Operating revenues and results
Operating revenues increased by 9.8 per cent compared to the previous year, including acquisitions. The operating result increased by 5.5 per cent. EBITDA, which doesn't include impairment and loss through the sale of fixed assets, increased by 13.0 per cent compared to 2014. Overall delivery volumes in 2015 were higher than the preceding year, but at lower prices. For the sawlog-consuming units reduced market prices for sawn timber products, chip and fibre products has partly been compensated by lower prices on sawn timber.
The inventory estimates, which are prepared according to the FIFO principle, are reviewed regularly to correct for developments in raw material costs. Along with an update of real value assessments of inventory, this formed the basis for price adjustments totalling NOK -45.6 million in 2015 and NOK 48.6 million in 2014. The items do not have any impact on cash flow.
The internal improvement work and restructuring that has been given high priority throughout 2015 is resource-intensive, but has yielded good results.
2015 has been the first year in a three-year plan to bring the Group's profitability up to the targeted level. Work will therefore proceed in the same manner in 2016 and 2017.
The result for 2015 has been charged with impairment and loss through the sale of fixed assets totalling NOK 54.1 million. The item is in its entirety related to the sale and discontinuation of operations at Moelven Nössemark Trä AB. The property, including production equipment and movable property was sold in December.
In connection with follow-up of the project portfolio in the Electrical Installations business, in 2015 a provision has been recognised for possible losses totalling NOK 40 million. The corresponding provision in 2014 comprised NOK 9 million.
In the course of the autumn of 2015 the Group's remaining defined-benefit pension schemes in Norway were converted to defined-contribution pension schemes. The change resulted in a positive non-recurring effect on the operating result of NOK 26.5 million.
In 2014 the operating result for the fourth quarter and the year as a whole saw positive effect from the recognition of reimbursements from group health insurance plans in Sweden totalling NOK 6.7 million.
Net financial expenses excluding changes in the value of financial instruments were somewhat higher in 2015 than in 2014. Net interest-bearing debt has been lower throughout 2015, but the overall borrowing cost has been higher following refinancing carried out in mid-2014. The Group employs financial instruments to hedge foreign exchange rates, interest rates and power prices. Non-cash items associated with this totalled NOK 5.6 million (NOK -30.4 million) The market value of both currency and interest hedges improved compared to the previous year, while falling energy prices entailed a negative development for the power contracts.
årsberetning timber tabell 1 E
In market terms the start of 2015 was characterized by some uncertainty and a wait-and-see attitude among customers in the international market for sawn timber products. Combined with high producer stocks this contributed to falling prices, particularly for pine products. This development continued for large parts of the year, and gradually spread from its origin in the export markets in Europe, the Middle East and North Africa, and into the Swedish domestic market. However, in the course of the fourth quarter there was a certain positive development for spruce products, while the declining trend for pine products levelled off.
The underlying demand was satisfactory throughout 2015, despite difficult financial conditions in certain export markets in the Middle East and North Africa making export to these markets more resource-intensive than usual.
Weak exchange rates for both Swedish krona and Norwegian kroner have contributed to reduce the price drop in these home currencies, while also maintaining competitiveness in export markets to a certain extent. For the year as a whole delivery volumes were higher than in 2014, but at somewhat lower prices.
Access to raw material has been satisfactory, and the prices for sawlogs were somewhat lower than in 2014. Overall the prices for chip and fibre products were also somewhat lower than in the previous year. Due to price developments, the profits have been charged with price adjustments to inventories totalling NOK -23.0 million The corresponding adjustment in 2014 had a positive effect of NOK 17.2 million.
Although several units can boast good results as a consequence of internal improvement work, too many units remain with excess units costs. The ongoing improvement work continues unabated to reduce unit costs and bring the companies with poor earnings up to an acceptable profitability level.
At the end of the year an agreement was reached with the Vida group for the sale of the property, production equipment and movable property from Moelven Nössemark Trä AB. All production activity in the company was discontinued in the fourth quarter, and the transaction was completed on 30 December. The accumulated operating result for 2015 has been charged with impairment and loss through the sale of fixed assets totalling NOK 54.1 million.
The conversion of the remaining defined-benefit pension schemes in Norway to defined-contribution pension schemes provided a positive non-recurring effect on the operating result of NOK 2.1 million in 2015. In 2014 the operating result has seen a positive effect from the recognition of reimbursements from group health insurance plans in Sweden totalling NOK 3.4 million.
årsberetning wood tabell 2 E
Market activities in 2015 were satisfactory in both Sweden and Norway, and complied with the normal seasonal variations throughout the year. In Denmark the organization is tailored according to market activities, which have been at a stable low level.
For the division overall delivery volumes were higher than in 2014, but at prices that were somewhat lower in total.
Several units saw good progress in 2015 as a result of the ongoing improvement work. This work continues unabated in the entire division in order to maintain competitiveness and to bring the remaining units with poor earnings up to an acceptable profitability level. In addition to operational improvements, the Wood division has had good success with its HSE work. In the course of 2015 the number of injuries per million worked hours (LTI) has dropped from 18.2 to 8.9.
