supervisory Board Joakim Johan Helenius and members of the Supervisory Board Trond Bernhard Brekke and Sakari Wallin.
Joakim Johan Helenius (re-elected into office until 18.09.2022), member of the Supervisory Board since 1999. Joakim Johan Helenius was born in 27.11.1957 in Finland and he obtained a degree from Cambridge University in England. He is also member of the Supervisory Board of AS Trigon Property Development, member of the Management Board of the Company's majority shareholder Pärnu Holdings OÜ, Chairman of the Management Board of AS Trigon Capital. Joakim Johan Helenius owns 20 000 Nordic Fibreboard shares.
Trond Bernhard Brekke (elected into office until 18.09.2022), member of the Supervisory Board since 2017. Trond Bernhard Brekke was born in 26.06.1951 in Norway and he obtained bachelor's degree from University de Grenoble in France and University of Denver in Colorado. Trond Bernhard Brekke holds Managing Director's position in Bernhd. Brekke AS. Trond Bernhard Brekke is a Chairman and member of board in several companies. Since 1999 Trond Bernhard Brekke is an Honorary Consul of Estonia. Trond Bernhard Brekke does not own any shares in Nordic Fibreboard AS.
Sakari Wallin (elected into office until 15.11.2023), member of the Supervisory Board since 2018. Sakari Wallin was born in 03.05.1954 in Finland and he obtained bachelor's degree in Engineering from Polytechnik Turku. Sakari Wallin holds Managing Director's position in Finnish Fibreboard LTD. Sakari Wallin is Chairman of the Board of Finnish Fibreboard (UK) Ltd and Managing director of Finnish Fibreboard Filial Sverige. Sakari Wallin does not own any shares in Nordic Fibreboard AS.
The powers of the Management Board of the Company are provided in the Commercial Code and are limited as established in the Company' Articles of Association. The members of the Management Board have no powers to issue shares. Members of the Management Board are appointed by the Company's Supervisory Board for three years. Members of the Management Board are appointed and recalled by simple majority voting of the Supervisory Board.
There are no agreements between Nordic Fibreboard AS and members of the Management Board as provided in Chapter 19 of the Securities Market Act. In accordance with the Articles of Association, the Management Board consists of up to seven members. As at the end of the financial year and at the approval of this annual report, the Management Board of Nordic Fibreboard AS has one member, Torfinn Losvik.
In 2020, the average number of employees in the Group from continuing operations was 106 (2019: 125 from continuing operations). At the end of the financial year, the Group employed 97 employees of which 74 workers and 23 specialists and executives (2019: number of employees from continuing operations was 126, of which 102 workers and 24 specialists and executives). The average age of the Group's employees was 50 years (2019: 49).
In 2020, employee wages and salaries with all applicable taxes totalled € 2.0 million from continuing operations (2019: € 2.5 million from continuing operations). In 2020, payments made to management and supervisory board members of all group companies including all subsidiaries with relevant taxes were € 217 thousand (€ 173 thousand in 2019).
The Group is one of the largest employers in Pärnu and therefore has positive social impact on local employment.
| 2020 | 2019 | Change | |||
|---|---|---|---|---|---|
| Nordic Fibreboard Ltd OÜ | 97 | 120 | (19%) | ||
| Skano Furniture OÜ | 0 | 6 | (100%) |
Total Group 97 126 (23%)
The Audit Committee is a body advising the Supervisory Board in the area of accounting, auditing control, risk management, internal control and internal auditing, performance of supervision and budgeting and the legality of the activities of the Supervisory Board. Audit Committee has two members and as at balance sheet date includes Rando Tomingas and Kristi Aarmaa.
In 2020, the Management Board, in cooperation with the Audit Committee, organised a tender for the appointment of an auditor. As a result of the tender, AS PricewaterhouseCoopers was chosen and appointed the company's auditor at the annual general meeting of shareholders held on 10 August 2020. A one-year contract was entered with AS PricewaterhouseCoopers for the audit of the financial years 2020.
During 2020, the auditor of the Company has provided to the Group a limited assurance engagement in respect of packaging report, that is permissible in accordance with the Auditors Activities Act of the Republic of Estonia.
The Group's Management Board publishes the annual report once a year and interim reports during the financial year. The information provided in reports is based on the reporting of financial indicators of intra-Group units that are monitored regularly. Reports are supplemented on a continuous basis in a process during which indicators influencing the achievement of agreed objectives are analysed. Shareholders are presented an annual report signed by the members of the Management Board and the Supervisory Board for consideration.
| Income statement 2020 2019 Revenue 10,269 13,333 EBITDA 540 325 EBITDA margin 5% 2% Operating profit (19) (343) Operating margin (0%) (3%) Net profit 1,074 (1,127) Net margin 10% (8%) Discontinued operations 0 (271) TOTAL NET PROFIT 1,074 (1,398) |
€ thousand | |
|---|---|---|
| Statement of financial position | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Total assets | 7,650 | 9,045 |
| Return on assets | 14% | (12%) |
| Equity | 2,648 | 1,542 |
| Return on equity | 41% | (73%) |
| Debt-to-equity ratio | 65% | 83% |
| Share | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Last Price* | 0.45 | 0.41 |
| Earnings per share | 0.24 | (0.31) |
| Price-earnings ratio | 1.89 | (1.32) |
| Book value of a share | 0.59 | 0.34 |
| Market to book ratio | 0.76 | 1.20 |
| Market capitalization, € thousand | 2,025 | 1,845 |
| Number of shares, piece | 4,499,061 | 4,499,061 |
EBITDA = Earnings before interest, taxes, depreciation and amortization EBITDA margin = EBITDA / Revenue Operating margin = Operating profit / Revenue Net margin = Net profit / Revenue Return on assets = Net profit / Total assets Return on equity = Net profit / Equity Debt-to-equity ratio = Liabilities / Total assets Earnings per share = Net profit / Total shares Price-earnings ratio = Last price / Earnings per share Book value of a share = Equity / Total shares Market to book ratio = Last price / Book value of a share Market capitalization = Last price * Total number of shares \*http://www.nasdaqbaltic.com/
Nordic Fibreboard AS has one type of shares and the Company's Statute have no provisions on restriction of sales of the Company's shares. The Company does not have shares that grant specific control rights and the Company has no information about agreements on restricting the voting rights of shareholders. The Company and shareholders have not entered into agreements between themselves that would restrict sale of shares.
| € | 2020 | 2019 | 2018 | 2017 | 2016 |
|---|---|---|---|---|---|
| Opening price € | 0.41 | 0.36 | 0.62 | 0.46 | 0.73 |
| Highest price € | 0.51 | 0.58 | 0.66 | 0.69 | 0.79 |
| Lowest price € | 0.30 | 0.35 | 0.30 | 0.43 | 0.46 |
| Last Price | 0.45 | 0.41 | 0.36 | 0.62 | 0.46 |
| Turnover, thousand shares | 524 | 175 | 291 | 319 | 286 |
| Turnover, thousand € | 208 | 75 | 140 | 170 | 160 |
| Market cap, mllion | 2.02 | 1.84 | 1.61 | 2.77 | 2.05 |
The following graph show the movements of Nordic Fibreboard AS price and turnovers for the years 2016 to 2020.
SHARE CAPITAL BY THE NUMBER OF SHARES AS OF 31.12.2020:
| Number of shareholders |
% from shareholders |
Number of shares | % from share capital |
|
|---|---|---|---|---|
| 1 – 99 | 117 | 24% | 3 105 | 0% |
| 100 – 999 | 187 | 39% | 61 912 | 1% |
| 1 000 - 9 999 | 144 | 30% | 429 329 | 10% |
| 10 000 - 99 999 | 34 | 7% | 847 555 | 19% |
| 100 000 - 999 999 | 2 | 0% | 474 968 | 11% |
| 1 000 000 - 9 999 999 | 1 | 0% | 2 682 192 | 60% |
| TOTAL | 485 | 100% | 4 499 061 | 100% |
| 12 |
| Number of shareholders |
% from shareholders |
Number of shares | % from share capital |
|
|---|---|---|---|---|
| Estonia | 454 | 94% | 4,258,815 | 95% |
| Finland | 9 | 2% | 38,317 | 1% |
| Germany | 4 | 1% | 31,719 | 1% |
| Latvia | 5 | 1% | 124,005 | 3% |
| Lithuania | 5 | 1% | 30,561 | 1% |
| Other | 8 | 2% | 15,644 | 0% |
| TOTAL | 485 | 100% | 4,499,061 | 100% |
| Number of | % from | Number of shares | % from share | |
|---|---|---|---|---|
| shareholders | shareholders | capital | ||
| Private individuals | 429 | 88% | 936,256 | 21% |
| Institutional investors | 56 | 12% | 3,562,805 | 79% |
| TOTAL | 485 | 100% | 4,499,061 | 100% |
| Shareholder | Number of shares | Shareholding % |
|---|---|---|
| PÄRNU HOLDINGS OÜ | 2,682,192 | 60% |
| Gamma Holding Investment OÜ | 374,968 | 8% |
| Live Nature OÜ | 100,000 | 2% |
| Olegs Radcenko | 93,644 | 2% |
| Osaühing Kalbro | 62,949 | 1% |
| OÜ EKOTEK EESTI | 59,750 | 1% |
| TOIVO KULDMÄE | 49,231 | 1% |
| STETIND OÜ | 44,206 | 1% |
| NIKOLAI TOVER | 38,720 | 1% |
| Urmas Sööt | 30,000 | 1% |
| Madis Talgre | 28,500 | 1% |
| MEELIS KÖRT | 28,027 | 1% |
| SIIM TALMAR | 28,000 | 1% |
| Hille Kallas | 25,000 | 1% |
| NORDEA BANK ABP/NON TREATY CLIENTS | 22,771 | 1% |
| Kirschmann OÜ | 22,525 | 1% |
Direct ownership of the members of the Management and Supervisory Boards as at 31.12.2020:
Both Joakim Johan Helenius and Torfinn Losvik have indirect ownership through parent company Pärnu Holdings OÜ. Indirectly Torfinn Losvik owns shares through Stetind OÜ in the amount of 44,206 shares (2019: 44,206 shares).
As a rule, payment of dividends is decided annually and depends on the Group's performance and possible investment needs. The method of payment of the didvidend shall be determined by a resolution of the general meeting. After end of the financial year, but before the approval of the annual report, the management board may, with the consent of the supervisory board, make advance payments to shareholders up to half of the expected profit. Dividends or advancesare distributed proportionally among the shareholders, according to the list of shareholders, which is fixed on the 10th trading day after the general meeting where the decision was made to distribute the profit or make advances.
Nordic Fibreboard AS's interest rate risk relates to changes in EURIBOR (Euro Interbank Offered Rate) since our loans are linked to EURIBOR. At 31.12.2020 six months' EURIBOR rate was (0.526) % and at 31.12.2019 six months' EURIBOR rate was (0.324) %. As EURIBOR is negative and the negative interest in the loan agreement is equal to zero, the continued negative rate of EURIBOR does not have interest expense reducing effect. As the borrowing have a maturity of up to 6 years, management is of the opinion that the floating interest rate will not bear significant impact to Group's cash flows.
The dates for fixing interest rates on the basis of changes in EURIBOR are the 30th day of every six months for its bank loans.
The interest rate risk also depends on the overall economic situation in Estonia and in the eurozone. Nordic Fibreboard AS has a cash flow risk arising from the interest rate risk because its loans have a floating interest rate. Management believes that the cash flow risk is not significant, therefore no hedging instruments are used.
The foreign exchange risk is the risk that the company may have significant loss because of fluctuating foreign exchange rates. Nordic Fibreboard has no operations outside of the euro zone and most of our export-import contracts to customers outside of the eurozone are nominated in EUR. The production has been sold and raw materials for production has mainly been purchased in euros.
The risk of the economic environment for the fibreboard division depends on general developments in the construction and industrial segments. Over the past year, the risk of a possible deterioration in the economic environment has been exacerbated by the COVID-19 pandemic. Europe is still in the throes of a coronavirus pandemic, the impact of the pandemic on the economy is multi-layered and its duration is quite difficult to assess.
The management estimates that the fair values of cash, accounts receivables and payables, short-term loans and borrowings do not materially differ from their carrying amounts. The fair values of long-term loans do not materially differ from their carrying amounts because their interest rates correspond to the interest rate risks prevailing on the market.
The liquidity risk is a potential loss arising from the existence of limited or insufficient financial resources that are necessary for performing the obligations related to the activities of the Group. The
Management Board continuously monitors cash flow movements, using the existence and sufficiency of the Group's financial resources for performing the assumed obligations and financing the strategic objectives of the Group.
| Domicile | Number of shares (pcs) 31.12.2020 |
Ownership % 31.12.2020 |
Number of shares (pcs) 31.12.2019 |
Ownership % 31.12.2019 |
|
|---|---|---|---|---|---|
| Nordic Fibreboard Ltd OÜ | Estonia | 1 | 100 | 1 | 100 |
| Skano Furniture OÜ | Estonia | 1 | 100 | 1 | 100 |
| Pärnu Riverside Development OÜ |
Estonia | 1 | 100 | 1 | 100 |
| OÜ Isotex | Estonia | 1 | 100 | 1 | 100 |
| Suomen Tuulileijona OY | Finland | 1 | 100 | 1 | 100 |
| UAB Skano LT | Lithuania | 100 | 100 | 100 | 100 |
Nordic Fibreboard AS is a holding company of subsidiaries Nordic Fibreboard Ltd OÜ, Pärnu Riverside Development OÜ (since 2019, established by the demerger of subsidiary) and Skano Furniture OÜ. Nordic Fibreboard Ltd OÜ manufactures and distributes wood fibreboards for the construction sector (wind barrier, insulation, sound protection), interior panels for ceiling and walls, as well as various industrial applications for use in packaging, door cores, pin boards, and expansion joint fillers. Nordic Fibreboard Ltd OÜ owns a subsidiary Suomen Tuulielijona OY, who is marketing company in Finland. Skano Furniture OÜ own retail furniture shop subsidiary Skano LT UAB, which ended operations in September 2019 and remains as a dormant company.
Pärnu Riverside Development OÜ owns and manages the property located at Suur-Jõe 48 in Pärnu. Isotex OÜ, a subsidiary of Nordic Fibreboard AS, is non-active company with no business activities in 2020 and 2019.
The Corporate Governance Recommendations is a set of guidelines and recommended rules to be carried out primarily by entities whose shares have been admitted to trading on a regulated market in Estonia. From 1 January 2006, the listed entities are required to follow the principle "Comply or Explain".
The Corporate Governance Recommendations lay down the principles of calling and conducting general meetings of shareholders, composition, activities and responsibilities of Supervisory and Management Boards, disclosures and financial reporting.
As the principles outlined in the Corporate Governance Recommendations are recommended, the Company does not have to comply with all of them but needs to explain in the Corporate Governance Recommendations Report why these requirements are not complied with.
In its business, Nordic Fibreboard AS adheres to prevailing laws and legislative provisions. As a public entity, Nordic Fibreboard AS also follows the requirements of the Tallinn Stock Exchange and the principles of equal treatment of shareholders and investors. Pursuant to this, the Company follows most of the guidelines set out in the Recommendations. Below are arguments for noncompliance of the Recommendations that the Company does not comply with.
Clause 1.3.2 Members of the Management Board, the Chairman of the Supervisory Board and if possible, all members of the Supervisory Board and at least one of the auditors shall participate in the General Meeting.
