INTERIM REPORT - Cisionmb.cision.com/Main/4841/2120995/588693.pdf · JANUARY – SEPTEMBER 2016 ABOUT THE KÄHRS GROUP The Kährs company was founded in 1857 by Johan Kähr, who began

INTERIM REPORT

KÄHRS HOLDING AB (PUBL) QUARTER 3 | 2016

Net sales up 3 per cent quarter over quarter

Stable sales growth in the Nordics and Europe segments

Operating profit EBIT rose 7 per cent

2KÄHRS GROUP'S INTERIM REPORT JULY–SEPTEMBER | JANUARY–SEPTEMBER | 2016

THIRD QUARTER,

JULY – SEPTEMBER 2016

• Net sales totalled SEK 708 million (689), an increase of 3 per cent compared with the same period in 2015. The third quarter showed con-tinued good growth in the Nordics and Europe segments, while the Other Markets and Resilient Global segments were somewhat weaker. Organic sales growth was 4 per cent, including a currency impact (net) of SEK -9 million

• Operating profit before depreciation, amortisa-tion and non-recurring items (adjusted EBITDA) was SEK 81 million (78), corresponding to an operating margin of 11.4 per cent (11.3)

• Operating profit before non-recurring items (adjusted EBIT) for the third quarter increased by 7 per cent to SEK 59 million (55), corresponding to 8.3 per cent (8.0)

• Consolidated profit for the quarter was SEK 21 million (-15) and was primarily affected by an increase in operating profit and lower financing costs compared with the same period in 2015

KEY PERFORMANCE INDICATORS FOR THE GROUP

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015-Sep 2016

Net sales 708 689 2,158 2,057 2,724 2,825

Operating profit excl. depreciation (EBITDA) 72 68 225 224 269 270

Operating profit excl. depreciation (EBITDA), % 10.2% 9.9% 10.4% 10.9% 9.9% 9.6%

Operating profit excl. depreciation and non-recurring items (adjusted EBITDA) 81 78 241 231 314 324

Operating profit excl. depreciation and non-recurring items (adjusted EBITDA), % 11.4% 11.3% 11.2% 11.2% 11.5% 11.5%

Operating profit excl. non-recurring items (adjusted EBIT) 59 55 173 159 217 231

Operating profit excl. non-recurring items (adjusted EBIT), % 8.3% 8.0% 8.0% 7.7% 8.0% 8.2%

Operating profit, (EBIT) 50 46 157 152 172 177

Operating profit (EBIT), % 7.1% 6.7% 7.3% 7.4% 6.3% 6.3%

Profit for the period 21 -15 89 44 62 107

Profit for the period, % 3.0% -2.2% 4.1% 2.1% 2.3% 3.8%

Earnings per share before and after dilution, SEK 0.7 -0.5 3.0 1.5 2.0 3.6

Net cash flows from operating activities 72 13 57 38 183 202

Net debt 615 857 615 857 600 615

Equity ratio, % 22.5% 17.7% 22.5% 17.7% 18.0% 22.5%

Return on capital employed, % 18.9% 16.1% 18.9% 16.1% 21.1% 18.9%

OPERATING PROFIT UP 7 PER CENT TO SEK 59 MILLION OR 8.3 PER CENT

PERIOD

JANUARY – SEPTEMBER 2016

• Net sales for the period January – September amounted to SEK 2,158 million (2,057), an increase of SEK 101 million or 5 per cent compared with the previous year. Organic sales growth was 6 per cent

• Operating profit before depreciation, amortisa-tion and non-recurring items (adjusted EBITDA) for the period was SEK 241 million (231), corre-sponding to an operating margin of 11.2 per cent (11.2)

• Operating profit excluding non-recurring items (adjusted EBIT) for the period was SEK 173 million (159), corresponding to an operating margin of 8.0 per cent (7.7). For the period as a whole, profit improved by 9 per cent compared with the same period in 2015. The organic improvement in profit was SEK 10 million or 6 per cent

• Consolidated profit for the period was SEK 89 million (44), representing a doubling of profit compared with the previous year


We are well-positioned in our seven core markets to optimally balance the potential negative effects that can arise as a result of the prevailing uncertainty in the markets.

Kährs Group continued its stable sales and profitability growth in the third quarter. Most of our core markets performed well, and provided good balance for the markets that currently have a less favourable market situation. This meant that Group sales and profitability both continued to develop positively in the quarter with growth of 3 and 7 per cent, respectively.

