Neova Group’s Interim Report January-September 2024
Third quarter net sales were slow, in line with normal seasonality. Restructuring costs of operations decreased profitability.
July-September 2024 in brief:
- The Group’s net sales amounted to EUR 79.8 million (EUR 81.1 million).
- EBITDA was EUR -3.2 million (EUR -0.1 million), or -4.0% (-0.1%) of net sales.
- Comparable EBITDA was EUR 3.8 million (EUR 1.1 million). EBITDA included a total of EUR -7 million (EUR -1.2 million) of non-recurring items.
- Operating profit was EUR -12.2 million (EUR -9.0 million), or -15.3% (-11.1%) of net sales, including EUR -7.0 million (EUR -1.1 million) of non-recurring items.
- Free cash flow before taxes was EUR 7.5 million (EUR -2.7 million).
January-September 2024 in brief:
- The Group’s net sales amounted to EUR 372.7 million (EUR 373.5 million).
- EBITDA was EUR 39.7 million (EUR 27.7 million), or 10.6% (7.4%) of net sales.
- Comparable EBITDA was EUR 47.7 million (EUR 34.2 million). EBITDA included a total of EUR -8.0 million (EUR -10.0 million) of non-recurring items relating to efficiency improvement measures.
- Operating profit was EUR 14.8 million (EUR 0.5 million), or 4.0% (0.1%) of net sales, including EUR -8.0 million (EUR -10.0 million) in non-recurring items that were mainly related to the restructuring of operations.
- Free cash flow before taxes was EUR 51.5 million (EUR 15.6 million).
- Gross investments totaled EUR 25.2 million (EUR 25.1 million).
- Earnings per share were EUR 322.36 ( EUR -108.09).
- The ratio of interest-bearing net debt to EBITDA was 2.9 (3.7)
- Return on invested capital (%, previous 12months): 2.1 (2.6)
Figures in brackets to the corresponding period in 2023 unless otherwise stated.
CEO Pekka Tennilä:
“The restructuring costs of the operations put a burden on the third quarter, which was modest as typical.
The third quarter of the year is normally the weakest for Neova Group, both in terms of sales and results. Kekkilä-BVB’s consumer sales season ends at the end of the second quarter and Neova Terra’s peat deliveries are at their lowest. This was also the case in this third quarter. Neova Group’s net sales fell slightly short of the comparison period and operating profit was lower than in the comparison period due to non-recurring items of approximately EUR 7 million.
Kekkilä-BVB’s net sales were at the level of the comparison period, but the operating profit was burdened by non-recurring items related to business restructuring, such as the closure of two growing media factories in Georgsdorf and Hardenberg in Central Europe.
Kekkilä-BVB’s business areas Global and Materials made a strong quarterly result. In addition, net sales developed positively in the business aimed at professional growers in Central Europe. The net sales of landscaping increased in both Central Europe and the Nordic countries. Low consumer confidence reduced retail sales in both Central Europe and the Nordic countries instead.
Kekkilä-BVB’s preparations for the upcoming season have begun. Retail business has shown slight signs of picking up in Central Europe.
The third quarter of Neova Terra was as expected in terms of net sales. Neova Terra’s peat production achieved its quantitative targets in Finland and Estonia, but the very rainy summer in southern Sweden caused production there to fall short of the target and the production volumes of the previous year by about a quarter.
A significant event in Neova Terra’s new businesses was the start of raw material deliveries of peat-based animal feed materials. Neova manufactures raw material for the animal feed at its Ilomantsi production plant. Several studies have found that peat and the humic substances it contains support animal welfare and growth. This year, animal feed raw material deliveries will remain at only hundreds of tonnes, but in the future this business is expected to be a significant contributor to earnings for Neova Terra.
The sales of the activated carbon manufacturer Novactor increased from previous year. During the last quarter, the Novactor production plant will have a two-week maintenance shutdown, during which investments will be made to improve its energy efficiency. The shutdown weakens production in the last quarter, but improves the plant’s energy efficiency and profitability in the future.
Neova Group’s business in January-September has developed favorably in comparison to the last year. The Group’s net sales were at the previous year’s level, but the Group’s operating profit in January-September was EUR 15 million higher than in the comparison period, which indicates the positive impact of efficiency measures.
Full-year operating profit is expected to be clearly higher than last year.”
Outlook for 2024
During the current financial period, Kekkilä-BVB will focus on more efficient operations, an increase of its product portfolio, a profitable increase of its international sales and improving its profitability. Group’s comparable operating profit is expected to be higher than in the previous year.
For Neova Terra, the demand for energy peat as a fuel is expected to continue to decline. The demand for horticultural peat is expected to pick up with the growth of the growing media market. The company will continue the commercialisation of new businesses, and the commercialisation of the first new peat-based innovations is proceeding as planned.
Key uncertainty factors affecting the outlook include the development of inflation and interest rates, as well as the success of the sales season and peat production season. International conflicts and unstable world politics also cause uncertainty in the operating environment. These factors may have an indirect effect on demand and financial development.
Consolidated key figures
| EUR million | 7-9/ 2024 | 7-9/ 2023 | 1-9/ 2024 | 1-9/ 2023 | 1-12/ 2023 |
| Net sales | 79.8 | 81.1 | 372.7 | 373.5 | 495.9 |
| Operating profit (EBIT) | -12.2 | -9.0 | 14.8 | 0.5 | -5.3 |
| % of net sales | -15.3 | -11.1 | 4.0 | 0.1 | -1.1 |
| Operating profit (EBIT) before impairment | -12.2 | -9.0 | 15.5 | 4.0 | -0.7 |
| % of net sales | -15.3 | -11.1 | 4.2 | 1.1 | -0.1 |
| Result for the period | -11.3 | -7.3 | 9.7 | -3.3 | -8.2 |
| EBITDA | -3.2 | -0.1 | 39.7 | 27.7 | 29.2 |
| +/- Change in working capital | 15.9 | 6.8 | 29.6 | 10.2 | 5.4 |
| -net investments | 5.2 | 9.4 | 17.8 | 22.2 | 31.2 |
| Free cash flow before taxes | 7.5 | -2.7 | 51.5 | 15.6 | 3.4 |
| Gross investments | 9.7 | 9.6 | 25.2 | 25.1 | 40.2 |
| Return on invested capital %* | 2.1 | 2.6 | -1.3 | ||
| Return on invested capital % before impairment | 1.7 | 4.6 | -2.4 | ||
| Return on equity %* | 1.6 | -6.5 | -2.7 | ||
| Total assets | 717.3 | 701.9 | 737.3 | ||
| Total equity | 298.0 | 291.3 | 293.1 | ||
| Interest-bearing net debt | 117.4 | 135.2 | 144.4 | ||
| Equity-to-assets ratio % | 41.7 | 41.7 | 40.1 | ||
| Interest-bearing net debt/EBITDA | 2.9 | 3.7 | 4.9 | ||
| Gearing % | 39.4 | 46.4 | 49.3 | ||
| Average number of employees | 830 | 950 | 936 | ||
| *) Previous 12 months |
For further information, please contact:
- Pekka Tennilä, CEO, Neova, tel. +358 40 821 5302
- Hannu Nyman, CFO, Neova, tel. +358 50 306 9913
- Ahti Martikainen, Director of communications and Public Affairs, Neova, tel. +358 40 680 4723