The General Meeting of Shareholders held on 10th of August 2020 was attended by the Members of the Management Board of Nordic Fibreboard AS. Neither Members of the Supervisory Board nor the auditor were present at the meeting. The auditor was not present at the meeting, because the Management Board did not consider the auditor's participation necessary, as there were not any issues on the agenda that might have needed the auditor's comments. The auditor has expressed his opinion in the auditor's report, stating that the consolidated financial statements of the Group give a true and fair view, in all material respects, except for the effect of the matter described in the Basis for qualified opinion section of aduitor's report, of the financial position of the Group as at 31.12.2019 and the financial results and cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. At the same time the agreement with the auditors was in force that in case the shareholders have questions to the auditors, the auditors were ready to answer all questions immediately by phone during the General Annual meeting. In accordance with good practice, shareholders had the opportunity to ask questions to the members of the Management Board during the meeting.
Clause 1.3.3 The Issuer shall make participation in the General Meeting possible by means of communication equipment (Internet) if the technical equipment is available and where doing so is not too cost prohibitive to the Issuer.
At General Meeting the Issuer did not make monitoring and participation by communication equipment's possible, because no technical equipment was available.
Clause 2.2.1 The Management Board shall have more than one (1) member and the Chairman shall be elected from among the members of the Management Board. The Management Board or Supervisory Board shall establish an area of responsibility for each member of the Management Board. The Chairman of the Supervisory Board shall conclude a contract of service with each member of the Management Board for discharge of their functions.
The Management Board of the Issuer has one member only, who is the Chairman of the Management Board. The Subsidiaries Nordic Fibreboard Ltd OÜ have four member of the Management Board and Suomen Tuulielijona OY have three members in Management Boards. Contracts of service have been concluded with the member of the Management Board which also regulate the areas of responsibility.
Clause 2.2.7 Basic wages, performance pay, termination benefits, other payable benefits and bonus schemes of a member of the Management Board as well as their essential features (incl. features based on comparison, incentives and risk) shall be published in a clear and unambiguous form on the website of the Issuer and in the Corporate Governance Recommendations Report. Information published shall be deemed clear and unambiguous if it directly expresses the amount of expense to the Issuer or the amount of foreseeable expense as at the day of disclosure.
The Issuer shall not disclose the remuneration paid to the member of the Management Board by person because the Issuer considers this information sensitive to a member of the Management Board and invasion of his privacy. Its disclosure is not necessary for making a statement of the management quality of the Issuer and it will harm the competitive position of the Issuer and the members of the Management Board. Thus, the Issuer has decided not to disclose the remuneration paid to the member of the Management Board.
Clause 3.1.3 Upon the establishment of committees by the Supervisory Board, the Issuer shall publish their existence, duties, membership and position in the organisation on its website. Upon a change in the committee's structure, the Issuer shall publish the content of such changes and the period during which the procedures are in effect.
During 2020, the Supervisory Board of the Issuer has not established any committees.
Clause 3.2.5 The amount of remuneration of a member of the Supervisory Board appointed at the meeting and the procedure for his payment shall be published in the Corporate Governance Recommendations Report, outlining separately basic and additional remuneration (incl. termination and other payable benefits).
The Issuer does not pay any remuneration to the members of the Supervisory Board.
Clause 5.2 The Issuer shall publish the disclosure dates of information subject to disclosure throughout the year at the beginning of the financial year in a separate notice, called a financial calendar.
The Issuer did not disclose a separate notice but information subject to disclosure was made public no later than at the dates set out in the law.
Clause 5.6 The Issuer shall disclose the dates and places of meetings with analysts and presentations and press conferences organized for analysts, investors or institutional investors on its website.
According to the rules and regulations of the Tallinn Stock Exchange, the Group shall disclose all relevant information through the stock exchange. The Issuer does not regularly organise press conferences and meetings, therefore, the schedule of meetings cannot be disclosed. At the meetings with investors, only previously disclosed information shall be supplied.
Clause 6.2.1 Together with a notice calling the General Meeting, the Supervisory Board shall make information on an auditor's candidate available to shareholders. If it is desired to appoint an auditor who has audited the Issuer's reports for the previous financial year, the Supervisory Board shall pass judgement on his work.
The auditor shall be paid a fee according to the concluded contract. According to the contract, the amount of the fee shall be confidential. However, the Issuer believes that the disclosure of the fee does not affect the reliability of the audit. As the Supervisory Board wants to continue cooperation with the auditor, it is a proof that the Supervisory Board is satisfied with the current auditor.
The activities of the Issuer comply with the requirements of the Corporate Governance Recommendations in all other aspects.
According to the Environmental Pollution Prevention and Control Act, both the Pärnu and Püssi factories have environmental permits of indefinite duration for special water use and air pollution. Relevant permits have been issued during 2020, before that the group had an integrated environmental permit for an indefinite period. Adherence to the requirements of the permits ensures that production activity has a minimal impact on the environment, the requirements set out in the environmental permit ensure the protection of water and air in an environmentally generated waste in an environmentally sound manner. As of 01.01.2020, the amended Waste Act is in force, on basis of which § 73 (2) a waste permit is required for the generation of waste only upon extraction or enrichment of mineral resources. Consequently, Nordic Fibreboard is not obliged to have a waste permit for waste generation.
To meet the requirements of the Packaging Act, in 2005 the Company entered into a contract with the Estonian Recovery Organisation (ERO). Under the contract, all responsibilities of Nordic Fibreboard AS related to packaging collection, recovery and related reporting were transferred to ERO. The contract
ensures that all end consumers may return the packaging free of charge to containers bearing the Green Point sign.
The Forest Stewardship Council (FSC) is an international non-profit independent organisation the goal of which is foster environmentally friendly forest management. By possessing the FSC certificate we support such forest management goals that will preserve biodiversity, productivity and natural processes of forests. Upon implementation of the FSC policy, Nordic Fibreboard AS precludes the use of such timber that has been felled illegally; that comes from genetically modified trees, that comes from regions where traditional or civil rights are violated and timber which is not certified in old growth forests with high conservation value. The soft fibre factories hold the FSC certificate since 14 January 2011. From 27th of November 2018 Nordic Fibreboard Ltd OÜ has been assessed and certified as meeting the requirements of PEFC standard. The Certificate is valid from 27th of November 2018 to 26th of November 2023.
| thousands of m³ | 2020 | 2019 | Change % |
|---|---|---|---|
| Water usage: | 118.7 | 154.8 | (23%) |
| groundwater (own bore wells) | 52.1 | 131.0 | (60%) |
| surface water | 66.7 | 23.7 | 181% |
| Water discharge: | 90.7 | 110.6 | (18%) |
| conditionally clean wastewater | 10.9 | 11.1 | (2%) |
| surface water | 79.9 | 99.5 | (20%) |
| Water loss | 28.0 | 44.2 | (37%) |
| €thousand | 2020 | 2019 | Change % |
|---|---|---|---|
| Water usage: | 7.1 | 13.0 | (45%) |
| groundwater (own bore wells) | 5.1 | 12.3 | (58%) |
| surface water | 2.0 | 0.7 | 181% |
| Water discharge: | 149.6 | 147.7 | 1% |
| wastewater | 149.6 | 147.7 | 1% |
| Total expenses | 156.7 | 160.7 | (2%) |
| tons | 2020 | 2019 | Change % |
|---|---|---|---|
| Volatile organic components | 6.5 | 8.2 | (22%) |
| Organic dust | 34.7 | 90.7 | (62%) |
| Total | 41.3 | 98.9 | (58%) |
| €thousand | 2020 | 2019 | Change % |
|---|---|---|---|
| Handling of hazardous waste | 0,0 | 0.2 | (100%) |
| Handling of non-hazardous waste | 33.2 | 28.8 | 15% |
| Total expenses | 33.2 | 29.0 | 15% |
| €thousand | 2020 | 2019 | Change % |
| Sales of metal waste | 1.3 | 3.6 | (64%) |
| Total conditionl income | 1.3 | 3.6 | (64%) |
Information on water usage, wastewater discharge, waste handling and pollutants is provided from the Group`s continuing operations.
The Management Board has prepared the management report and the consolidated financial statements of Nordic Fibreboard AS for the financial year ended 31 December 2020.
The Management Board confirms that the management report on pages 4-18 provides a true and fair view of the business operations, financial results and financial condition of the parent company and the entities included in consolidation as a whole.
The Management Board confirms that according to their best knowledge the consolidated financial report on pages 20-67 presents a fair view of the assets, liabilities, financial position and profit or loss of the issuer and the entities involved in the consolidation as a whole according to the International Financial Reporting Standards as they are adopted by the European Union and contains a description of the main risks and doubts.
Torfinn Losvik
Chairman of the Management Board ............................................
Pärnu, April 26, 2021
| € thousand | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Cash and cash equivalents | 26 | 7 |
| Receivables and prepayments (Note 5) | 794 | 1,394 |
| Inventories (Note 6) | 544 | 894 |
| Total current assets | 1,364 | 2,296 |
| Investment property (Note 7) | 1,134 | 1,121 |
| Financial assets at fair value through profit or loss (Note 9) | 451 | 397 |
| Property, plant and equipment (Note 8) | 4,695 | 5,212 |
| Intangible assets (Note 8) | 6 | 19 |
| Total non-current assets | 6,286 | 6,749 |
| TOTAL ASSETS | 7,650 | 9,045 |
| Borrowings (Notes 10) | 756 | 4,547 |
| Payables and prepayments (Notes 11) | 1,574 | 2,665 |
| Short-term provisions (Note 12) | 18 | 20 |
| Total current liabilities | 2,348 | 7,232 |
| Long-term borrowings (Notes 10) | 2,493 | 92 |
| Long-term provisions (Note 12) | 161 | 179 |
| Total non-current liabilities | 2,654 | 271 |
| Total liabilities | 5,002 | 7,503 |
| Share capital (at nominal value) (Note 13) | 450 | 2,699 |
| Share premium | 0 | 364 |
| Statutory reserve capital | 0 | 288 |
| Other reserves | 0 | 84 |
| Retained earnings (loss) | 2,198 | (1,894) |
| Total equity | 2,648 | 1,542 |
| TOTAL LIABILITIES AND EQUITY | 7,650 | 9,045 |
*The notes to the financial statements presented on pages 24 to 67 are an integral part of these consolidated financial statements.
| € thousand | 2020 | 2019 |
|---|---|---|
| Continued operations | ||
| Revenue (Note 22) | 10,269 | 13,333 |
| Cost of goods sold (Note 15) | 8,099 | 11,538 |
| Gross profit | 2,170 | 1,796 |
| Distribution costs (Note 16) | 1,283 | 1,698 |
| Administrative expenses (Note 17) | 605 | 658 |
| Other operating income (Note 19) | 42 | 351 |
| Other operating expenses (Note 20) | 342 | 134 |
| Operating profit (loss) | (19) | (343) |
| Finance income (Note 21) | 1,291 | 19 |
| Finance costs (Note 21) | 199 | 803 |
| LOSS BEFORE INCOME TAX | 1,074 | (1,127) |
| NET PROFIT (LOSS) FOR THE FINANCIAL YEAR FROM CONTINUING OPERATIONS | 1,074 | (1,127) |
| Net profit (loss) for the financial year from discontinuing operations | 0 | (271) |
| NET PROFIT (LOSS) FOR THE FINANCIAL YEAR | 1,074 | (1,398) |
| Basic earnings per share (Note 14) | 0.24 | (0.31) |
| Diluted earnings per share (Note 14) | 0.24 | (0.30) |
*The notes to the financial statements presented on pages 24 to 67 are an integral part of these consolidated financial statements.
| CONSOLIDATED STATEMENT OF CASH FLOWS | ||
|---|---|---|
| € thousand | 2020 | 2019 |
| Cash flows from operating activities | ||
| Operating profit (loss) | (19) | (343) |
| Adjustments: | ||
| Depreciation charge (Notes 8) | 560 | 669 |
| Profit/loss from revaluation of real estate investment (Note 7) | (5) | (327) |
| Profit/loss from sale of non-current asset | (28) | 0 |
| Profit/loss on non-current asset write-off | 2 | 2 |
| Profit/loss from revaluation of financial assets (Note 9;21) | (53) | 25 |
| Non-monetary transactions: reserve for share option | 32 | 39 |
| Expenses of doubtful receivables | 0 | 1 |
| Change in trade and other receivables (Note 5) | 600 | (651) |
| Change in inventories (Note 6) | 350 | 581 |
| Change in trade and other payables (Note 11) | (1,091) | 617 |
| Discontinued operations | 0 | 131 |
| Cash generated from operations | 348 | 744 |
| Interest payments (Note 21) | (192) | (221) |
| Net other financial income and expense (Note 21) | (6) | (7) |
| Net cash generated from operating activities | 150 | 516 |
| Cash flows from investing activities | ||
| Purchase of property, plant and equipment and intangible assets (Notes 8) | (78) | (133) |
| Disposal of property, plant and equipment and intangible assets (Note 8) | 29 | 0 |
| Purchase of investment property (Note 7) | (7) | (20) |
| Net cash used in investing activities | (56) | (153) |
| Cash flows from financing activities | ||
| Loans received (Note 10) | 1,200 | 0 |
| Repayment of loans received (Note 10) | (853) | (306) |
| Loans received from related parties (Note 10) | 549 | 304 |
| Repayment of loans received from related parties (Note 10) | (569) | (284) |
| Repayment of principal element of lease liabilities (Note 10) | (62) | (96) |
| Change in overdraft (Note 10) | (340) | (28) |
| Net cash (used in)/from financing activities | (75) | (410) |
| NET CHANGE IN CASH | 19 | (47) |
| OPENING BALANCE OF CASH | 7 | 54 |
| CLOSING BALANCE OF CASH | 26 | 7 |
*The notes to the financial statements presented on pages 24 to 67 are an integral part of these consolidated financial statements.
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
|---|
| --------------------------------------------- |
| € thousand | Share capital |
Share premium |
Statutory reserve capital |
Other reserves |
Retained earnings |
Total |
|---|---|---|---|---|---|---|
| Balance at 31.12.2018 | 2,699 | 364 | 288 | 45 | (496) | 2,901 |
| Share options | 0 | 0 | 0 | 39 | 0 | 39 |
| Net loss for 2019 | 0 | 0 | 0 | 0 | (1,398) | (1,398) |
| Other comprehensive income for 2019 |
0 | 0 | 0 | 0 | 0 | 0 |
| Total comprehensive loss for 2019 |
0 | 0 | 0 | 0 | (1,398) | (1,398) |
| Balance at 31.12.2019 | 2,699 | 364 | 288 | 84 | (1,894) | 1,542 |
| Share options | 0 | 0 | 0 | (84) | 116 | 32 |
| Other changes | 0 | (364) | (288) | 0 | 652 | 0 |
| Change in share capital | (2,250) | 0 | 0 | 0 | 2,250 | 0 |
| Net profit for 2020 | 0 | 0 | 0 | 0 | 1,074 | 1,074 |
| Other comprehensive income for 2020 |
0 | 0 | 0 | 0 | 0 | 0 |
| Total comprehensive profit for 2020 |
0 | 0 | 0 | 0 | 1,074 | 1,074 |
| Balance at 31.12.2020 | 450 | 0 | 0 | 0 | 2,198 | 2,648 |
* More detailed information about share capital and changes in equity is disclosed in Note 13.
*The notes to the financial statements presented on pages 24 to 67 are an integral part of these consolidated financial statements.
Nordic Fibreboard AS, hereinafter the Company, (registration number: 11421437; address: Suur-Jõe 48, Pärnu), is an entity registered in the Republic of Estonia. It operates in Estonia and through its subsidiaries in Lithuania and Finland. The consolidated financial statements prepared for the financial year ended 31 December 2020 include the financial information of the Company and its 100% subsidiaries (together referred to as the Group):
| Nordic Fibreboard Ltd OÜ |
Skano Furniture OÜ |
Pärnu Riverside Development OÜ |
OÜ Isotex | Suomen Tuulileijona OY |
UAB Skano LT |
|
|---|---|---|---|---|---|---|
| Domicile | (Estonia) | (Estonia) | (Estonia) | (Estonia) | (Finland) | (Lithuania) |
| Share % | 100 | 100 | 100 | 100 | 100 | 100 |
The Group's main activities are production and distribution of furniture and softboard made of wood.