Net sales for the quarter improved compared with last year, reaching SEK 708 million, an increase of 3 per cent. Sweden, Norway, the US and several large markets in Europe performed well, while the sales performance in Russia and Finland continued to be weak. The Group's product strategy is working well and our assessment is that we are gaining market share in several core markets. The Group’s resilient flooring had a slightly weaker third quarter than the same period last year. Total operating profit for the Group exclud-ing non-recurring items (adjusted EBIT) was SEK 59 million, SEK 4 million better than 2015 and an increase of 7 per cent.

In the Nordics segment we see continued strong sales growth in hardwood flooring in Sweden, which grew 12 per cent during the quarter. Stable market growth was driven by an active projects market and a high level of consumer sales. The sales trend in Norway was also favourable, where the middle and upper price segments showed the best performance. However, fluctuating oil prices continue to cause consider-able uncertainty regarding the future trend for the projects market, despite strong pent-up demand, mainly in western Norway. Sales in Finland were largely in line with last year, but there are signs of increased activity in the projects market.

In the Europe segment we saw good growth in most of the major markets where Kährs Group operates, including France, Switzerland and the UK. The segment grew by 5 per cent during the quarter. In Germany, however, where growth was only 1 per cent, we see a steadily growing projects market with a shift towards more exclusive 1-strip products. The UK market is good with sales growth of 7 per cent for the quarter. Switzerland, France, Spain and Czech Republic also showed favourable sales growth for hardwood flooring.

Sales in the Other Markets segment declined by 3 per cent during the quarter. The Russian market remained weak and sales dropped compared with the same period last year, despite a strengthening of the RUB against the SEK. Oil prices along with high interest rates and high inflation con-tinue to have a negative impact on both projects and con-sumer sales. In the US a strong underlying economy resulted in positive momentum in the flooring market, and despite slightly weaker than expected sales in the quarter, we are optimistic about the market moving forward.

The Resilient Global segment showed slower sales growth in the third quarter and decreased by 6 per cent. We saw the strongest sales growth in the US, which increased by over 20 per cent, while Finland and Sweden had a weaker performance than last year because of low market activity and delays in the projects market. Nevertheless, we continue to see great potential in this business through our strong environmental and quality profile, which is in demand in the market.

The implementation of our new business plan is ongoing and the initiatives relating to digitalization are of high pri-ority. The digitalization strategy is decided and the stra-tegic transformation is progressing as planned. We have identified the prioritized markets and see significant oppor-tunities strengthening our relations with customers and end consumers.

In general we continue to be reasonably optimistic about the remainder of 2016 and also for 2017. The equity mar-kets performed well during the autumn, with better than expected macro data from both Europe and the US. This trend, combined with the stimulus measures by the central banks, should have a positive impact on consumption in gen-eral. At the same time, however, there is uncertainty in the market due to external factors such as Brexit, the US pres-idential election and the rapid and large fluctuations in the currency markets. Nevertheless, we are well-positioned in our seven core markets to optimally balance the potential negative effects that can arise as a result of the prevailing uncertainty in the markets.

Christer PerssonPresident and CEO

CHIEF EXECUTIVE’S COMMENTS

CONTINUED STRONG PROFITABILITY GROWTH IN THE THIRD QUARTER OF 2016


KÄHRS INTERIM REPORT JANUARY – SEPTEMBER 2016

ABOUT THE KÄHRS GROUPThe Kährs company was founded in 1857 by Johan Kähr, who began to make wooden kitchen utensils; in 1919 AB Gustaf Kähr was formed with a focus on manufacturing hardwood floor-ing. In 2012 Kährs merged with Karelia-Upofloor and formed Kährs Group, a world-leading flooring company. The parent company, Kährs Holding AB, has its registered office in Nybro, Sweden. The consolidated financial statements include the subgroups AB Gustaf Kähr, Karelia-Upofloor Oy and Oak Norge AS. Headquarters are located in Malmö. The Group has approx-imately 1,600 employees and annual sales of EUR 300 million.

The Group’s main products are hardwood and resilient floor-ing for various applications and environments. The Group has global sales and the four operating segments are represented by three geographic segments for hardwood flooring, Nordics, Europe and Other Markets and one division for resilient floor-ing, Resilient Global. Production facilities are located in Sweden, Finland, Russia, Romania, Poland and Croatia (co-owned).