For the division's planing mills, who use sawn timber products as a raw material, raw material costs for the year as a whole were on a par with 2014.
For the division's sawlog-consuming units access to sawlogs was satisfactory in 2015 and prices were somewhat lower. Overall, the prices for chip and fibre products were also somewhat lower. Due to price developments, the profits for the quarter have been charged with price adjustments to inventories of NOK 22.6 million (31.4).
The conversion of the remaining defined-benefit pension schemes in Norway to defined-contribution pension schemes provided a positive non-recurring effect on the operating result of NOK 4.6 million in 2015. In 2014 the operating result has seen a positive effect from the recognition of reimbursements from group health insurance plans in Sweden totalling NOK 1.3 million.
Following progress for all business areas, both revenue and operating results increased compared to the same period the previous year for the division as a whole. At the end of the quarter the order backlog was NOK 272 million higher that for the same period the previous year. The conversion of the remaining defined-benefit pension schemes in Norway to defined-contribution pension schemes provided a positive non-recurring effect on the operating result of NOK 17.2 million. In 2014 the operating result has seen a positive effect from the recognition of reimbursements from group health insurance plans in Sweden totalling NOK 2.0 million.
In 2015 the glulam business in Norway had a satisfactory activity level in both standard glulam and projects, in a market where competition from foreign players has declined somewhat due to the currency situation. For the business in Sweden activity levels were below par for the first six months, but positive developments in the second half of the year and an increasing market share resulted in a satisfactory level at year end.
It is primarily standard glulam for small buildings, but also the project market that have picked up compared to the previous year. In terms of volume, deliveries to the Swedish market were among the highest ever in the year's final quarter. Operations in Sweden have, following unsatisfactory results in 2014, carried out restructuring and rationalization measures, and had at year end improved profitability significantly compared to the situation a year previously. The full effect of the recently implemented measures will however not be achieved until the first quarter of 2016.
Besides obligations related to the completion of older, long-term projects, the Electrical Installations business has been restructured in 2015. In the core business area of the restructured part of the Electrical Installations business, i.e. smaller projects and service assignments, activity levels were good in 2015 and results developed satisfactorily through the year. The order backlog at the end of 2015 was good. For the part of the company responsible for the completion of older, larger projects, a further devaluation of the project portfolio was required. The 2015 result has been charged with a total of NOK 40.0 million following valuation allowances of NOK 6.0 million in the first quarter, NOK 22.0 million in the second quarter and NOK 12.0 million in the fourth quarter.
For the Building Module business in Sweden market activities and new orders were very good throughout 2015. The 2015 result was the best recorded. The main reasons are an increased share of projects with a high level of standardisation, as well as improved factory productivity.
On the market for module based buildings in Norway activity was somewhat better than in 2014 in the first three quarter, but dropped back to the level of a year previously in the final quarter. The combined activity for Moelven's module production in Norway increased as a result of the acquisition of module manufacturer Hedalm AS at Hjellum in Hamar municipality. The transaction was completed on 1 October.
The company continues to operate as an independent company, coordinated with other module production in the Group, under the name Moelven Byggmodul Hjellum AS. The acquisition provides the Group with greater specialization, capacity and ability to deliver large orders in the short term in all three segments in module operations – a) construction, b) projects, and c) housing. The acquisition thus strengthens the Group's position as the leading module manufacturer in the Nordic region. At the end of 2015 a number of measures were ongoing to streamline production and cultivate the production concepts according to plant. This will be completed in the first quarter of 2016. All Norwegian module production for housing purposes will take place in the factory at Hjellum, while other modules will be produced in Moelv.
For the Modular System Interiors companies, the level of activity for new construction was good in the Swedish part of the business, especially in the major cities of Stockholm, Gothenburg and Malmø. The renovation and remodelling market had a stable and high level of activity throughout the quarter.
Market activities in Norway were, despite some improvement in central areas of eastern Norway, still declining compared to 2014. The decline is significant in south-western Norway, and particularly applies to new buildings to a greater extent than the renovation, conversion and extension market, although activities have also declined somewhat in this segment too.
årsberetning øvrige tabell 4 E
Fluctuations in operating revenues within the area of Other businesses are largely due to fluctuations in the level of activity within timber supply and sales of chips and energy products. The main activity is internal sales, which do not materially affect the results within the business area. In order to safeguard the supply of timber and market opportunities for wood chip and energy products in regions without local demand for these products, train solutions have been established for transport. The arrangement entails increased external sales due to pulp wood now being purchased and subsequently sold externally. The business is based on fixed agreements on both the customer and supplier sides, and the risk is limited.
The result for 2015 includes a positive net result of NOK 5.0 million from badwill related to acquisitions and the elimination of internal profit from inventory. In addition there is a positive non-recurring effect of NOK 3.5 million as a result of the group's remaining defined-benefit pension schemes in Norway being converted to defined contribution pension schemes. A provision for 18 months' salary for the former CEO was charged to the operating profit for 2014 in accordance with the guidelines described in note 28 in the consolidated financial statements.