Nordic Fibreboard AS was established on 19 September 2007 in the demerger of the former Skano Group AS, currently AS Trigon Property Development, as a result of which the manufacturing units, i.e. the building materials division and furniture division were spun off and transferred to the new entity.
The Group's shares were listed in the Main List of the Tallinn Stock Exchange until 2nd of April 2018, when the shares were moved from the Main List to the Secondary List. The Group`s largest shareholder is Pärnu Holdings OÜ (owning 59.62%), and its largest owners as of 31 December 2020 are OÜ Stetind (46.99%) and Joakim Johan Helenius (46.44%), as of 31 December 2019 the largest owners were OÜ Stetind (46.99%) and AS Trigon Capital (45.18%).
The Management Board of Nordic Fibreboard AS authorised these consolidated financial statements for issue on 26 April, 2021. Pursuant to the Commercial Code of the Republic of Estonia, the financial statements are subject to approval by the Supervisory Board of Nordic Fibreboard AS and the General Meeting of Shareholders. Shareholders have the right not to approve the annual report prepared and approved by the Management Board, and request preparation of a new annual report.
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless stated otherwise.
The 2020 consolidated financial statements of Nordic Fibreboard AS have been prepared in accordance with International Financial Reporting Standards as adopted in the European Union (IFRS).
The financial statements have been prepared under the historical cost convention.
The preparation of the financial statements in accordance with IFRS requires management to make assumptions and pass judgements, which affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and related assumptions are
based on the historical experience and several other factors that are believed to be relevant and that are based on circumstances which help define principles for the evaluation of assets and liabilities and which are not directly available from other sources. Actual results may not coincide with these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates are recognised prospectively after the period in which a change in the estimate occurred. Note 4 includes those areas which require more complicated estimates and where accounting estimates and assumptions have a material impact on the information recognised in the financial statements.
a) Adoption of New or Revised Standards and Interpretations
The following new or revised standards and interpretations became effective for the Group from 1 January 2020:
According to the paragraphs 52A and 57A of IAS 12 (International Accounting Standard 12), no current or deferred tax liability shall be recognised until a liability to pay dividends is recognised. In Estonia, such accounting principle has been applied consistently to all undistributed profits regardless of whether such profits arose in the parent or in a subsidiary. In June 2020, IFRS Interpretation Committee made an agenda decision where it concluded that the principle set out in the paragraphs 52A and 57A of the Standard IAS 12 only applies to undistributed profits accumulated in a parent company and does not apply to undistributed profits accumulated in the subsidiaries. Instead, the principles described in the paragraphs 39-40 of the Standard IAS 12 should be followed in respect of undistributed profits in subsidiaries, explaining that the deferred tax shall be recognized for all taxable differences associated with investments in subsidiaries unless it is probable that the profits will not be distributed in the foreseeable future.
Nordic Fibreboard has assessed the potential impact of the IFRS Interpretation Committee agenda decision on its financial statements and has found that there is no impact because the following exception is used:
The exception can be used due to the fact that the Group`s subsidiaries have incurred losses in previous years, as a result of which the parent company does not have sufficient funds to pay dividends.
There are no other new or revised standards or interpretations that are effective for the first time for the financial year beginning on or after 1 January 2020 that would be expected to have a material impact to the Group.
b) New accounting pronouncements
Certain new or revised standards and interpretations have been issued that are mandatory for the Group's annual periods beginning on or after 1 January 2021, and which the Group has not early adopted.
Classification of liabilities as current or non-current – Amendments to IAS 1 (effective for annual periods beginning on or after 1 January 2023; not yet adopted by the EU).
These narrow scope amendments clarify that liabilities are classified as either current or noncurrent, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the
entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. Management's expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity complies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. 'Settlement' is defined as the extinguishment of a liability with cash, other resources embodying economic benefits or an entity's own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument.
The Company expects that there will not be a material impact on the Group's financial position, performance nor cash flows.
Proceeds before intended use, Onerous contracts – cost of fulfilling a contract, Reference to the Conceptual Framework – narrow scope amendments to IAS 16, IAS 37 and IFRS 3, and Annual Improvements to IFRSs 2018-2020 – amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (Effective for annual periods beginning on or after 1 January 2022; not yet adopted by the EU).
The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such items, together with the costs of producing them, are now recognised in profit or loss. An entity will use IAS 2 to measure the cost of those items. Cost will not include depreciation of the asset being tested because it is not ready for its intended use. The amendment to IAS 16 also clarifies that an entity is 'testing whether the asset is functioning properly' when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. An asset might therefore be capable of operating as intended by management and subject to depreciation before it has achieved the level of operating performance expected by management.
The amendment to IAS 37 clarifies the meaning of 'costs to fulfil a contract'. The amendment explains that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract.
IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what constitutes an asset or a liability in a business combination. Prior to the amendment, IFRS 3 referred to the 2001 Conceptual Framework for Financial Reporting. In addition, a new exception in IFRS 3 was added for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the 2018 Conceptual Framework. Without this new exception, an entity would have recognised some liabilities in a business combination that it would not recognise under IAS 37. Therefore, immediately after the acquisition, the entity would have had to derecognise such liabilities and recognise a gain that did not depict an economic gain. It was also clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at the acquisition date.
The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to third parties will not be included in the 10% test.
Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives.
IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure its assets and liabilities at the carrying amounts that would be included in its parent's consolidated financial statements, based on the parent's date of transition to IFRS, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences using the amounts reported by the parent, based on the parent's date of transition to IFRS. The amendment to IFRS 1 extends the above exemption to cumulative translation differences, in order to reduce costs for first-time adopters. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption.
The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis.
The Group does not expect the amendments to have a material impact on its financial statements when initially applied.
The other new and revised standards are interpretations that are not yet effective are not expected to have a material impact on the Group.
The financial statements have been prepared in accordance with the consistency and comparability principles, the nature of the changes in methods and their effect is explained in the respective notes. When the presentation of items in the financial statements or their classification method has been amended, then also the comparative information of previous periods has been restated.
Items included in the consolidated financial statements of each of the Group's entities are measured using the currency of their primary economic environment (the functional currency). The consolidated financial statements are presented in euros (€), which is the functional currency of the parent and the presentation currency of the Group.
The consolidated financial statements are presented in thousands of euros (€), which is in compliance with the requirements of the Tallinn Stock Exchange.
Foreign currency transactions have been translated into the functional currency using the official exchange rate of the European Central Bank prevailing at the transaction day. Exchange rate differences between the cash transfer date and the transaction date, the currency translation differences are recognised in the consolidated income statement. Monetary assets and liabilities
denominated in a foreign currency are translated using the official euro exchange rate of the European Central Bank applicable at the end of the reporting period. Any translation gains and losses are recognised in the consolidated income statement. Gains and losses on translation of payables and cash and cash equivalents are recognised as finance income and costs in the consolidated income statement; other gains and losses from exchange rate changes are recognised as other operating income or operating expenses.
The functional currency of the Group`s foreign subsidiaries does not differ from the presentation currency of the Group.
(D) PRINCIPLES OF CONSOLIDATION AND ACCOUNTING FOR SUBSIDIARIES
All subsidiaries have been consolidated in the Group's financial statements. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary or business unit is the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-byacquisition basis, the Group recognizes any non-controlling interest in the acquirer either at fair value or at the non-controlling interest's proportionate share of the acquirer's net assets.
Goodwill is initially recognised as the amount by which the consideration transferred, and the value of non-controlled interests exceeds the fair value of identifiable assets and transferred liabilities. If this amount is lower than the fair value of net assets of the acquired subsidiary, the difference is recognised in the income statement.
In the consolidated financial statements, the financial statements of the subsidiaries under the control of the Parent company (except for the subsidiaries acquired for resale) are combined on a line-by-line basis. Intercompany balances, transactions and unrealised gains on transactions between Group companies are eliminated; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset. The Group and all of its subsidiaries use uniform accounting policies consistent with the Group's policies. Where necessary, the accounting policies of the subsidiaries have been changed to ensure consistency with the policies adopted by the Group.
Revenues and expenses of the subsidiaries acquired within the financial year are consolidated into the Group's statement of profit or loss and other comprehensive income starting from the date of acquisition to the end of the financial year. Result of operations of subsidiaries disposed of during the year are consolidated into Group's statement of profit or loss and other comprehensive income from the beginning of the financial year until the date of disposal.
Pursuant to the Accounting Act of the Republic of Estonia, information of the unconsolidated financial statements (primary statements) of the consolidating entity (parent company) shall be disclosed in the notes to the consolidated financial statements. In preparing the primary financial statements of the parent company, the same accounting policies have been used as in preparing the consolidated financial statements. The accounting policy for accounting subsidiaries has been amended in the separate primary financial statements disclosed as supplementary information in the Annual Report in conjunction with IAS 27 "Separate Financial Statements".
| Initialled for identification purposes only | ||
|---|---|---|
| MAIN pwc |
Initials L.L | Date 26.04.2021 |
In the parent separate primary financial statements, disclose in these consolidated financial statements (see Note Supplementary disclosures on the Group`s parent), the investments into the shares of subsidiaries are accounted for at cost less any impairment recognised.
The Group classifies its financial assets in the following measurement categories:
The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Subsequent measurement of debt instruments depends on the Group's business model for managing the asset and the cash flow characteristics of the asset.
All Group's debt instruments are classified in amortised cost measurement category.
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other income/(expenses). Foreign exchange gains and losses and impairment losses are presented as separate line items in the statement of profit or loss.
As at 1 January 2020 and 31 December 2020, the following financial assets of the Group were classified in this category:
The Group subsequently measures all equity investments at fair value. Where the Group's management has made an irrevocable election to present in OCI the fair value gains and losses on equity investments that are not held for trading, there is no subsequent reclassification of fair value
gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group's right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in other income/(expenses) in the statement of profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
The Group assesses on a forward-looking basis the expected credit losses ("ECL") associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.
For trade receivables without a significant financing component the Group applies a simplified approach permitted by IFRS 9 and measures the allowance for impairment losses at expected lifetime credit losses from initial recognition of the receivables. The Group uses a provision matrix in which allowance for impairment losses is calculated for trade receivables falling into different ageing or overdue periods.
For the purposes of the statement of financial position and the cash flow statement, cash and cash equivalents comprise cash on hand, bank account balances (except for overdraft) and term deposits with maturities of three months or less. Cash and cash equivalents are carried at the adjusted acquisition cost.
Trade receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are initially recognised at fair value plus transaction costs and are subsequently measured at amortised cost using the effective interest method, less a provision for impairment.
Impairment of receivables is recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Evidence of potential impairment includes the bankruptcy or major financial difficulties of the debtor and non-adherence to payment dates. The impairment of the receivables that are individually significant (i.e. need for a writedown) is assessed individually for each customer, based on the present value of expected future collectible amounts. Receivables that are not individually significant or for which no objective evidence of impairment exists, are collectively assessed for impairment using previous years' experience on uncollectible receivables. The amount of loss of the impaired receivables is the difference between the carrying amounts of receivables and the present value of expected future cash flows discounted at the original effective interest rate. The carrying amount of receivables is reduced by the amount of doubtful receivables and the impairment loss is recognised in profit or loss within Other operating expenses. If a receivable is deemed irrecoverable, the receivable and its impairment loss are taken off the financial position statement. The collection of the receivables that have previously been written down is accounted for as a reversal of the allowance for doubtful receivables.
Inventories are stated at the lower of acquisition cost and net realisable value. Inventories are initially recognised at acquisition cost which consists of purchase costs, direct and indirect production costs and other costs incurred in bringing the inventories to their current condition and location.
In addition to the purchase price, purchase costs also include custom duties, other non-refundable taxes and directly attributable transport, less discounts and subsidies. The production costs of inventories include costs directly related to the units of production (such as direct raw materials and materials and packing material costs, unavoidable storage costs related to work in progress, direct labour costs), and also fixed and variable production overheads that are allocated to the cost of products on the basis of normal production capacities.
The weighted average cost method is used for the evaluation of inventories at the Group.
The net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The amount of the inventory write-down is recognised in the income statement line Cost of goods sold.
Real estate properties (land, buildings) that the Group owns or leases under finance lease terms to earn lease income or for capital appreciation, and that are not used for the Group's operating activities, are classified as investment property.
Real estate properties consist of land owned by the Group that is not used by the Group for its own economic activities (plots of Suur-Jõe 48 and Rääma 31).
Investment property is initially measured at its cost, including related transaction costs. Investment properties are subsequently carried at fair value, which based on yearly market price set by an independent valuer or market, based in the prices of recent transactions for similar items (adjusting for estimates for differences) or using the discounted cash flow method. Changes in fair value are recognized in the income statement in line item "Other operating income". Investment property carried at fair value is not deprecated.
Subsequent costs are included in the carrying amount of the investment property when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to the income statement during the period in which they are incurred.
Real estate that is being constructed or developed for future use as investment property is recognized as investment property.
Property, plant and equipment are non-current assets used in the operating activities of the Group with a useful life of over one year and with a cost of 1000 euro. An item of property, plant and equipment is initially recognised at its cost which consists of the purchase price (including customs duties and other non-refundable taxes) and other expenditures directly related to the acquisition that are necessary for bringing the asset to its operating condition and location. Borrowing costs related to the acquisition of non-current assets, the completion of which occurs over a longer period of time, are included in the cost of non-current assets. The cost of a self-constructed asset is determined using the same principles as for an acquired asset.
Costs of reconstruction and improvements are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the asset can be measured reliably. All other repair and maintenance costs are charged to the income statement during the period in which they are incurred.
Property, plant and equipment are subsequently carried at cost less accumulated depreciation and any impairment losses (see accounting policy L). The difference between the acquisition cost and the residual value of an asset is depreciated over the useful life of the asset. Each part of an item with a cost that is significant in relation to the total cost of the item and with a useful life different from other significant parts of that same item is depreciated separately based on its useful life.
Depreciation is calculated based on useful lives of items of property, plant and equipment, using the straight-line method. The annual depreciation rates applied to individual assets by groups of property, plant and equipment are as follows (per cent):
Depreciation of an asset begins when the asset is available for use for the purpose intended by management and is ceased when the residual value exceeds the carrying amount, when the asset is permanently withdrawn from use or upon its reclassification as held for sale. At each balance sheet date, the appropriateness of the depreciation rates, the depreciation method and the residual values are reviewed.
Where an asset's carrying amount exceeds its estimated recoverable amount (higher of an asset's fair value less costs to sell and its value in use), it is written down immediately to its recoverable amount (see the accounting policy in Section L).
Items of property, plant and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. Gains or losses arising from the disposal of items of property, plant and equipment are included either within other operating income or other operating expenses in the income statement.
Items of property, plant and equipment that are expected to be sold within the next 12 months and for which the management has commenced active sales activities, and which are offered for sale at their fair value for a realistic price are reclassified as assets held for sale.
Intangible assets are recognised in the financial statements only if the following terms have been satisfied:
Intangible assets are amortised by using the straight-line method during the estimated useful life.
Intangible assets are tested for impairment if there are circumstances indicating such a possibility, similarly with the evaluation of impairment of property, plant and equipment.
Expenses related to current maintenance of computer software are recognised as cost at the time they are incurred. Purchased computer software that is not an inseparable part of specific hardware is
recognised as intangible asset. Intangible assets with finite useful lives are amortised over their useful lives (2.5-5 years) using the straight-line method. The Group has no intangible assets with indefinite useful lives.