Chairman: Anders Wassberg

CEO: Christer Persson

MARKETGenerally speaking, the global flooring market continues to perform well, although there are major differences between the markets. In the European market we expect continued good market growth, with Sweden, the UK, Germany and Spain as examples of markets with a stable trend and strong momen-tum. The trend is expected to remain weak during the year in Finland and Russia, though some signs of improvement are visible in these markets. The US market continues to be stable and we expect strong growth in the coming years. However, external factors beyond our control, such as Brexit and the US presidential election, could change this market outlook.

In the Nordic region, the Swedish market demonstrated the strongest growth with an increase in demand from both new construction and the renovation market. We cannot see any signs of change in the market, though competition regarding prices is growing in the project business. In Norway, the market is buoyed by good consumer sales in the middle and upper price segments, while the projects market is weaker. There is a strong need for new construction in Oslo and western Norway, but the price of oil has so far dampened project-related

activities. In Finland, demand for hardwood flooring is low since the projects market remains weak. However, there are signs that the market is recovering as we see an increase in construction activity for multifamily housing, while single family homes remain at a low level.

Most markets in Central Europe are showing solid growth. In Germany, demand is generally good and we see the stron-gest growth in the projects market, where the proportion of 1-strip products continues to increase. The UK market remains favourable, with a strong focus on the projects market in London. We also see continued stable growth in several of the Group’s other markets in Europe, including France, Spain, and the Czech Republic. In Switzerland and Austria, however, we believe that the market is declining slightly and we can clearly see an increase in the pressure on prices from local suppliers who are trying to defend and capture market share.

The Russian market shows weak growth in the third quar-ter. We see a continued unstable market situation because of oil prices, high inflation and high interest rates, which have resulted in stagnation in the projects market and lower demand in the retail segment. The decline in the market for 2016 is estimated at 20 per cent compared with last year in local cur-rency and the weak market is expected to continue in 2017. The market situation in Russia is offset in part by developments in other countries in the region, as Kazakhstan and Ukraine.

In the US we see a robust underlying market with the stron-gest demand in the retail segment, which is around 50 per cent of the total hardwood flooring market. New construction has also begun to grow in several regions, with demand for hard-wood flooring driven mainly by the condo and rental flat seg-ment. The US market as a whole is expected to grow by 6-7 per cent in 2016.

For the resilient flooring market we continue to see varying trends in our core markets. In Finland, the market is weak, but we see that the number of renovation projects is increasing. The Swedish market is stable and is driven primarily by demand from the healthcare sector. In Germany the projects market is beginning to recover after a relatively weak start in the first half and interest in PVC-free flooring is strong. Commercial con-struction in the US is increasing and many construction proj-ects that were postponed are now starting up. The strongest growth is expected in the healthcare sector and schools.


NET SALES BY SEGMENT QUARTER 3, 2016

NET SALESThird quarterTotal Group net sales amounted to SEK 708 million (689), an increase of SEK 19 million or 3 per cent compared with the third quarter of 2015. The increase in sales can be attributed to continued good growth in the Nordics and Europe seg-ments, while the Other Markets and Resilient Global seg-ments were somewhat weaker.

Calculated in local currencies, sales growth was 4 per cent, including a currency impact (net) of SEK -9 million.

Period January – September Net sales for the Group during the January to September period amounted to SEK 2,158 million (2,057), an increase of 5 per cent compared with the corresponding period in 2015. The Europe and Nordics segments showed the high-est growth rate of 10 per cent and 5 per cent, respectively.

Calculated in local currencies, organic growth was 6 per cent for January-September 2016.

NET SALES AND OPERATING PROFIT BY SEGMENTNordicsThe segment demonstrated an increase in sales of 7 per cent to a total of SEK 303 million (284) for the third quarter of the year. Sweden reported growth of 12 per cent compared with the third quarter of 2015 and the improvement can be attributed to continued general robust demand. Our overall product strategy delivers results and our assessment is that we are gaining market share. Sales in Norway rose 18 per cent, driven by good consumer sales in the middle and upper price segments. Finland reported a slightly negative trend for hardwood flooring and activities in the projects market were limited during the third quarter. For the January-

GROUP PERFORMANCE JULY–SEPTEMBER AND JANUARY–SEPTEMBER 2016

September period, net sales for the segment amounted to SEK 979 million (930), an increase of 5 per cent.Operating profit before non-recurring items (adjusted EBIT) for the quarter was SEK 37 million (25), corresponding to 12.2 per cent (8.8) and for the period as a whole SEK 101 million (85), or 10.3 per cent (9.1).

