Neova Half-Year report January-June 2024
The Group’s profitability improved during the first half of the year
Neova Group’s net sales, EBITDA and operating profit increased in the first half of the year. The recovering global demand in professional growing market, continued favorable demand in the fuel market, and results of cost savings programmes enabled EBITDA to improve by more than 30 percent in the first half of the year.
April-June 2024 in brief:
- The Group’s net sales amounted to EUR 137.6 million (EUR 145.6 million).
- EBITDA was EUR 15.9 million (EUR 17.3 million), or 11.5% (11.9%) of net sales.
- Comparable EBITDA was EUR 15.6 million (EUR 18.3 million). EBITDA included a total of EUR 0.4 million (EUR -1.0 million) of non-recurring items.
- Operating profit was EUR 5.7 million (EUR 8.0 million), or 4.1% (5.5%) of net sales, including EUR 0.4 million (EUR -1.0 million) in non-recurring items.
- Free cash flow before taxes was EUR 21.0 million (EUR 5.7 million).
January-June 2024 in brief:
- The Group’s net sales amounted to EUR 292.9 million (EUR 292.4 million).
- EBITDA was EUR 42.8 million (EUR 27.7 million), or 14.6% (9.5%) of net sales.
- Comparable EBITDA was EUR 43.8 million (EUR 33.0 million). EBITDA included a total of EUR -1.0 million (EUR -5.3 million) of non-recurring items relating to efficiency improvement measures.
- Operating profit was EUR 27.0 million (EUR 9.4 million), or 9.2% (3.2%) of net sales, including EUR -1.0 million (EUR -8.8 million) in non-recurring items that were mainly related to the restructuring of operations.
- Free cash flow before taxes was EUR 43.9 million (EUR 43.6 million).
- Gross investments totaled EUR 15.5 million (EUR 15.5 million).
- Earnings per share were EUR 702.00 ( EUR 104.30).
- The ratio of interest-bearing net debt to EBITDA was 2.4 (3.4)
- Return on invested capital (%, previous 12months): 2.8 (3.2)
Figures in brackets to the corresponding period in 2023 unless otherwise stated.
CEO Pekka Tennilä:
”The second quarter was twofold for the Neova Group. Good sales and profitability development continued in Neova Terra segment, but Kekkilä-BVB sales and EBITDA decreased due to weak demand in the consumer segment in Central Europe and production challenges in Sweden.
Kekkilä-BVB’s net sales in the first quarter were slightly higher than in the same period last year, but decreased in the second quarter by almost 9 percent year-on-year. The overall decrease in net sales for the first half of the year was 4 percent. Kekkilä-BVB’s profitability improved clearly thanks to production optimization and cost-efficiency improvement measures. Due to seasonal variation, EBITDA in the second quarter decreased 28 percent year-on-year, but EBITDA for the first half of the year was 23 percent higher.
Comparing Kekkilä-BVB’s second quarter financials year-on-year, clear weather-related variation is evident. The season was shorter than usual in the Netherlands and Germany due to the cold and rainy spring. The fluctuation was particularly evident in sales in the consumer segment in Central Europe, but reflected partly also to the professional segment. In Sweden, we were unable to fully meet demand due to production challenges arising partly from timing of machinery and equipment investments. Business area Global’s sales and profitability increased well year-on-year.
In the second quarter, Kekkilä-BVB initiated measures to optimize production in Central Europe. The plan is to transfer substrate production from the Georgsdorf site to Grubbenvorst in the Netherlands and the production of the Hardenberg site to Drachten in the Netherlands.
In Neova Terra segment, net sales and profitability developed well throughout the first half of the year. Neova Terra’s net sales increased by more than 10 percent in the second quarter year-on-year and more than 11 percent during the first half of the year. EBITDA improved by almost 25 percent in the second quarter and by almost 38 percent in the first half of the year.
As in the first quarter, profitability in the fuel markets was strong in April-June. Many customers are preparing for the upcoming heating season in time. In addition to demand, this was reflected in sales prices in the solid fuels market. Neova Terra was able to increase its net sales and EBITDA during both first two quarters despite the fact that the sales volume of energy peat decreased from projected and sale of Turenki pellet plant at the beginning of the year.
The ramp-up of Neova’s Novactor activated carbon production plant in Ilomantsi was successful after seasonal maintenance shutdown. Production has stabilised at almost full capacity and the quality has been good. The aim is to operate the plant continuously until the maintenance shutdown in July 2025.
In Neova Terra’s new businesses, the marketing of biostimulants has started in Spain under Neova’s own NeoCore brand. In the second quarter, Neova and Hankkija announced an agreement that Neova will start production of peat-based animal feed raw material at the Ilomantsi pellet plant.
Peat harvesting season has progressed normally in Finland and Baltics. In Sweden, exceptionally unstable weather in southern Sweden has slowed down harvesting. Neova increased the cultivation area for reed canary grass by 600 hectares, bringing the total area to 1,600 hectares. Reed canary grass is mainly grown in peat production areas that have been discontinued and it is used as a renewable raw material in various growing media products.
Sustainability is at the heart of Neova Group’s strategy and a key part of business development. One concrete indicator is the positive development of accident frequency for several years in a row.
Going forward, Neova Group expects its full-year result to improve from last year. Net sales in both divisions will focus on the first half of the year, so sales and profitability in the second half of the year will be lower than in the first half of the 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.
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 | 4-6/2024 | 4-6/2023 | 1-6/2024 | 1-6/2023 | 1-12/2023 |
| Net sales | 137.6 | 145.6 | 292.9 | 292.4 | 495.9 |
| Operating profit (EBIT) | 5.7 | 8.0 | 27.0 | 9.4 | -5.3 |
| % of net sales | 4.1 | 5.5 | 9.2 | 3.2 | -1.1 |
| Operating profit (EBIT) before impairment | 6.3 | 8.1 | 27.7 | 13.0 | -0.7 |
| % of net sales | 4.6 | 5.6 | 9.4 | 4.4 | -0.1 |
| Result for the period | 1.0 | 5.9 | 21.0 | 3.2 | -8.2 |
| EBITDA | 15.9 | 17.3 | 42.8 | 27.7 | 29.2 |
| +/- Change in working capital | 14.7 | 15.5 | 13.7 | 3.1 | 5.4 |
| -net investments | 9.6 | 7.4 | 12.7 | 12.6 | 31.2 |
| Free cash flow before taxes | 21.0 | 5.7 | 43.9 | 43.6 | 3.4 |
| Gross investments | 9.8 | 7.6 | 15.5 | 15.5 | 40.2 |
| Return on invested capital %* | 2.8 | 3.2 | -1.3 | ||
| Return on invested capital % before impairment | 2.4 | 5.1 | -2.4 | ||
| Return on equity %* | 2.9 | 1.0 | -2.7 | ||
| Total assets | 713.8 | 726.8 | 737.3 | ||
| Total equity | 309.4 | 300.0 | 293.1 | ||
| Interest-bearing net debt | 107.3 | 132.3 | 144.4 | ||
| Equity-to-assets ratio %* | 43.5 | 41.0 | 40.1 | ||
| Interest-bearing net debt/EBITDA | 2.4 | 3.4 | 4.9 | ||
| Gearing % | 34.7 | 44.1 | 49.3 | ||
| Average number of employees | 839 | 952 | 936 | ||
| *) Previous 12 months |