Assets that are subject to depreciation and amortisation, and assets with unlimited useful lives (land) are reviewed for any indication of impairment. Whenever such indication exists, the recoverable amount of the asset is estimated and compared with the carrying amount. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. If the fair value of an asset less sales expenses cannot be determined, the recoverable amount of the asset is its market value. The value in use of assets is determined as the current value of estimated cash flows generated in the future. Impairment of assets is estimated if following possible circumstances exist:
An impairment test is also carried out if the Group identifies other circumstances indicating loss of value of assets.
For impairment, the recoverable amount is evaluated either for a single asset item or for the smallest possible group of assets for which cash flow can be identified (cash generating unit). A cash generating unit is the smallest separately group of identifiable assets the cash flow generated can be forecast for significant part regardless of cash flow generated from the rest of assets. The impairment loss is expensed immediately in the income statement.
At the end of every reporting period it is assessed whether there are circumstances indicating that the impairment loss of assets recognised in previous years no longer exists or it has decreased. If any such circumstance exists, the recoverable amount of the asset is re-evaluated. In accordance with the results of the test, the impairment can be reversed in part or in full. Earlier loss is reversed only to the degree where the carrying amount does not exceed the carrying amount of such assets considering normal amortization of earlier years.
On 1. January 2019 the new standard IFRS 16 "Leases" became effective. The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases.
The Group leases various machinery and equipment used in economic activities. Rental contracts are typically made for fixed periods of up to 5 years but as a rule, include extension and termination options. Lease terms are negotiated on an individual basis and may contain a wide range of different terms and conditions.
The Group recognises as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use.
Lease liabilities were recognised as present value of lease payments. The right-of use assets were measured at the amount equal to the lease liability, as no adjustments to right of use assets were necessary. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life or the lease term on a straight-line basis.
Lease liabilities include the net present value of the following lease payments:
The lease payments are discounted using the interest rate implicit in the lease, if it is readily determinable, or the Group's incremental borrowing rate. The alternative interest rate is the rate of interest that a lessee would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
Short-term leases are leases with a lease term of 12 months or less. Low value assets comprise ITequipment and small items of office furniture. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The management reviews the assessment if a significant event or a significant change in circumstances occurs which affects the probability of using options and that is within the control of the management. Alternatively, the extension period of the contract has changed (for example, Group has exercised an option, which initially was considered reasonably uncertain or has not exercised an option, which was initially considered reasonably certain).
According to the contracts, Group has not granted any residual value guarantees in the end of the contracts.
The lease payments are discounted at the alternative interest rate range 2.19-2.49%.
The Group has used the following practical expedients permitted by the standard:
Payments made or received under operating leases are charged to the income statement on a straightline basis over the period of the lease.
Assets and liabilities under finance leases are initially recognised at the lower of the fair value of the leased property and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. Financial expenses are allocated over the lease term to produce a constant periodic rate of interest on the remaining balance of the liability.
Payments made or received under operating leases are charged to the income statement on a straightline basis over the period of the lease. Properties leased out under operating leases are classified as investment property
Financial liabilities (trade payables, borrowings, accrued expenses and other short and long-term borrowings) are initially recognised at their fair value and subsequently measured at amortised cost using the effective interest rate method. Upon the initial recognition of such financial liabilities which are not accounted for at fair value through profit or loss, the transactions costs directly attributable to the acquisition are deducted from their fair value.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are charged to period financial expenses.
The amortised cost of current financial liabilities generally equals their nominal value; therefore, current financial liabilities are carried in the statement of financial position in their redemption value. For determining the amortised cost of non-current financial liabilities, they are initially recognised at the fair value of the consideration received (less any transaction costs), calculating interest expense on the liability in subsequent periods using the effective interest rate method.
A financial liability is classified as current when it is due to be settled within 12 months after the balance sheet date or the Group does not have an unconditional right to defer settlement of the liability for more than 12 months after the balance sheet date. Borrowings due to be settled within 12 months after the balance sheet date that are refinanced as long-term after the balance sheet date but before the financial statements are authorised for issue, are recognised as current liabilities. Borrowings that the lender has the right to recall at the balance sheet date because of a breach of contractual terms are also recognised as current liabilities.
Provisions are recognised in the statement of financial position when the Group has a present legal or contractual obligation which has arisen as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of the liability can be reliably estimated.
The provisions are recognised based on management's (or independent experts') estimates regarding the amount and timing of the expected outflows. Risks and uncertainties are taken into consideration when measuring provisions; the provisions for which the effect of the time value of money is significant
are discounted. The increase of the provision due to the passage of time is recognised as an interest expense.
Other commitments that in certain circumstances may become obligations, but it is not probable that an outflow of resources will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability are disclosed in the notes to the financial statements as contingent liabilities.
Under law, the Group is obliged to pay compensation to employees for permanent injuries incurred during their employment at the Group. The level of the benefit depends on the extent of disability, the average monthly salary of the employee prior to injury, and the changes in pension payments by the state. The level of the benefit does not depend on the length of service. For the Group, the obligation to pay benefits arises at the time when the degree of the employee's incapacity for work is determined.
Disability compensation is recognised in the statement of financial position in its discounted present value. In measuring the liability, management has used demographic assumptions (such as mortality), and financial assumptions (e.g. the discount rate and future benefit levels).
The rate used to discount the obligation is determined by reference to market yields at the balance sheet date on high quality corporate bonds, the currency and term of which are consistent with the currency and estimated term of the obligation.
(P) LIABILITIES TO EMPLOYEES
Payables to employees contain the contractual right arising from employment contracts and performance-based pay which is calculated on the basis of Group's financial results and meeting of objectives set for the employees. Performance-based pay is included in period expenses and as a liability if it is paid out in the next financial year.
Pursuant to employment contracts and current legislation, payables to employees also include an accrued holiday pay liability as at the balance sheet date. This liability also includes accrued social and unemployment taxes calculated on it.
Incapacity benefits (see accounting policy O).
Corporate income tax
According to the current legislation, the annual profit earned by entities is not taxed in Estonia. Corporate income tax is paid on dividends, fringe benefits, gifts, donations, costs of entertaining guests, non-business-related disbursements and adjustments of the transfer price. From 1 January 2015, the tax rate on the net dividends paid out of retained earnings is 20/80. The corporate income tax arising from the payment of dividends is recognised as a liability and an income tax expense in the period in which dividends are declared, regardless of the period for which the dividends are paid or the actual payment date. An income tax liability is due on the 10th day of the month following the payment of dividends.
From 2019, tax rate of 14/86 can be applied to dividend payments. The more beneficial tax rate can be used for dividend payments in the amount of up to the average dividend payment during the three
preceding years that were taxed with the tax rate of 20/80. When calculating the average dividend payment of three preceding years, 2018 will be the first year to be considered.
Due to the nature of the taxation system, the companies registered in Estonia do not have any differences between the tax bases of assets and their carrying amounts and hence, no deferred income tax assets and liabilities arise. However, according to the decision of the IFRS Interpretation Committee in June 2020, the parent is required to recognize an income tax liability on the profits on the subsidiary unless profits are not planned to be distributed to parent company in the foreseeable future. As the Group does not plan to take dividends from the Nordic Fibreboard Ltd OÜ profits of 2020 due to large losses in previous years, no deferred tax liability has been recognized for the profits of the subsidiary in the Group's consolidated financial statements. The maximum income tax liability which would accompany the distribution of the Group's retained earnings is disclosed in the notes to the financial statements.
According to local income tax legislation, the profits of entities in Finland, Latvia and Lithuania are adjusted for the permanent and temporary differences provided by law. Pursuant to tax legislation, temporary differences arise between the carrying amounts and tax bases of assets and liabilities; therefore, deferred income tax liabilities and assets arise. As at 31.12.2020 and 31.12.2019, the subsidiaries did not have any deferred tax assets and liabilities. The management of the Group estimates that the realisation of the income tax asset is not reliably assessable, thus it is not recorded in the financial statements.
| 2020 | 2019 | 2018 | |
|---|---|---|---|
| Latvia | 20% | 20% | 20% |
| Lithuania | 15% | 15% | 15% |
| Finland | 20% | 20% | 20% |
In accordance with the tax law effective until 2017, profits of entities in Latvia were taxable with income tax. Therefore, until that, deferred tax was provided for on all temporary differences arising between the tax bases of assets and liabilities of Latvian subsidiaries and their carrying amounts in the consolidated financial statements. In accordance with the new Corporate Income Tax Law, starting from 1 January 2018, corporate income tax with a rate of 20/80 is levied on profits arisen after 2017 only upon their distribution.
Due to the new tax law, there are no longer differences between the tax bases and carrying amounts of assets and liabilities, and hence, deferred income tax assets and liabilities no longer arise in respect of subsidiaries in Latvia. All deferred tax assets and liabilities recognised in previous periods were derecognised in 2017 and related income tax expense/income was recorded in the statement of profit or loss.
Revenue is income arising in the course of the Group's ordinary activities. Revenue is measured in the amount of transaction price. Transaction price is the amount of consideration to which the Group expects to be entitled in exchange of transferring control over promised goods or services to a customer, excluding the amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a good or service to a customer.
The Group manufactures and sells fibreboard products in the wholesale market. Sales are recognised when control of the products has transferred, being when the products are delivered to the
wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler's acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the wholesaler, and either the wholesaler has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have been satisfied.
Fibreboard products are often sold with retrospective volume discounts based on aggregate sales over a 12 months period. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated volume discounts. Accumulated experience is used to estimate and provide for the discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. A refund liability (included in trade and other payables) is recognised for expected volume discounts payable the wholesaler in relation to sales made until the end of the reporting period.
No element of financing is deemed present as the sales are made with a credit term of 45-90 days, which is consistent with market practice.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.
If the Company provides any additional services to the customer after control over the goods has passed, revenue from such services is considered to be a separate performance obligation and is recognised over the time of the service rendering.
Until the end of January 2020, the Group operated a chain of retail stores selling furniture products and accessories. Revenue from the sale of goods was recognised when the Group sold the product to the customer, ie delivery in store.
Payment of the transaction price was due immediately when the customer bought and took the product.
Under the Group's standard contract terms, customers had the right of return within 14 days. At the point of sale, a refund liability and a corresponding adjustment to revenue were recognised for those products expected to be returned. At the same time, the Group has a right to recover the product when customers exercise their right of return so consequently recognises a right to returned goods asset and a corresponding adjustment to cost of sales. The Group used its accumulated historical experience to estimate the number of returns on a portfolio level using the expected value method. Because the number of products returned had steady for years, it was highly probable that a significant reversal in the cumulative revenue recognised will not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date.
If the Group provides any additional services to the customer after control over the goods has passed, revenue from such services was considered to be a separate performance obligation and was recognised over the time of the service rendering.
Group does not have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. Consequently, the Group does not adjust any of the transaction prices for the time value of money.
The cash flow statement is prepared using the indirect method. Cash flows from operating activities are determined by adjusting the net profit for the financial year through elimination of the effect of non-monetary transactions, changes in the balances of assets and liabilities related to operating activities and revenue and expenses related to investing or financing activities. Cash flows from investing or financing activities are recognised under the direct method.
Statutory reserve capital is formed from annual net profit allocations as well as other provisions which are entered in reserve capital pursuant to legislation or articles of association. The amount of reserve capital is stipulated in the articles of association and it cannot be less than 1/10 of share capital. Each financial year, at least 1/20 of net profit shall be entered in the reserve capital. When reserve capital reaches the level required by the articles of association, the allocations to reserve capital from the net profit may be terminated.
Based on the decision of the General Meeting of Shareholders, the statutory legal reserve may be used to cover a loss, or to increase share capital. Payments shall not be made to shareholders from the statutory legal reserve.
Basic earnings per share are calculated by dividing the net profit for the financial year attributable to the equity holders of the parent by the period's weighted average number of outstanding ordinary shares. Diluted earnings per share are calculated by dividing the net profit for the financial year attributable to the equity holders of the parent by the weighted average number of outstanding ordinary shares, adjusted for the effect of dilutive potential ordinary shares.
Significant circumstances that have an adjusting effect on the evaluation of assets and liabilities and that became evident between the balance sheet date and the date of approving the financial statements (April 27, 2021) but that are related to the reporting period or prior periods, have been recorded in the financial statements. Non-adjusting events and the events that have a significant impact on the results of the next financial year have been disclosed in the notes to the financial statements.
Factoring is the transfer (sale) of receivables, whereby depending on the type of the factoring contract the buyer has the right to resell the transferred receivable within time agreed (factoring with recourse) or there is no right for resale and all the risks and gain associated with the receivable are transferred from seller to purchaser (factoring without recourse). If the seller of the receivable retains the repurchase obligation, the transaction is recognised as a financing transaction (i.e. as a loan with the receivable as a collateral) and not as a sale. The receivable is not considered as sold as a result of factoring, but it remains in the financial statement position until the receivable is collected, or the recourse right has expired. The related liability is recorded similarly to other borrowings. If there is no repurchase obligation and the control over the receivable and the related risks and gain of the ownership are transferred to the buyer, the transaction is recognised as a sale of the receivable. The related expense is recognised as a finance cost (similarly to interest expense) or as an impairment loss of receivables, depending on whether the purpose of the transaction was to manage the cash flows or to manage credit risk. The Group mainly uses factoring without recourse.
Nordic Fibreboard AS operates a share-based compensation plan, under which the company receives services from group employees as consideration for equity instruments (options) of Nordic Fibreboard AS. The fair value of the services received in exchange for the grant of the options is recognised during the share-based compensation program as staff expense and as an increase in the equity (other reserves). The total amount to be expensed is determined by the fair value at the time of issuing the options. The fair value of the options granted:
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the vesting conditions (other than market conditions). It recognises the impact of the revision to original estimates, if any, in the statement of profit or loss, with a corresponding adjustment to equity. When the options are exercised, the Group issues new shares.
The grant by Nordic Fibreboard AS of options over its equity instruments to the Management Board members of subsidiary undertakings in the Group is treated as a capital contribution in a separate statement. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts. According to the contractual conditions of the share options there are no social security tax charges when exercising the options after the 3-year period.
Operating segments have been determined and information about operating segments has been disclosed in a manner consistent with preparation of reporting for making management decisions and analysing the results. Segment reporting is in compliance with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Management Board of Nordic Fibreboard AS.
Segment results, assets and liabilities include items which are directly related to the segment or can be allocated to it on a reasonable basis.
The operations of the Group expose it to several financial risks: credit risk, liquidity risk and market risk (which involves foreign currency exchange risk and interest rate risk of cash flows). The general risk management programme of the Group focuses on unpredictability of the financial market and attempts to minimise any possible negative effects on the financial activities of the Group. The Group's financial instruments include cash for funding operating activities and receivables from debtors and payables to creditors arising in operating activities as well as loans. Management defines risk as a potential deviation from the expected results. The Group's risk management is based on the requirements of the Tallinn Stock Exchange, Financial Supervision Authority and other regulatory bodies as well as compliance with Corporate Governance Recommendations and the Group's internal regulations. Financial assets of the Group in the categories of "Cash and cash equivalents" and
"Receivables" and all financial liabilities in the category of "Other financial liabilities" are carried at amortised cost.
The Group has also financial assets in the category financial assets at fair value through profit or loss, carried at fair value through profit or loss statement.
| € thousand | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Financial assets | ||
| Cash and cash equivalents | 26 | 7 |
| Recievables (Note 5) | 686 | 1,193 |
| incl. trade receivables | 677 | 1,186 |
| incl. other receivables | 9 | 7 |
| Financial assets at fair value through profit or loss (Note 9) | 451 | 397 |
| Total financial assets | 1,163 | 1,598 |
| Financial liabilities | ||
| Borrowings (Note 10) | 3,200 | 4,450 |
| Lease liability (Note 10) | 49 | 189 |
| Payables (Note 11) | 1,146 | 2,259 |
| incl. trade payables | 1,110 | 2,226 |
| incl. other payables | 36 | 32 |
| Total financial liabilities | 4,395 | 6,898 |
Nordic Fibreboard AS's credit risk is the risk of the inability of its business partners to meet their contractual obligations. The Group's credit risk arises from cash and cash equivalents, deposits in banks and financial institutions as well as receivables exposed to risk.