EuropeNet sales for the segment amounted to SEK 179 million (171) for the quarter, an increase of 5 per cent. All of the major countries in the Europe segment, including Germany, Switzerland, France and the UK, showed increased sales in the third quarter. In Germany, sales growth was only 1 per cent, but we see a steadily growing projects market with a clear shift to exclusive 1-strip products. The UK market continues to be robust and Kährs increased sales by 7 per cent for the quarter. The strongest growth rate was in the projects market, with a focus on London. Sales in France, Switzerland and the Czech Republic all increased by over 10 per cent for the quarter. For the January-September period, net sales for the segment amounted to SEK 550 million (500), an increase in sales of 10 per cent.

Operating profit before non-recurring items (adjusted EBIT) was SEK 21 million (18) in the third quarter, corre-sponding to an operating margin of 11.7 per cent (10.4) and an operating margin of SEK 56 million (36), or 10.2 per cent (7.1) for the period as a whole.

Other MarketsNet sales for Other Markets amounted to SEK 178 million (183) for the quarter, a decrease of 3 per cent. The two largest markets in the segment, Russia and the US, had different trends. The Russian market was weak and sales

Nordics 43%

Europe 25%

Other Markets 25%

Resilient Global 7%

NET SALES BY SEGMENT JANUARY-SEPTEMBER 2016

Nordics 45%

Europe 26%

Other Markets 22%

Resilient Global 7%


dropped by 20 per cent in local currency. A continued unsta-ble market situation because of oil prices, high inflation and high interest rates has resulted in stagnation in the projects market and lower demand in the retail segment. Meanwhile, in the US we see a strong underlying market with high demand in the retail segment and the projects market has also continued to show strong growth in several regions. For the January-September period, net sales for the segment amounted to SEK 475 million (479), a marginal decrease compared with the previous year.

Operating profit before non-recurring items (adjusted EBIT) was SEK 4 million (11), corresponding to an operating margin of 2.2 per cent (6.0) and an operating margin of SEK 7 million (29), or 1.5 per cent (6.1) for the period as a whole.

Resilient GlobalSales for Resilient Global, which account for about 7 per cent of consolidated net sales, amounted to SEK 48 million (51) for the third quarter, a decrease of 6 per cent. The largest markets in the Resilient Global segment – Finland, Sweden, the US and Germany – have continued to have varying market conditions in the third quarter. We saw the stron-gest sales growth in the US, which increased by over 20 per cent, while Finland, Sweden and Germany had a weaker performance than last year because of low market activity and delays in the projects market. For the period as a whole, sales totalled SEK 154 million (148), corresponding with an increase of 4 per cent.

Operating profit before non-recurring items (adjusted EBIT) was SEK -3 million (2), corresponding to an operating margin of -6.3 per cent (3.1) for the quarter and an operat-ing margin of SEK 9 million (10), or 5.8 per cent (6.5) for the period as a whole.

OPERATING PROFIT Third quarterOperating profit (EBIT) for the quarter amounted to SEK 50 million (46), a SEK 4 million improvement largely attribut-

able to higher sales. Operating profit excluding non-recur-ring items (adjusted EBIT) was SEK 59 million (55) or 8.3 per cent (8.0). Operating profit before depreciation, amortisa-tion, and non-recurring items (adjusted EBITDA) reached SEK 81 million (78), or 11.4 per cent (11.3). Profit for the quarter totalled SEK 21 million (-15).

The Group’s total depreciation and amortisation of prop-erty, plant and equipment for the third quarter amounted to SEK 22 million (23).

Period January – September Operating profit (EBIT) for the January to September period amounted to SEK 157 million (152), a 3 per cent improvement. Operating profit excluding non-recurring items (adjusted EBIT) was SEK 173 million (159), corresponding to an operat-ing margin of 8.0 per cent (7.7). For the period as a whole, adjusted EBIT increased by 9 per cent compared with the same period in 2015. Operating profit before deprecia-tion and amortisation, and excluding non-recurring items (adjusted EBITDA) was SEK 241 million (231), corresponding to an EBITDA margin of 11.2 per cent (11.2). Net profit for the period amounted to SEK 89 million (44). The improvement was mainly attributable to an improved operating profit and lower financial expenses.