The Group approves banks and financial institutions with the credit rating of "A" as its long-term collaboration partners, however, for short period banks without a credit rating are also approved.
| € thousand | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Credit rating "Aa3" | 26 | 6 |
| Not rated (cash) | 0 | 1 |
| Total | 26 | 7 |
The credit rating is derived from the website of Moody's Investor Service.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial as at 31 December 2019 and 31 December 2020.
Pursuant to the Group's credit policy, no security is required from wholesale customers to ensure collection of receivables, but focus is laid on monitoring collection, balances of accounts receivable and compliance with payment terms on a continuous basis. In riskier markets, complete or partial prepayment, credit limits and shorter payment terms are applied.
As a rule, sales to retail customers occur in cash, using prepayments or bank credit cards, therefore there is no credit risk related to sale to retail customers except for risk related to banks and financial institutions that the Group has approved as its business partners.
As at the balance sheet date, the Group was not aware of any major risks related to accounts receivable, which had been deemed as uncollectible, see Notes 5 and 21. The Group monitors the financial position of its current and potential partners and their ability to meet the obligations they have assumed.
To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 36 month before 31 December 2020 or 1 January 2020 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the GDP and the unemployment rate of the countries in which it sells its goods and services to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors.
On that basis described above, the loss allowance as at 31 December 2020 and 31 December 2019 was determined immaterial.
Key customers are defined as those to whom the sales amount to more than 5% of the Group's revenue. The Group has five external customers whose revenue exceeds the previously pointed condition. Receivable balances from key customers based on overdue days:
| thousand € | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Not due | 374 | 578 |
| Overdue: | ||
| Up to 90 days | 7 | 73 |
| TOTAL | 381 | 651 |
See also Note 5 for additional information regarding receivables.
As of 31.03.2021 there were no receivables outstanding from key customers that were outstanding as of 31.12.2020. As of 31.03.2021 receivables which was outstanding as at 31.12.2020 amount in total to € 7 thousand.
Non-key customer related doubtful receivables amounted to € 1 thousand for 2020, € 1 thousand for 2019 (see also Note 5 and Note 21).
Liquidity risk is a potential loss arising from limited or insufficient monetary funds necessary for the meeting of obligations arising from the Group's operations. Management constantly monitors cash flow forecasts, evaluating the existence and availability of the Group's monetary resources to meet the obligations assumed and to fund the Group's strategic goals.
Analysis of financial liabilities by maturity as at 31.12.2020
| Balance at | Non-discounted cash flows | |||||
|---|---|---|---|---|---|---|
| thousand € | 31.12.2020 | Up to 3 months |
4-12 months |
2-5 years | 5-6 years | Total |
| Borrowings and lease liabilities (Note 10) |
3,249 | 90 | 707 | 1,180 | 1,732 | 3,709 |
| Trade payables (Note 11) | 1,110 | 1,110 | 0 | 0 | 0 | 1,110 |
| Other payables (Note 11) | 36 | 36 | 0 | 0 | 0 | 36 |
| TOTAL | 4,395 | 1,236 | 707 | 1,180 | 1,732 | 4,855 |
| Non-discounted cash flows | ||||||
|---|---|---|---|---|---|---|
| thousand € | 31.12.2019 | Up to 3 months |
4-12 months |
2-5 years | 5-6 years | Total |
| Borrowings and lease liabilities (Note 10) |
4,639 | 158 | 4,520 | 96 | 0 | 4,774 |
| Trade payables (Note 11) | 2,226 | 2,226 | 0 | 0 | 0 | 2,226 |
| Other payables (Note 11) | 32 | 32 | 0 | 0 | 0 | 32 |
| TOTAL | 6,898 | 2,417 | 4,520 | 96 | 0 | 7,033 |
Interest rates on borrowings are set out in Note 10.
For determining cash flows for interest bearing borrowings which are based on floating interest rate, the spot interest rate in effect at the balance sheet date has been used. If EURIBOR has not published 2 months in a row before the date of the change of interest rate, the Bank has the right to unilaterally replace EURIBOR and set a new Contractual Base Rate, the principles and methods of calculation of which are closest to EURIBOR. The bank has the right to apply the principle of substituting EURIBOR also if the principles and/or methodology of calculating EURIBOR have, in the Bank`s opinion changed significantly.
As at 31.12.2020, the Group did not have overdraft agreement (as at 31 December 2019, the amount of unused overdraft was € 35) and there were no valid factoring contracts.
As of 2019 include borrowings lease obligations under IRFS 16 effective 01.01.2019.
The Group's working capital position was negative by 984 thousand euros as at the year end 31 December 2020 (negative by 4 936 thousand as at 31 December 2019). The Group's working capital position is continuing to improve as a result of the improved profitability since the 2nd quarter of 2020, and also helped by the Group's recent refinancing of the borrowings before the 31 December 2020 year end. Management is continuing to pay special attention to fulfil its obligations towards key suppliers, so as to ensure continuity in safeguarding the Group's operational efficiency. The Group has close contacts with its main suppliers, and has organised payment plans for the invoices overdue. The Group's cash flow position has allowed it to reduce the overdue payables balances to suppliers also after the balance sheet date and the situation is expected to continue in coming months as the strong demand from clients allow it to continue to generate positive cash flows from operations. In addition, management is looking to refinance the current external borrowings from Swedbank which would allow it to refinance the short-term portion of borrowings to a longer repayment schedule and strengthen the liquidity position of the Group even more. Based on the refinancing plan, financial budget for 2021 and the current actual results of 2021, management consider it is realistic to solve the negative working capital situation of the Group latest in the second half of 2021.
Based on the performance of the Group since April 2020 and with the cash flow and financial performance forecasts made for 2021, management is in opinion that the Group is able to reduce the negative working capital in coming months.
The interest rate risk of the Group's cash flows is mainly related to long-term debt obligations with a floating interest rate.
The Group is exposed to cash flow risk affected by interest rate changes, because the loan has a variable interest rate – the sensitivity analysis for fluctuation in interest rates is presented below. The management estimates that the cash flow risk related to changes in interest rates is not material, therefore financial instruments are not used to hedge risks.
The interest rate risk of Nordic Fibreboard AS depends mainly on possible changes in EURIBOR (Euro Interbank Offered Rate), because the Group's loans are tied to 6-month EURIBOR. As at 31.12.2020, 6 month EURIBOR was (0.526) (31.12.2019: 6-month was (0.324)). As EURIBOR is negative and the negative interest in the loan agreement is equal to zero, the continued negative rate of EURIBOR does not have interest expense reducing effect. As the borrowing have a maturity of up to 6 years, management is of the opinion that the floating interest rate will not bear significant impact to Group's cash flows.
The dates for fixing interest rates on the basis of changes in EURIBOR are the 30th day of every month. Six month's EURIBOR is fixed every six months.
As at 31.12.2020, the total carrying amount of the long-term loan was € 2.48 million and as at 31.12.2019 € 0 million. The residual value of the long-term lease obligation as of 31.12.2020 was € 0.01 million (as of 31.12.2019 € 0.09 million).
The deposits of the Group's cash and cash equivalents have fixed interest rates.
In the course of loan refinancing, a fixed interest rate loan of € 2.0 million has been received from the Rural Development Foundation at the end of 2020. As of 31.12.2020 Nordic Fibreboard did not have an overdraft facility, as of 31.12.2019 there was a valid fixed interest overdraft agreement in the amount of € 340 thousand.
Foreign currency exchange risk is the risk that the Group may incur a significant loss because of fluctuations in foreign currency exchange rates. Group's foreign currency rate exchange risk from export-import transactions is very low because most of the contracts have been concluded in Euro. In the financial year, the Group collected € 20 thousand in currencies not directly or indirectly tied to the Euro, of which 100% constituted proceeds in USD. The Group paid for goods and services in the amount of € 0.5 thousand in the currencies with an exchange rate risk of which 100% USD. All Group companies whose assets and liabilities are located outside Estonia are exposed to changes in the local currency exchange rates, the base currency being EURO.
As the effect of currency risk is marginal, the Group has not acquired any derivative financial instruments to manage the currency risk.
As the Group's transactions and balances in foreign currencies are marginal in both 2020 and 2019, no currency position and sensitivity analyses have been prepared as of the balance sheet dates.
The group's exposure to equity securities price risk arises from investments held by the group and classified in the balance sheet as financial assets at fair value through profit or loss. The Group acquired sister company (Trigon Property Development) shares. The shares are publicly traded, with rather small volumes and therefore poor liquidity. The share price has had an average volatility over last 3 years (2018-2020) of -13%. The table below shows potential impact on post tax profit with assumptions of 10%, 25%, 50%, 75% of sensitivity.
| thousand € | Fair Value as at 31.12.2020 |
Impact on after tax-profit (2020) |
Fair Value as at 31.12.2019 |
Impact on after tax-profit (2019) |
|---|---|---|---|---|
| TPD shares | ||||
| -current value (Note 9) | 451 | 397 | ||
| impact: | ||||
| - change by 10% | 45 | 40 | ||
| - change by 25% | 113 | 99 | ||
| - change by 50% | 225 | 199 | ||
| - change by 75% | 338 | 298 |
In capital risk management, the Group's main goal is to ensure the Group's sustainability of operations to generate returns to its shareholders and benefits to other stakeholders, thereby maintaining the optimal capital structure to lower the cost of capital. To preserve or improve the capital structure, the Group can regulate the dividends payable to shareholders, reimburse the paid in capital, issue new shares or sell assets to lower its liabilities. The management monitors capital based on the debt to capital ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated financial position statement) less cash and cash equivalents. Total capital is calculated as the sum of equity as shown in the consolidated financial position statement and net debt.
At the end of 2020, loans and overdrafts of Nordic Fibreboard AS and Nordic Fibreboard Ltd OÜ were refinanced, in the course of which a loan of € 1.2 million was received from Swedbank AS and € 2.0 million from the Rural Development Foundation, and financial income of € 1.2 million was recorded from refinancing.
| thousand € | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Borrowings and lease liabilities (Note 10) | 3,249 | 4,639 |
| Cash and cash equivalents (Note 3) | 26 | 7 |
| Net debt | 3,223 | 4,632 |
| Total equity (Note 13) | 2,648 | 1,542 |
| Total capital | 5,871 | 6,173 |
| Debt to capital ratio | 55% | 75% |
As at 31.12.2020 and 31.12.2019 the Group's equity was in compliance with the requirements of the Commercial Code.
The Group divides financial instruments into three levels depending on their revaluation:
Trade receivable, trade payable and short-term loans are recorded at amortised cost and since trade receivable, trade payable and short-term loans are short-term, management estimates that their carrying amounts are close to their fair values.
The fair values of long-term loans and borrowings do not significantly differ from their carrying value because the floating interest rates of loans correspond to fluctuation of the interest rates prevailing in the market. The risk margin of loans is dependent on ratio of total debt and EBITDA; therefore, the performance of the company's operations is reflected also in the risk margin.
Taking the previous information into account, the management estimates that the fair values of longterm liabilities do not materially differ from their carrying amounts. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
For financial assets at fair value through profit or loss, (ie Trigon Property Development shares) no corrections at balance sheet date were made. The Management is in the opinion that since trading volumes on the securities are low and irregular the minor fluctuations in shares prices have little impact on overall result for 2020. Although the price of the investment is derived from Tallinn stock exchange and have not been adjusted due to liquidity of the market for the share, it is considered as level 2 instrument.
The preparation of the financial statements in conformity with International Financial Reporting Standards requires management to make accounting estimates. Management also needs to pass judgement regarding the choice of accounting policies and their application.
Management judgements and estimates are reviewed on an ongoing basis and they are based on historical experience and other factors such as forecasts of future events which are considered reasonable under current circumstances.
The areas which require more significant or complex management decisions and estimates, and which have a major effect on the financial statements, include valuation of receivables and inventories (Notes 5, 6), and estimation of recoverable value and residual value of property, plant and equipment (Note 8) and valuation of the fair value of investment property (Note 7), and the provisions for long-term disability benefits (Note 12).
Trade receivables are short-term receivables from customers, generated in the Group's ordinary course of business. Trade receivables are carried at amortised cost (i.e. original invoice amount less any repayments and any impairment losses, if necessary). In valuating receivables, the Management bases its estimations on its best knowledge, considering historical experience, general background information and possible assumptions and conditions of future events. In identifying the amount of receivable written down the overdue status is considered. See additional information in Notes 3 and 5.
Management measures inventories using its best judgement, historical experience, general background information and assumptions and conditions of future expected events. In determining the recoverable amount of inventories, the sales potential and potential net realisable value of finished goods is considered; in assessing the recoverable amount of raw materials and materials, their potential use in producing finished goods and earning income is estimated. In assessing work-in-
progress, its stage of completion which can be measured reliably is used as the basis. In assessing the cost of raw materials which are not precisely measurable, management uses estimates based on historical experience. See additional information in Note 6.
If there exist any indications that an asset may be impaired, the Group estimates the recoverable amount (higher of the asset's fair value (less costs to sell) and its value in use) of the asset (see also the accounting policy in Section 2 L).
As of 31.12.2020, the Group operates in Pärnu factory and Püssi factory was closed in March 2020. Pärnu factory is generating strong EBITDA for the Group and therefore no impairment indicators exist at the balance sheet date. For Püssi factory, management has assessed the recoverable amount of non-current assets (land, buildings and machinery and equipment) based on fair value less costs to sell and the recoverable amount is higher than the carrying amount of 3,648 thousand euros of noncurrent assets at the balance sheet date. Management used external valuation experts to assess the fair value of the Püssi non-current assets. This method was applied by management as compared to the value in use method, which was used previously, as the cash flow forecasts for Püssi factory would have included too much uncertainties due to the current closure of the factory. The valuation reports of Püssi factory include valuation for land and building and machinery and equipment. Land and building valuation is based on comparable transaction method. Machinery and equipment valuation takes into account several inputs such as age and location of the production line, cost of the new line and replacement cost.
As the demand for Nordic Fibreboard products has increased in the markets and the Pärnu factory will not be able to meet the entire volume of demand, the management is considering measures for the possible reopening of the Püssi factory, which closed in March 2020, during second half of this year.
Management determined the fair value of investment properties using valuation results from independent experts. More specifically, information on the fair value measurement of investment properties is disclosed in Note 7.
Management determined the useful lives of buildings and equipment based on production volumes, historical experience in the area and future outlook. The residual values are determined based on historical experience in the area and outlook. When assessing the sensitivity of profits to depreciation and amortisation, management assumed that by changing the deprecation rates by 25%, the Group's profit in 2020 would change by € 140 thousand from continuing operations (2019: € 167 thousand from continuing operation).
Calculation of the amount of compensation depends on several assumptions, the most significant of which are assumptions regarding the expected remaining lives of employees receiving the benefits, and assumptions about the discount rate. Management has used the statistical data publicly available at the Statistical Office of Estonia regarding the expectations of the remaining period of payments. The discount rate is determined based on the Baltic bond list of high-quality corporate bond rate and the discount rate was 3.5% in 2020 and 2019. The change in the discount rate by one percentage point will change the liabilities balance by € 9 thousand in 2020 and € 11 thousand in 2019. See also Note 2 and Note 12.
| € thousand | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Trade receivables - net (Note 3) | 677 | 1,186 |
| Prepaid taxes | 92 | 185 |
| Prepaid services | 17 | 16 |
| Other receivables (Note 3) | 9 | 7 |
| TOTAL | 795 | 1,394 |
Impairment losses of receivables and their reversal are included in the income statement lines Other operating income and Other operating expenses, see also Notes 19 and 20.
| thousand € | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Not past due | 650 | 1,033 |
| incl receivables from customers who also have receivables past due | 75 | 388 |
| incl receivables from customers who have no receivables past due | 575 | 646 |
| Past due but not impaired | 27 | 152 |
| Overdue up to 90 days | 20 | 140 |
| Overdue more than 90 days | 7 | 12 |
| TOTAL | 677 | 1,186 |
Trade receivables outstanding as of 31.12.2020 are outstanding as of 31.03.2021 in the amount € 7 thousand.