The Group’s total depreciation and amortisation of prop-erty, plant and equipment for the period January-September amounted to SEK 67 million (71).

NET FINANCIAL EXPENSESThird quarterNet financial expenses amounted to SEK 21 million (66) for the third quarter of 2016. The positive deviation in the quar-ter of SEK 45 million relates to lower interest expense for external financing. Transaction costs for the Group's refi-nancing of bonds to traditional bank financing also had a negative impact on the third quarter of 2015.

NET SALES BY PRODUCT GROUP JANUARY–SEPTEMBER 2016

Hardwood flooring 87%

Resilient Flooring 7%

Other 6%

NET SALES BY PRODUCT GROUP QUARTER 3, 2016

Hardwood flooring 87%

Resilient Flooring 7%

Other 6%


Period January – September Net financial expenses amounted to SEK 43 million (100) for the period and the improvement of SEK 57 million can be attributed to lower interest expense for the company’s external financing and the refinancing costs that had a neg-ative impact on the third quarter of 2015.

TAX EXPENSETax expense for the third quarter of 2016 amounted to SEK 8 million (-5) and for the January to September period SEK 25 million (8).

CASH FLOW AND INVESTMENTSThird quarterOperating cash flow from operating activities was SEK 72 million (13). The improved operating profit, lower interest expense and the change in working capital explain the improvement in operating cash flow compared with the third quarter of 2015. Working capital decreased by SEK 8 million (-38) during the quarter. Nevertheless, net working capital was SEK 35 million higher as at 30 September compared with the same date in 2015, totalling SEK 842 million (807). More capital is tied up in inventories and trade receivables as at 30 September this year than at the corresponding point in time in 2015, but trade payables have also increased.

Investments for the quarter amounted to SEK 22 million (33).

Period January – September Operating cash flow from operating activities during the entire period amounted to SEK 57 million (38). Working capi-

tal increased by SEK 141 million during the period, compared with an increase of SEK 112 million for the same period in 2015.

Investments for the January to September period amounted to SEK 53 million (98).

FINANCIAL POSITION The Group’s total assets amounted to SEK 2,187 million as at 30 September 2016 (2,002 as at 31 December 2015) and the equity ratio was 22.5 per cent (18.0).

The Group’s net debt was SEK 615 million as at 30 September 2016, compared with SEK 600 million as at 31 December 2015. Net debt in relation to adjusted EBITDA was 1.9 times (1.9) as at 30 September, with the interest cover-age ratio 11.6 times (7.1).

The Group’s cash and cash equivalents as at 30 September 2016 was SEK 182 million, compared with SEK 179 million as at 31 December 2015. As at 30 September the Group utilised SEK 50 million of the existing RCF facility of SEK 100 million. The Group also utilised SEK 55 million of the existing CAPEX facility of SEK 100 million. Consequently, available liquidity for the Group is SEK 277 million as at 30 September 2016.

EMPLOYEES As at 30 September 2016 the Group had 1,645 employees, an increase of 96 compared with 31 December 2015 (1,549). This increase in personnel mainly relates to the newly opened production plant in Romania, which was completed at the end of 2015.

NET SALES OPERATING PROFIT EXCL. NON-RECURRING ITEMS (ADJ. EBIT)

Net sales

Net sales Rolling 12 months

Operating profit excl. non-recurring items

Operating profit excl. non-recurring items Rolling 12 months

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2013 2014 2015 2016

Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014 2015

Q3 Q1

2016

Q2 Q3

0

500

1 000

1 500

2 000

2 500

3 000

300

400

500

600

700

800

900

0

50

100

150

200

250

0

20

40

60

80

100

Qua

rter

Qua

rter


SEGMENT PERFORMANCE

NORDICS

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Segment revenue

External customers 303 284 979 930 1,225 1,274

Operating profit excl. non-recurring items (adj. EBIT) 37 25 101 85 101 117

Operating profit excl. non-recurring items (adj. EBIT), % 12.2% 8.8% 10.3% 9.1% 8.2% 9%

Operating profit (EBIT) 32 19 93 80 78 91


EUROPE

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Segment revenue

External customers 179 171 550 500 675 725


Operating profit excl. non-recurring items (adj. EBIT), % 11.7% 10.4% 10.2% 7.1% 9.6% 11.8%



RESILIENT GLOBAL

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Segment revenue


Operating profit excl. non-recurring items (adj. EBIT) -3 2 9 10 10 9

Operating profit excl. non-recurring items (adj. EBIT), % -6.3% 3.1% 5.8% 6.5% 5.2% 4.7%

Operating profit (EBIT) -3 5 9 13 7 3

Operating profit (EBIT), % -6.3% 9.2% 5.8% 8.6% 3.6% 1.7%

OTHER MARKETS

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Segment revenue



Operating profit excl. non-recurring items (adj. EBIT), % 2.2% 6.0% 1.5% 6.1% 6.5% 3.0%




NORDICS - 303 SEKm EUROPE - 179 SEKm

Sweden 62%

Norway 19%

Finland 13%

Other 6%

Germany 45%

UK 21%

Switzerland 11%

Other 23%

US 33%

Russia 32%

China 5%

Other 30%

Finland 40%

US 27%

Sweden 9%

Germany 11%

Other 13%

OTHER MARKETS - 178 SEKm

NET SALES PER SEGMENT AND MARKETJANUARY–SEPTEMBER 2016

RESILIENT GLOBAL - 48 SEKm


GENERAL INFORMATIONACCOUNTING PRINCIPLES 2016 This interim report is prepared in accordance with the Swedish Annual Accounts Act and IAS34, Interim Financial Reporting. For information regarding the accounting poli-cies applied, see the Consolidated Financial Statements for fiscal year 2015.

RELATED-PARTY TRANSACTIONS Transactions with related parties are priced in accordance with market terms and prices. Related parties refer to compa-nies over which Kährs Holding AB (publ) has a controlling or significant influence in terms of the operational and financial decisions. Related parties also include those companies and individuals, such as the board of directors and members of man-agement, who have the ability to control or exercise significant influence over the Group’s financial and operational decisions.

RISKS AND UNCERTAINTIES Kährs is a global company with operations in many countries and as such exposed to a number of commercial and financial risks. Accordingly, risk management is an important process for Kährs in its work to achieve established targets. Efficient risk management is an ongoing process conducted within the framework of business controlling, and is a continuing review of the operations and forward-looking assessments of the business. Kährs long-term risk exposure is not assumed to deviate from the inherent exposure associated with Kährs’ ongoing business operations.

PARENT COMPANY Net sales in the parent company for January to September 2016 totalled SEK 0 million (0) with a profit after tax of SEK 8

million (-46). The improvement in earnings in the parent com-pany is mainly related to lower financing costs. The parent company’s income statement and balance sheet are pre-sented on pages 16–17 in this interim report.

EVENTS AFTER BALANCE SHEET DATE Kährs Group appointed Torbjörn Clementz to serve as the new CFO of the Group as of 21 November and he will be part of Group Management. He succeeds Jonas Bäck, who will take on a different role within the company.

No other significant events in addition to those included in this report have occurred after the balance sheet date.

FINANCIAL REPORTING CALENDAR 2016-2017Kährs Holding AB (publ)’s interim reporting as well as its annual financial reports are available on the Kährs Group website www.kahrsgroup.com.

Reporting calendar:

Interim report Q3, 2016 11 November 2016

Year-end Report 2016 13 February 2017

Interim report Q1, 2017 12 May 2017

Interim report Q2, 2017 11 August 2017

Interim report Q3, 2017 13 November 2017

GOVERNING TEXT This interim report has been prepared in both Swedish and English. The Swedish text shall govern for all purposes and prevail in the event of any discrepancy between the versions.


Nybro, 11 November 2016KÄHRS HOLDING AB (PUBL)

The Board of Directors and the CEO certify that the interim report provides a true and fair overview of the oper-ations, financial position and results of the Parent Company and the Group and describes the material risks and

uncertainties faced by the Parent Company and the companies in the Group.

The information in this interim report is that which Kährs Holding AB (publ) is required to disclose under the Swedish Securities Market Act

and/or the Financial Instruments Trading Act. The information was submitted for publication at 3 p.m. CET on Friday 11 November 2016.

This interim report has not been reviewed by the company’s auditors.