Other current receivables were not overdue as at 31.12.2020 (no overdues also 31.12.2019). The receivables and prepayments are pledged as part of the commercial pledge (Note 10).
| € thousand | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Raw materials and other materials | 181 | 218 |
| Work-in-progress | 91 | 130 |
| Finished goods | 264 | 568 |
| Goods purchased for resale | 0 | 59 |
| Prepayments to suppliers | 48 | 18 |
| Write-off reserve for inventories | (41) | (100) |
| TOTAL | 544 | 894 |
In the year 2020 raw materials at cost of € 8 thousand (2019: € 0 thousand) and finished goods at cost of € 1 thousand (2019: € 1 thousand) were written off. The inventory write-down reserve decreased by € 59 thousand during 2020 due to the termination of the retail sale of furniture (2019: change in inventory write-down of € 9 thousand).
Inventories are pledged and are part of a commercial pledge (Note 10).
| thousand € | |
|---|---|
| Carring amount 31.12.2018 | 175 |
| Capitalized cost | 20 |
| Fair value revalution | 327 |
| Reclassification from fixed assets (Suur-Jõe 48) | 599 |
| Carrying amount 31.12.2019 | 1,121 |
| Capitalized cost | 8 |
| Fair value revalution | 5 |
| Carryng amount 31.12.2020 | 1,134 |
The investment properties consist of the real estate owned by Pärnu Riverside OÜ in Pärnu, Suur-Jõe street 48 and the part of the real estate owned by Nordic Fibreboard Ltd OÜ, Rääma street 31.
Capitalized cost of investment property during 2020 are related to expenses of Suur-Jõe 48, Pärnu detail plan (2019: € 20 thousand, as well as expenses related to the detailed plan of Suur-Jõe 48).
In 2019, the Suur-Jõe 48 land plot was transferred between the Group`s subsidiaries (the land plot was transferred from Skano Furniture Factory OÜ to Pärnu Riverside Development OÜ) and in connection with this the purpose of the land changed and reclassification from property, plant and equipment to investment property. As a result, in 2019, the management changed the accounting policies for investment, investment property is no longer measured at cost but a fair value. The Company obtained a valuation of its Pärnu Riverside Development's property from an independent expert valuation company, which resulted in an increase in the value of the property from its past method of using cost based valuation. The revaluation of the registered immovable (no. 1409705) at Suur-Jõe street 48, Pärnu to fair value was based on an expert valuation carried out by an independent valuer in May 2019, based on the discounted cash flow method. According to the management, the fair value presented in the valuation report of the independent appraiser was also representative as of the balance sheet date of 31.12.2020 and 31.12.2019.
At the end of 2020, a new expert appraisal was performed on the registered immovable (no. 1409605) at Rääma Street 31 property using a comparison method by an independent valuer, and on the 31.12.2020, the Rääma Street 31 investment property was recognized in the balance sheet at the new fair value. In selecting the valuating method, the valuer has assumed that there have been recent free market transactions and similar market situations in compenting regions for similar assets, which was a sufficient basis for using the comparison method.
FAIR VALUE OF INVESTMENT PROPERTY:
| thousand € | |
|---|---|
| 31.12.2018 | |
| Share of registered immovable property at Suur-Jõe 48, Pärnu | 5 |
| Share of registered immovable property at Rääma Street 31, Pärnu | 170 |
| 31.12.2019 | |
| Share of registered immovable property at Suur-Jõe 48, Pärnu | 951 |
| Share of registered immovable property at Rääma Street 31, Pärnu | 170 |
| 31.12.2020 | |
| Share of registered immovable property at Suur-Jõe 48, Pärnu | 959 |
| Share of registered immovable property at Rääma Street 31, Pärnu | 175 |
The amount of expenses related to the management of investments properties with resold expenses during the 2020 were € 196 thousand and € 143 thousand in 2019. Rental income from investment properties, including utilities, for 2020 was € 212 thousand and € 111 thousand in 2019.
| thousand € | Land | Buildings and facilities |
Machinery and equip ment |
Other fixtures |
Construc tion-in progress |
Right of-use asset |
TOTAL |
|---|---|---|---|---|---|---|---|
| Cost at 31.12.2018 | 223 | 4,970 | 14,500 | 164 | 0 | 0 | 19,857 |
| Accumulated depreciation at 31.12.2018 |
0 | (3,308) | (10,169) | (157) | 0 | 0 | (13,634) |
| Carrying amount at 31.12.2018 | 223 | 1,662 | 4,331 | 7 | 0 | 0 | 6,223 |
| Additions | 0 | 0 | 47 | 0 | 86 | 0 | 133 |
| Right-of-use assets additions | 0 | 0 | 0 | 0 | 0 | 211 | 211 |
| Reclassification | (32) | (2,397) | 16 | 0 | (16) | 0 | (2,429) |
| Change in accounting policies | 0 | 0 | 0 | 0 | 0 | 73 | 73 |
| Disposals and write-offs (Note 19, 20) |
0 | 0 | (3,790) | (69) | 0 | (17) | (3,876) |
| Accumulated depreciation of fixed assets written off |
0 | 0 | 3,701 | 68 | 0 | 17 | 3,786 |
| Accumulated depreciation of reclassification assets written off |
0 | 1,772 | 0 | 0 | 0 | 0 | 1,772 |
| Depreciation (Notes 15;16;17) | 0 | (113) | (470) | (2) | 0 | (96) | (681) |
| Cost at 31.12.2019 | 191 | 2,573 | 10,773 | 95 | 70 | 267 | 13,969 |
| Accumulated depreciation at 31.12.2019 |
0 | (1,649) | (6,938) | (91) | 0 | (79) | (8,757) |
| Carrying amount at 31.12.2019 | 191 | 924 | 3,835 | 4 | 70 | 188 | 5,212 |
| Additions | 0 | 0 | 33 | 0 | 77 | 0 | 110 |
| Reclassification | 0 | 0 | 116 | 0 | (116) | 0 | 0 |
| Disposals and write-offs (Note 19, 20) |
0 | (32) | (176) | (6) | 0 | (137) | (351) |
| Accumulated depreciation of fixed assets written off |
0 | 31 | 175 | 6 | 0 | 60 | 271 |
| Depreciation (Notes 15;16;17) | 0 | (83) | (401) | (2) | 0 | (62) | (548) |
| Cost at 31.12.2020 | 191 | 2,541 | 10,747 | 89 | 31 | 130 | 13,728 |
| Accumulated depreciation at 31.12.2020 |
0 | (1,701) | (7,165) | (87) | 0 | (81) | (9,034) |
| Carrying amount at 31.12.2020 | 191 | 840 | 3,582 | 3 | 31 | 49 | 4,694 |
In 2020, depreciated and not in use machinery and equipment were written off at measured cost of € 176 thousand and accumulated depreciation of machinery and equipment was written off in the amount of € 175 thousand. Other inventory at measured cost of € 6 thousand and accumulated depreciation calculated on it was written off in the amount of € 6 thousand. Rental lease with a
measured cost of € 137 thousand were terminated prematurely, therefore their measured cost of € 137 thousand and accumulated depreciation of € 60 thousand were written off.
In 2020, the apartments registered as property, plant and equipment in Püssi were sold. The writtenoff acquisition cost of sold fixed assets was € 19.8 thousand, the written-off depreciation € 17.9 thousand. The profit from the sale of fixed assets was € 27.6 thousand, in 2019 there were no sales of property, plant and equipment.
As at 31.12.2020, the cost of fully depreciated property, plant and equipment still in use amounted to € 4.46 million and as at 31.12.2019, the respective amount was € 4.33 million.
As at 31.12.2020 the construction-in-progress included investment in production technology in the amount of 31 thousand euros, (31.12.2019: € 70 thousand). During 2020, investment in production technology additions € 77 thousand and were reclassified to the group of machinery and equipment in the total amount of € 116 thousand.
| thousand € | Computer software |
|---|---|
| Cost at 31.12.2018 | 129 |
| Accumulated amortisation at 31.12.2018 | (96) |
| Carrying amount 31.12.2018 | 34 |
| Additions 2019 | 0 |
| Disposals and write-offs (Note 19, 20) | (42) |
| Accumulated depreciation of fixed assets written off | 41 |
| Amortisation charge (Notes 15;16;17) | (14) |
| Cost at 31.12.2019 | 87 |
| Accumulated amortisation at 31.12.2019 | (69) |
| Carrying amount 31.12.2019 | 18 |
| Additions 2020 | 0 |
| Disposals and write-offs (Note 19, 20) | (10) |
| Accumulated depreciation of fixed assets written off | 10 |
| Amortisation charge (Notes 15;16;17) | (12) |
| Cost at 31.12.2020 | 77 |
| Accumulated amortisation at 31.12.2020 | (71) |
| Carrying amount 31.12.2020 | 6 |
| thousand € | 31.12.2020 | Change 2020 | 31.12.2019 |
|---|---|---|---|
| Non-current assets | |||
| Listed securities - Equity securities - cost as at | 410 | 0 | 410 |
| Revaluation | 40 | 53 | (13) |
| Fair value as at | 451 | 53 | 397 |
Financial assets at fair value through profit or loss(i.e. Trigon Property Development shares) have been revaluated to reflect fair value based on last price as at 31.12.2020 and as 31.12.2019 as shown on Nasdaq Tallinn Stock Exchange.
| INFORMATION REGARDING BORROWINGS AS AT: | |||
|---|---|---|---|
| thousand € | Interest rate | 31.12.2020 | 31.12.2019 |
| Current borrowings | |||
| Current portion of long-term loan (Swedbank) |
6 month euribor+5% | 717 | 4,090 |
| Current portion of short-term lease liability | 6 month euribor+ margin (2.19-2.49%) |
39 | 97 |
| Short term loan from related parties | 5% | 0 | 20 |
| Bank overdrafts | 5% | 0 | 340 |
| Total | 756 | 4,547 | |
| Non-current borrowings | |||
| Current portion of long-term loan (Swedbank) |
6 month euribor+5% | 483 | 0 |
| Current portion of long-term loan (MES) | Until 30.12.2022 2%, later 4% | 2,000 | 0 |
| Non-current lease liability | 6 month euribor+ margin (2.19-2.49%) |
10 | 92 |
| Total | 2,493 | 92 | |
| Total borrowings | 3,249 | 4,639 |
| Changes in liabilities arising from financing activities thousand € |
31.12.2019 | Cash flows |
Non monetary settleme nts |
Interest accrued |
Interest paid |
Reclassi fication |
31.12.2020 |
|---|---|---|---|---|---|---|---|
| Current portion of long-term loan (Swedbank) |
4,090 | (853) | (2,000) | 173 | (173) | (520) | 717 |
| Current portion of long-term lease liability |
97 | (62) | (33) | 3 | (3) | 37 | 39 |
| Short term loan from related parties |
20 | (20) | 0 | 1 | (0) | 0 | 0 |
| Bank overdrafts | 340 | (340) | 0 | 16 | (16) | 0 | 0 |
| Non-current loans (Swedbank) | 0 | 1 200 | 0 | 0 | 0 | (717) | 483 |
| Non-current loans (MES) | 0 | 0 | 2,000 | 0 | 0 | 0 | 2,000 |
| Non-current lease liability | 92 | 0 | (45) | 0 | 0 | (37) | 10 |
| Total liabilities from financing activities |
4,639 | (75) | (78) | 192 | (192) | (1,237) | 3,249 |
| Changes in liabilities arising from financing activities thousand € |
31.12.2018 | Cash flows |
Non monetary settleme nts |
Interest accrued |
Interest paid |
Reclassi ficiation |
31.12.2019 |
|---|---|---|---|---|---|---|---|
| Current portion of long-term loan (Swedbank) |
294 | (306) | 0 | 196 | (196) | 4,102 | 4,090 |
| Current portion of long-term financial lease |
0 | (96) | 193 | 5 | (5) | 0 | 97 |
| Short term loan from related parties |
0 | 20 | 0 | 0 | 0 | 0 | 20 |
| Bank overdrafts | 368 | (28) | 0 | 20 | (20) | 0 | 340 |
| Non-current loans (Swedbank) |
4,102 | 0 | 0 | 0 | 0 | (4,102) | 0 |
| Non-current financial lease | 0 | 0 | 8 | 0 | 0 | 85 | 92 |
| Total liabilities from financing activities |
4,763 | (409) | 200 | 221 | (221) | 85 | 4,639 |
At the end of 2020, Nordic Fibreboard AS and Nordic Fibreboard Ltd entered into a new loan agreement with their current lender Swedbank AS and new lender, the Rural Development Foundation, to refinance Groups loans and overdrafts. The refinancing enabled the Group to restructure its loan liabilities from € 4.4 million to € 3.2 million. The Rural Development Foundation granted € 2.0 million loans with a term 6 years, the loan interest rate is 2% per annum for the first 2 years, later 4% per annum. There is a grace period of 2 years before loan principal repayment will commence. Swedbank AS granted a loan of € 1.2 million, of which € 717 thousand are reclassified as short-term loans as of 31.12.2020, with an interest rate of 5% per annum for term of 5 years. The Groups financial income from loan refinancing was € 1.2 million, which is disclosed as reclassification in the above table for current and non-current portion of the bank loan.
In 2020, repayments of lease obligations in the amount of € 62 thousand and interest on lease obligations of € 3 thousand were made.
In 2020 Nordic Fibreboard OÜ Ltd received short-term loan from related party Stetind OÜ in amount € 549 thousand, with interest rate of 5% p.a. During 2020, the loan in the amount of € 569 thousand was repaid to Stetind OÜ, this included the € 20 thousand outstanding as of 31.12.2019. As at 31.12.2020, the short-term loan from related parties were € 0 thousand, see also Note 23.
Non-discounted future cash flows of loan payments are provided in section (B) of Clause 3.1 of Note 3. The borrowings of the Group have been secured as follows:
Information regarding financial risks arising from borrowings is disclosed in Note 3. Information regarding the carrying amounts of assets pledged as collateral for bank loans is disclosed in Notes 5, 6, 7 and 8.
| thousand € | |
|---|---|
| In the statement of cash flows: | |
| Decrease of lease liability | (78) |
| Lease liability repayments | (62) |
| Loan received from MES | 2,000 |
| Loans received from Swedbank | 1,200 |
| Loan repayment | (2,853) |
| Loans refinancing | (1,237) |
| Loans received from related parties | 549 |
| Repayment of loans received from related parties | (569) |
| Change in overdraft payments | (340) |
| Change in use of factoring | 0 |
| Total | (1,390) |
| In the statement of financial position | |
| Borrowings as at 31.12.2019 | 4,639 |
| Borrowings as at 31.12.2020 | 3,249 |
| Change | (1,390) |
| thousand € | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Trade payables | 1,110 | 2,226 |
| Payables to employees | 138 | 163 |
| incl. accrued holiday pay reserve | 33 | 36 |
| Tax liabilities | 128 | 162 |
| incl. social security and unemployment insurance | 82 | 101 |
| personal income tax | 35 | 42 |
| contribution to mandatory funded pension | 3 | 4 |
| value added tax | 0 | 5 |
| other taxes | 8 | 10 |
| Prepayments received | 162 | 82 |
| Other payables | 36 | 32 |
| TOTAL | 1,574 | 2,665 |
Provisions are made in relation to the compensations for loss of working capacity of former employees after work accidents. The total amount of the provision has been estimated considering the number of persons receiving the compensation, extent of their disability, their former level of salary, level of pension payments and estimations of the remaining period of payments.
| thousand € | |
|---|---|
| Balance at 31.12.2018 | 225 |
| incl. current portion of provision | 15 |
| incl. non-current portion of provision | 210 |
| Movements 2019: | |
| Use of provision | (22) |
| Interest cost (Note 21) | 7 |
| Decrease of reserve | (10) |
| Balance at 31.12.2019 | 199 |
| incl. current portion of provision | 20 |
| incl. non-current portion of provision | 179 |
| Movements 2020: | |
| Use of provision | (24) |
| Interest cost (Note 21) | 3 |
| Decrease of reserve | 0 |
| Balance at 31.12.2020 | 179 |
| incl. current portion of provision | 18 |
| incl. non-current portion of provision | 161 |
| Nominal value | Number of shares | Share capital | |
|---|---|---|---|
| € | pcs | thousand € | |
| Balance at 31.12.2020 | 0.10 | 4,499,061 | 450 |
| Balance at 31.12.2019 | 0.60 | 4,499,061 | 2,699 |
As of 31.12.2020 the share capital of Nordic Fibreboard AS totalled 449,906.10 euros which consisted of 4,449,061 no par value registered shares with a book value of 0.10 euros per share. Each ordinary share grants its owner one vote in the General Meeting of Shareholders and the right to receive dividends. No dividends were paid to shareholders during 2020 and 2019.
At the regular General Meeting of Shareholders held on 10.08.2020, a decision made to introduce nopar value shares and to reduce the share capital of Nordic Fibreboard AS by 2,249,530.50 euros, from 2,699,436.60 euros to 449,906.10 euros by reducing the book value of shares. The number of shares remained the same, but the book value of the share decreased from 0.60 euros to 0.10 euros. The list of shareholders participating in the reduction of share capital was fixed 24th August 2020 as at end of the working day of the Nasdaq CSD securities settlement system.
In addition, decisions were made to make changes to the minimum and maximum capital of the Group and the minimum and maximum number of shares. The minimum share capital outlined in the Articles of Association is 250,000 euros and the maximum share capital is 1,000,000 euros.
As at 31.12.2020 the Group had 485 shareholders (31.12.2019: 430 shareholders) of which with more than 5% ownership interest were:
• Pärnu Holdings OÜ with 2,682,192 shares or 59.62% (31.12.2019: 59.62%)
The number of Nordic Fibreboard AS shares owned by the members of the Management Board and Supervisory Board of Nordic Fibreboard AS was as follows:
Both Joakim Johan Helenius and Torfinn Losvik have indirect ownership through parent company Pärnu Holdings OÜ. Torfinn Losvik owns shares through Stetind OÜ in the amount of 44,206 shares (2019: 44,206 shares).
Until 31.12.2020, Torfinn Losvik had a share option agreement for a total of 300,000 share options, such share option agreement was signed 11 October 2017. Strike price was higher (€ 0.506) compared to the market price (€ 0.45 as of 31.12.2020) and the option agreement was not used, thus the option reserve was released and accounted in retained earnings.
The agreement provided:
Torfinn Losvik shall be entitled to use the issued option starting from the 37th (thirty-seventh) calendar month after issue of the option. He shall lose the right to use the share option if he leaves from the management board of Nordic Fibreboard AS upon own initiative prior to the thirty-seventh calendar month after the issue of the option or if his board member contract is terminated upon the initiative of the supervisory board within 12 months after the issue of the option. He shall have the right to use the share option to the extent of 1/3 if his board member contract is terminated within 13-24 months after the issue of the option and to the extent of 2/3 if his or her board member contract is terminated within 25-36 months after the issue of the option.
Torfinn Losvik shall not have the right to transfer the share options issued thereto.
Up to 300 000 (three hundred thousand) shares of Nordic Fibreboard AS shall be emitted to fulfil the conditions of the share option.
The price of one share option is 0.506 EUR (calculated as the average closing price of the Nordic Fibreboard shares for the last 60 trading days before the announcement of given AGM on 12.04.2017).
The final term of the share programme is 31.12.2020. The specific schedule of the share programme and the procedure for sale shall be determined by the supervisory board.
The pre-emptive right of shareholders to subscribe to new shares emitted to fulfil the conditions of the share option shall be precluded.
Based on Nordic Fibreboard AS share historical volatility of 85% over past 4 years (2014-2017), the management has evaluated value of the call option of the option agreement to be of 77% compared to agreed strike price.
Due to the nature of the taxation system, the companies registered in Estonia do not have any differences between the tax bases of assets and their carrying amounts and hence, no deferred income tax assets and liabilities arise. However, according to the decision of the IFRS Interpretation Committee in June 2020, the parent is required to recognize an income tax liability on the profits on the subsidiary unless profits are not planned to be distributed to parent company in the foreseeable future. As the
Group does not plan to take dividends from the Nordic Fibreboard Ltd OÜ profits of 2020 due to large losses in previous years, no deferred tax liability has been recognized for the profits of the subsidiary in the Group's consolidated financial statements. As the parent company`s adjusted unconsolidated retained earnings on the 31 December 2019 were negative, therefore as at the balance sheet date there were no dividends to distribute.
The maximum potential income tax liability is calculated under the assumption that the distributable net dividends and the amount of the income tax expense on dividends cannot exceed the distributable retained earnings as at the balance sheet date.
| 31.12.2020 | 31.12.2019 | |
|---|---|---|
| Net profit (-loss) (in thousands of euros) | 1,074 | (1,398) |
| Weighted average number of shares (units) | 4,499 | 4,499 |
| Basic earnings per share | 0.24 | (0.31) |
| Weighted average number of shares used for calculating the diluted earnings per shares (units) |
4,499 | 4,630 |
| Diluted earnings per share | 0.24 | (0.30) |
| Book value of share | 0.59 | 0.34 |
| Price/earnings ratio (P/E) | 1.89 | (1.32) |
| Last price of the share of Nordic Fibreboard AS on Tallinn Stock Exchange at 31.12.2020, 31.12.2019. |
0.45 | 0.41 |
| Weighted average number of shares used as the denominator (units) | ||
| Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share (th pc) |
4,499 | 4,499 |
| Adjustments for calculation of diluted earnings per share: | ||
| Share options (2017 program) | 0 | 131 |
| Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share (th pc) |
4,499 | 4,630 |
Diluted earnings (loss) per share is calculated based on the net profit (loss) and the number of shares plus contingent shares corresponding with the Group`s option program started from 2017. Nordic Fibreboard share price on average has been lower than the exercise price of options granted to Torfinn Losvik. The share options where valid until 31.12.2020 with strike price of € 0.506. Since the strike price was higher compared to the market price the option agreement was not used, thus the option reserve was released and accounted in retained earnings.
The share of Nordic Fibreboard AS has been listed on Tallinn Stock Exchange starting from 25.09.2007.
| thousand € | 2020 | 2019 |
|---|---|---|
| Raw materials and main materials | 2,689 | 4,435 |
| Electricity and heat | 2,705 | 3,216 |
| Labour expenses (Note 18) | 1,600 | 1,833 |
| Depreciation (Note 8) | 557 | 591 |
| Purchased goods | 68 | 809 |
| Change in balances of finished goods and work in progress | 257 | 353 |
| Other expenses | 223 | 302 |
| TOTAL | 8,099 | 11,538 |
| thousand € | 2020 | 2019 |
|---|---|---|
| Transportation expenses | 921 | 995 |
| Labour expenses (Note 18) | 192 | 327 |
| Operating Lease | 0 | 132 |
| Commission fees | 146 | 61 |
| Marketing expense | 3 | 57 |
| Depreciation (Note 8) | 0 | 1 |
| Other expenses | 21 | 125 |
| Continued operations TOTAL | 1,283 | 1,698 |
| thousand € | 2020 | 2019 |
|---|---|---|
| Labour expenses (Note 18) | 248 | 348 |
| Purchased services | 285 | 136 |
| Office supplies | 10 | 7 |
| Operating Lease | 0 | 2 |
| Depreciation (Note 8) | 1 | 59 |
| Other expenses | 61 | 106 |
| TOTAL | 605 | 658 |
| thousand € | 2020 | 2019 |
|---|---|---|
| Wages and salaries | 1,553 | 1,910 |
| Social security and unemployment insurance | 490 | 597 |
| Accrued holiday pay provision | (2) | 1 |
| Fringe benefits paid to employees | 18 | 31 |
| TOTAL | 2,059 | 2,539 |
| thousand € | 2020 | 2019 |
|---|---|---|
| Compensation from insurance | 5 | 22 |
| Profit from sale of fixed assets | 28 | 0 |
| Other operating income | 9 | 329* |
| TOTAL | 42 | 351 |
* 2019 includes other operating income from revaluation of investment property € 327 thousand.
| thousand € | 2020 | 2019 |
|---|---|---|
| Sales bonuses | 0 | 38 |
| Reclamations | 19 | 6 |
| Commission, factoring fees | 3 | 1 |
| Membership fees | 3 | 4 |
| Insurance | 0 | 5 |
| Doubtful receivables | 12 | 1 |
| Penalties paid | 72 | 75 |
| Loss from sales of fixed assets | 2 | 2 |
| Other costs | 231* | 0 |
| Continued operations TOTAL | 342 | 134 |
*main items on other operating expenses in the 2020 the closure cost of the Püssi factory of € 187 thousand and a one-time cost of € 38 thousand for the demolition of the building that was not used.
| thousand € | 2020 | 2019 |
|---|---|---|
| Financial income: | ||
| Received interest | 1 | 0 |
| Revaluation of TPD shares | 53 | 19 |
| Loans and overdrafts refinancing | 1,237 | 0 |
| Total financial income | 1,291 | 19 |
| Financial cost: | ||
| Interest expenses | 194 | 210 |
| including interest expenses related to provisions (Note 12) | 3 | 7 |
| Other finance cost | 5 | 593* |
| Total financial cost | 199 | 803 |
*Other financial expenses of 2019 is the result of sale of a subsidiary.
Operating segments have been determined based on the reports reviewed by the Management Board that are used to make strategic decision. The Management Board considers the business based on the types of products and services as follows:
* Discontinued operations, the subsidiary was sold on 05.09.2019.
**Furniture retail finished its activities on 31.01.2020.
The Management Board assesses the performance of operating segments based on operating profit and EBITDA as a primary measure. As a secondary measure, the Management Board also reviews net revenue.
All amounts provided to the Management Board are measured in a manner consistent with that of the financial statements. Inter-segment sales are carried out at arm's length.
| 2020 thousand € |
Fibreboard manu facturing and wholesale |
Rental Estate Manage ment |
Furniture retail sale |
Group's general expenses and eliminations |
CONTINUED SEGMENTS TOTAL |
Discontinued operations (furniture manufacturing and wholesale) |
SEGMENTS TOTAL |
|---|---|---|---|---|---|---|---|
| Revenue from external customers |
10,001 | 212 | 56 | 0 | 10,269 | 0 | 10,269 |
| Inter-segment revenue |
0 | 0 | 0 | (0) | 0 | 0 | 0 |
| Operating profit | 39 | 0 | (40) | (18) | (19) | 0 | (19) |
| Depreciation (Notes 8)* |
558 | 0 | 0 | 1 | 558 | 0 | 558 |
| Segment assets | 6,751 | 1,011 | 11 | (122) | 7,650 | 0 | 7,650 |
| Non-current assets of the segment (Note 7;8)* |
5,325 | 959 | 0 | 1 | 6,286 | 0 | 6,286 |
| Segment liabilities | 4,795 | 45 | 483 | (322) | 5,002 | 0 | 5,002 |
| Additions to non current assets (Note 7;8)* |
110 | 8 | 0 | 0 | 118 | 0 | 118 |
| Interest expenses | 178 | 0 | 0 | 17 | 194 | 0 | 194 |
| 2019 thousand € |
Fibreboard manu facturing and wholesale |
Real Estate Manage ment |
Furni ture retail sale |
Group's general expenses and eliminations |
CONTINUED SEGMENTS TOTAL |
Discontinued operations (furniture manufacturing and wholesale) |
SEGMENTS TOTAL |
|---|---|---|---|---|---|---|---|
| Revenue from external customers |
11,745 | 77 | 1,511 | 0 | 13,333 | 1,215 | 14,548 |
| Inter-segment revenue |
0 | 34 | 4 | (38) | 0 | 0 | 0 |
| Operating profit | (540) | 294 | (202) | 104 | (344) | (253) | (597) |
| Depreciation (Notes 8)* |
591 | 58 | 2 | 0 | 651 | 78 | 729 |
| Segment assets | 8,058 | 992 | 75 | (80) | 9,045 | 0 | 9,045 |
| Non-current assets of the segment (Note 7;8)* |
5,865 | 951 | 0 | (67) | 6,749 | 0 | 6,749 |
| Segment liabilities | 6,899 | 27 | 509 | 69 | 7,503 | 0 | 7,503 |
| Additions to non current assets (Note 7;8)* |
400 | 347 | 0 | 0 | 747 | 0 | 747 |
| Interest expenses | 204 | 0 | 0 | 6 | 210 | 17 | 227 |
* Property, plant and equipment of the segment
Eliminations comprise unrealised profits on inventories arising from inter-segment transactions.
| thousand € | 2020 | ||||||
|---|---|---|---|---|---|---|---|
| Fibreboard manu facturing and wholesale |
Real Estate Manage ment |
Furniture retail sale |
CONTINUED SEGMENTS TOTAL |
Discontinued operations (furniture manufacturing and wholesale) |
SEGMENTS TOTAL |
||
| European Union | 8,327 | 212 | 56 | 8,594 | 0 | 8,594 | |
| Russia | 1,240 | 0 | 0 | 1,240 | 0 | 1,240 | |
| Asia | 189 | 0 | 189 | 0 | 189 | ||
| Africa | 96 | 0 | 0 | 96 | 0 | 96 | |
| Other | 85 | 0 | 0 | 85 | 0 | 85 | |
| Middle East | 65 | 0 | 0 | 65 | 0 | 65 | |
| TOTAL | 10,001 | 212 | 56 | 10,269 | 0 | 10,269 |
| thousand € | 2019 | ||||||
|---|---|---|---|---|---|---|---|
| Fibreboard manu facturing and wholesale |
Real Estate Manage ment |
Furniture retail sale |
CONTINUED SEGMENTS TOTAL |
Discontinued operations (furniture manufacturing and wholesale) |
SEGMENTS TOTAL |
||
| European Union | 8,656 | 77 | 1,511 | 10,244 | 637 | 10,881 | |
| Russia | 1,545 | 0 | 0 | 1,545 | 458 | 2,003 | |
| Asia | 544 | 0 | 0 | 544 | 0 | 544 | |
| Africa | 523 | 0 | 0 | 523 | 0 | 523 | |
| Other | 245 | 0 | 0 | 245 | 48 | 293 | |
| Middle East | 232 | 0 | 0 | 232 | 72 | 304 | |
| TOTAL | 11,745 | 77 | 1,511 | 13,333 | 1,215 | 14,548 |
Revenue is generated from sales of own production and goods purchased for resale. Majority of the Group's assets, 100% both in 2020 and 2019, are located in Estonia.
The following parties are considered to be related parties:
As of 31 December 2020, the largest shareholder of Pärnu Holdings OÜ and the entities with significant influence over the Group are: Joakim Johan Helenius (46%) and Stetind OÜ (47%), as of 31 December 2019 AS Trigon Capital (45%) and Stetind OÜ (47%). The owner of Stetind OÜ is Torfinn Losvik and the owner of AS Trigon Capital is Joakim Helenius.
Benefits (incl. tax expenses) include payments of parent and subsidiary company Management Board and Supervisory Board fees paid within the period and resignation compensations for previous Management Board and Supervisory Board members:
| thousand € | 2020 | 2019 |
|---|---|---|
| Membership fees (Note 18) | 163 | 130 |
| Social tax | 54 | 43 |
| Total | 217 | 173 |
The member of the Management Board of Nordic Fibreboard AS will receive severance pay to three months' remuneration according to the contract. No payments were made to members of Supervisory Board.
In 2020 short term benefits in the amount of € 163 thousand were paid to members of the Management Board of all consolidated group companies (2019: € 130 thousand). No short-term benefits for Supervisory Board members neither during 2020 nor 2019. Pursuant to the contracts concluded, as at 31.12.2020, the members of the Management Board are entitled upon termination of management board member agreements by the initiative of Supervisory Board to receive severance pay amounting to three-month remuneration.
In 2017, share option program was established for management. Share options reserve in the amount of € 32 thousand was recorded in 2020 (2019: € 38 thousand). For additional information see Note 14.
Nordic Fibreboard AS has sold goods and purchased rental, consultation and other services from related parties. Transactions with related parties are based on market terms.
| thousand € | 2020 | 2019 |
|---|---|---|
| Goods Sold | 9 | 0 |
| Purchased services | 20 | 17 |
| Total | 29 | 17 |
Balances with related parties as of 31.12.2020 were € 17 and 31.12.2019 were € 0 thousand from purchased services. In 2020 Group received short-term loan from related parties Stetind OÜ in amount € 549 thousand, with interest rate of 5% p.a., which was repaid in full during in 2020 together with the outsanding loan balance as at 31.12.2019. As at 31.12.2020, the short-term loan from related parties were € 0 thousand (2019: € 20 thousand). See also Note 10.
| thousand € | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Purchased services | 17 | 0 |
| Short-term loan | 0 | 20 |
| Short-term loan interest | 1 | 0 |
| Total | 18 | 20 |
The tax authorities may at any time inspect the books and records within 5 years subsequent to the reported tax year, and upon establishing errors, may impose additional tax assessments and penalties. The Group's management is not aware of any circumstances which may give rise to a potential material liability in this respect.
| 62 | |
|---|---|
Based on the resolution of the supervisory board, Nordic Fibreboard AS sold its fully owned furniture manufacturing and wholesale subsidiary Skano Furniture Factory OÜ to Wood Export OÜ. The purchase price for buying 100% of the share capital of Skano Furniture Factory OÜ is € 100,000. However, after adjustments between the sale price and the liabilities of Skano Furniture Factory OÜ. No monetary payment was made by the buyer. There are no related between members of Nordic Fibreboard AS supervisory board and management board. Wood Export for a many years has been a supplier to Skano Furniture Factory OÜ.
Based on the resolution of supervisory board of Nordic Fibreboard AS, Skano Furniture Factory OÜ has with 30 August 2019 transaction transferred its 100% ownership of Skano Furniture OÜ to Nordic Fibreboard AS. The transfer was done without any payment taking place and has no effect on the financial performance of Nordic Fibreboard AS and its subsidiaries. Prior to the sale, Skano Furniture Factory OÜ bank loan, overdraft facilities and all obligations related to the company`s ex-workers disability claims transferred to Nordic Fibreboard AS in agreement with buyer. The sale of Skano Furniture OÜ is not a transaction with connected persons and any members of Nordic Fibreboard AS supervisory board and management board are not otherwise personally interested in the transaction.
The following table presents the financial results of Skano Furniture Factory OÜ for the first 8 months of 2019 up to the sale of the subsidiary.
| € thousand | 2019 (8 months) |
|---|---|
| Revenue | 1,215 |
| Cost of goods sold | 1,350 |
| Gross profit | (134) |
| Distribution costs | 70 |
| Administrative expenses | 82 |
| Other operating income | 38 |
| Other operating expenses | 4 |
| Operating loss | (253) |
| Loss from subsidiaries | 0 |
| Finance income | 0 |
| Finance costs | 18 |
| LOSS BEFORE INCOME TAX | (271) |
| Corporate income tax | 0 |
| NET LOSS FOR THE PERIOD | (271) |
| Summarised statement of Financial Position | 05.09.2019 |
|---|---|
| Current assets | 721 |
| Non-currents assets | 96 |
| Current liabilities | 288 |
| Non-current liabilities | 0 |
| Total net assets | 530 |
The financial information on the parent is included in the separate primary financial statements (pages 66 to 68), the disclosure of which in the notes to the consolidated financial statements is required by the Estonian Accounting Act. The separate financial statements of the parent have been prepared using the same accounting policies as for the consolidated financial statements, except for measurement of investment in subsidiaries, which are stated at cost (less any impairment losses).
| € thousand | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Receivables and prepayments | 6 | 16 |
| Total current assets | 6 | 16 |
| Other shares and issues | 1,161 | 1,246 |
| Property, plant and equipment | 0 | 1 |
| Intangible assets | 1 | 1 |
| Total non-current assets | 1,162 | 1,248 |
| TOTAL ASSETS | 1,168 | 1,264 |
| Borrowings | 0 | 335 |
| Payables and prepayments | 113 | 31 |
| Short-term provisions | 15 | 17 |
| Total current liabilities | 128 | 383 |
| Long-term provisions | 136 | 151 |
| Total non-current liabilities | 136 | 151 |
| Total liabilities | 264 | 534 |
| Share capital (at nominal value) | 450 | 2,699 |
| Share premium | 0 | 364 |
| Statutory reserve capital | 0 | 288 |
| Other reserves | 0 | 85 |
| Retained earnings (loss) | 454 | (2,706) |
| Total equity | 904 | 730 |
| TOTAL LIABILITIES AND EQUITY | 1,168 | 1,264 |
| € thousand | 2020 | 2019 |
|---|---|---|
| Revenue | 3 | 5 |
| Cost of goods sold | 0 | 5 |
| Includes sales to subsidiares | 3 | 5 |
| Gross profit | 3 | 0 |
| Administrative expenses | 20 | 8 |
| Other operating income | 0 | 2 |
| Other operating expenses | 23 | 218 |
| Operating loss | (40) | (224) |
| Finance income | 315 | 3 |
| Finance costs | 17 | 2,222 |
| PROFIT/LOSS BEFORE INCOME TAX | 258 | (2,443) |
| NET PROFIT/LOSS FOR THE FINANCIAL YEAR | 258 | (2,443) |
| TOTAL COMPREHENSIVE PROFIT/LOSS FOR THE FINANCIAL YEAR | 258 | (2,443) |
| € thousand | 2020 | 2019 |
|---|---|---|
| Cash flows from operating activities | ||
| Operating profit (loss) | (40) | (224) |
| Adjustments: | ||
| Loss on write-off in subsidiary loan | 22 | 0 |
| Change in trade and other receivables | (20) | 328 |
| Change in trade and other payables | 81 | 31 |
| Cash generated from operations | 43 | 135 |
| Net other financial income and expense | (3) | 0 |
| Net cash generated from operating activities | 40 | 135 |
| Cash flows from investing activities | ||
| Interest received | 0 | 3 |
| Purchase of property, plant and equipment and intangible assets | 0 | (2) |
| Loans from related parties | 93 | 0 |
| Repayments of loans received from related parties | (17) | 0 |
| Loans to related parties | (37) | (219) |
| Repayment of loans by related parties | 5 | 179 |
| Net cash used in investing activities | 44 | (39) |
| Cash flows from financing activities | ||
| Loan received | 0 | 276 |
| Loan repayment | (4) | (7) |
| Interest payments | (14) | (6) |
| Loans refinancing | 0 | (426) |
| Change in overdraft | (66) | 66 |
| Net cash (used in)/from financing activities | (84) | (97) |
| NET CHANGE IN CASH | 0 | (1) |
| OPENING BALANCE OF CASH | 0 | 1 |
| CLOSING BALANCE OF CASH | 0 | 0 |
| € thousand | Share capital |
Share premium |
Statutory reserve capital |
Other reserves |
Retained earnings |
Total |
|---|---|---|---|---|---|---|
| Adjusted uncosidated equity at 31.12.2018 |
2,699 | 364 | 288 | 44 | (270) | 3 125 |
| Share options 2019 | 0 | 0 | 0 | 40 | 0 | 40 |
| Net loss for 2019 | 0 | 0 | 0 | 0 | (2,443) | (2,443) |
| Other comprehensive income for 2019 |
0 | 0 | 0 | 0 | 0 | 0 |
| Total comprehensive loss for 2019 |
0 | 0 | 0 | 0 | (2,443) | (2,446) |
| Balance at 31.12.2019 | 2,699 | 364 | 288 | 84 | (2,704) | 730 |
| Carrying amount of investment under control and significant influence |
0 | 0 | 0 | 0 | (1,245) | (1,245) |
| Value of investment under control and significant influence under equity method |
0 | 0 | 0 | 0 | 1,245 | 1,245 |
| Adjusted unconsolidated equity at 31.12.2019 |
2,699 | 364 | 288 | 84 | (2,704) | 730 |
| Share options 2020 | 0 | 0 | 0 | (84) | 0 | (84) |
| Other changes | 0 | (364) | (288) | 0 | 652 | 0 |
| Change in share capital | (2,249) | 0 | 0 | 0 | 2 249 | 0 |
| Net profit for 2020 | 0 | 0 | 0 | 0 | 258 | 258 |
| Other comprehensive income for 2020 |
0 | 0 | 0 | 0 | 0 | 0 |
| Total comprehensive profit for 2020 |
0 | 0 | 0 | 0 | 258 | 258 |
| Balance at 31.12.2020 | 450 | 0 | 0 | 0 | 454 | 904 |
| Carrying amount of investment under control and significant influence |
(1,161) | (1,161) | ||||
| Value of investment under control and significant influence under equity method |
1,161 | 1,161 | ||||
| Adjusted unconsolidated equity at 31.12.2020 |
450 | 0 | 0 | 0 | 454 | 904 |
Adjusted unconsolidated equity is the maximum amount that can be distributed to shareholders' according to Estonian legislation.
To the Shareholders of Nordic Fibreboard AS
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Nordic Fibreboard AS ("the Company") and its subsidiaries (together – "the Group") as at 31 December 2020, and the Group´s consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
Our opinion is consistent with our additional report to the Audit Committee dated 26 April 2021.
The Group's consolidated financial statements comprise:
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the Company and of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.
To the best of our knowledge and belief, we declare that non-audit services that we have provided to the Company and its parent and subsidiaries are in accordance with the applicable law and regulations in the Republic of Estonia and that we have not provided non-audit services that are prohibited under § 591 of the Auditors Activities Act of the Republic of Estonia. The non-audit services that we have provided to the Company and its parent and subsidiaries in the period from 1 January 2020 to 31 December 2020 are disclosed in the management report.
This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements. In particular, we considered where the Management Board made subjective judgments; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They 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 consolidated financial statements.
Based on our professional judgment, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
| Overall Group audit materiality | EUR 103 thousand |
|---|---|
| How we determined it | Approximately 1% of consolidated revenue |
| Rationale for the materiality benchmark applied |
We have applied this benchmark, as in our view total revenues is a key performance indicator that determines the Group's value and is monitored by management, investors and other stakeholders. |
This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
As at 31 December 2020 the Group has property, plant and equipment in the carrying amount of EUR 4,694 thousand, of which EUR 3,648 thousand relates to Püssi factory of the fibreboard production entity.
As a result of the COVID-19 pandemic, Püssi factory was closed in March 2020, which is an indication that the recoverable amount of the non-current assets of Püssi factory (land, building and machinery and equipment) may be below their carrying value.
Management used external valuation experts to assess the fair value of Püssi factory. This method was applied by management as compared to the value in use method, which was used previously, as the cash flow forecasts for Püssi factory would have included too much uncertainty due to the current closure of the factory. Experts' valuations resulted in the fair value of Püssi factory exceeding its carrying value and thus management concluded that there is no need for impairment of Püssi factory.
The valuation reports of Püssi factory include valuation for land and building and machinery and equipment. Land and building valuation is based on comparable transaction method. Machinery and equipment valuation takes into account several inputs such as age and location of the production line, cost of the new line and replacement cost.
We assessed for which cash generating units of the Group impairment indicators exist. We took into account our knowledge of the Group and its business activities, the situation of its primary export markets as well as post-balance sheet results. In addition, we performed assessment of the management's experts performing the valuations as well as the inputs used to reach the valuation result. We found the management's conclusion regarding cash generating units with impairment indicators to be consistent with the evidence we obtained.
We evaluated the appropriateness of the management's experts valuations by:
In respect of some fair value assessment inputs, we formed a different view from that of the management's experts, but the estimates were within a reasonable range of outcomes.
This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
Fair value assessment of these assets is subjective and requires significant judgements due to the inherent uncertainty involved in selecting comparable transactions for land and building or assessing the key inputs to machinery and equipment valuation.
We also read the financial statements' disclosures regarding impairment assessment.
Due to the above reasons we considered this area to be a key audit matter.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.
The Group consists of a number of entities that are further disclosed in Note 1 of financial statements. Based on the size and risk characteristics, we performed a full scope audit of the financial information for Nordic Fibreboard AS and Nordic Fibreboard Ltd OÜ.
In addition, specific audit procedures, including analytical procedures, were performed in respect of the subsidiary Pärnu Riverside Development OÜ. At the Group level, we audited the consolidation process and performed procedures to assess that the audits of the Group entities and of specified account balances covered all material items in the Group's consolidated financial statements.
The Management Board is responsible for the other information. The other information comprises Introduction, Management report, Management Board's confirmations and Revenue of the parent company by EMTAK classificators (but does not include the consolidated financial statements and our auditor's report thereon).
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated 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 consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, 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.
The Management Board is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Management Board determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
In preparing the consolidated financial statements, the Management Board is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the consolidated 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 ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
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.
This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated 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 European Single Electronic Format (ESEF) reporting requirements pursuant to Commission Delegated Regulation (EU) 2018/815
These annual consolidated financial statements of the Company and the Group for the year ended 31 December 2020 have not been prepared in accordance with ESEF reporting requirements.
We were first appointed as auditors of Nordic Fibreboard AS, as a public interest entity, for the financial year ended 31 December 2007. Our appointment has been renewed by tenders and shareholder resolutions in the intermediate years, representing the total period of our uninterrupted engagement appointment for Nordic Fibreboard AS, as a public interest entity, of 14 years. In accordance with the Auditors Activities Act of the Republic of Estonia and the Regulation (EU) No 537/2014, our appointment as the auditor of Nordic Fibreboard AS can be extended for up to the financial year ending 31 December 2026.
AS PricewaterhouseCoopers
Tiit Raimla Verner Uibo Certified auditor in charge, auditor's certificate no.287 Auditor's certificate no.568
26 April 2021 Tallinn, Estonia
This version of our report is a translation from the original, which was prepared in Estonian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.
| € thousand | |
|---|---|
| Retained earnings at 31.12.2019 | (1,894) |
| Other changes 2020 | 768 |
| Change in share capital | 2 250 |
| Net profit in 2020 | 1 074 |
| Retained earnings / (accumulated losses) at 31.12.2020 | 2,198 |
________________________
Torfinn Losvik
Chairman of the Management Board
The Management Board has prepared the Company's Annual Report for 2020. The Annual Report (pages 1 to 74) consists of the management report, financial statements, auditor's report and proposal for profit allocation. The Supervisory Board has reviewed the Annual Report prepared by the Management Board and approved it for presentation at the General Meeting of Shareholders
Chairman of the Management board Torfinn Losvik ____________
27.04.2021
Chairman of the Supervisory Board Joakim Johan Helenius ____________
Member of the Supervisory Board Trond Bernhard Brekke ____________
Member of the Supervisory Board Sakari Wallin ____________
| € thousand | 2020 | 2019 |
|---|---|---|
| 96099 Other services | 3 | 5 |
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