Anders WassbergChairman

Jakob JakobssonEmployee representative

Stefan KarlssonEmployee representative

Eva LindqvistMember

Bertel Langenskiöld Member

Christer PerssonPresident and CEO

Sven-Gunnar SchoughMember

Hannu PaitulaMember

Carl Johan Falkenberg Member

Johanna Arantola-HattabMember

For further information, please contact:

Christer PerssonPresident and CEOPhone: +46 70 271 2014 Email: [email protected]

Address:

Kährs Holding AB (publ)Dunderbergsgatan 10382 28 NybroSwedenPhone: +46 481 460 00www.kahrsgroup.com

Corporate Identity number:556534-2481

Jonas BäckCFO Phone: +46 70 510 6143Email: [email protected]


CONSOLIDATED INCOME STATEMENT

SEKm noteJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Net sales 2 708 689 2,158 2,057 2,724 2,825

Cost of goods sold 3 -554 -550 -1,689 -1,627 -2,152 -2,214

Gross profit 154 139 469 430 572 611

Selling and distribution expenses 3 -71 -72 -227 -234 -317 -310

Administrative expenses 3 -31 -26 -80 -63 -99 -116

Other operating income 0 8 1 28 26 -1

Other operating expenses -1 -2 -5 -8 -7 -4

Share of results of associated companies -1 -1 -1 -1 -3 -3

Operating profit 2 50 46 157 152 172 177

Financial income -2 0 0 2 23 21

Financial expenses -19 -66 -43 -102 -120 -61

Profit before tax 29 -20 114 52 75 137

Income tax expense -8 5 -25 -8 -13 -30


Attributable to:

Shareholders of the parent company 21 -15 89 44 62 107

Non-controlling interests 0 0 0 0 0 0

Total 21 -15 89 44 62 107

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016


Other comprehensive income

Items that may be reclassified in the income statement:

Translation differences 16 -7 43 -11 -54 0

Other comprehensive income, net of tax 16 -7 43 -11 -54 0

Total comprehensive income for the period 37 -22 132 33 8 107

Attributable to:

Shareholders of the parent company 37 -22 132 33 8 107

Non-controlling interests 0 0 0 0 0 0

Total 37 -22 132 33 8 107

Earnings per share before and after dilution, SEK 0.7 -0.5 3.0 1.5 2.0 3.6

FINANCIAL STATEMENTS


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

SEKm note30 Sep

201630 Sep

201531 Dec

2015

ASSETS

Non-current assets

Intangible assets 1 1 1

Tangible assets 660 778 646

Investments in associated companies 7 11 7

Other financial assets 7 6 5

Deferred tax assets 87 99 87

Total non-current assets 762 895 746

Current assets

Inventories 713 673 683

Trade receivables 461 428 325

Derivatives - 6 4

Other current assets 69 62 65

Cash and cash equivalents 182 105 179

Total current assets 1,425 1,274 1,256

TOTAL ASSETS 2,187 2,169 2,002

EQUITY AND LIABILITIES

Equity

Share capital 0 0 0

Reserves -129 -129 -172

Retained earnings including profit for the period 620 512 531

Total 491 383 359

Attributable to non-controlling interests 0 1 0

Total equity 491 384 359

Non-current liabilities

Interest bearing liabilities 4 1,019 1,153 991

Provisions for pensions 1 1 1

Other provisions 2 3 2

Deferred tax liabilities 10 16 11

Total non-current liabilities 1,032 1,173 1,005

Current liabilities

Interest bearing liabilities 4 2 4 2

Other provisions 22 23 20

Trade payables 332 294 332

Income tax payable 17 7 1

Derivatives 13 5 6

Other current liabilities 278 279 277

Total current liabilities 664 612 638

TOTAL EQUITY AND LIABILITIES 2,187 2,169 2,002


CONSOLIDATED STATEMENT OF CASH FLOWS

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Operating activities

Profit before tax 29 -20 114 52 75 137

Other non cash items 43 87 110 149 141 102

Cash flow before interest and tax 72 67 224 201 216 239

Interest received 0 0 0 2 2 0

Interest paid -6 -8 -20 -36 -44 -28

Income tax paid -2 -8 -6 -17 -6 5

Net cash flow from operating activities beforechange in working capital 64 51 198 150 168 216

Change in working capital

Change in inventories 33 46 -30 18 9 -39

Change in operating receivables 7 -22 -135 -120 -17 -32

Change in operating liabilities -32 -62 24 -10 23 57


Investing activities

Investment in tangible assets -22 -33 -53 -98 -118 -73

Investment in financial assets -3 0 -3 0 -10 -13

Proceeds from sale of property, plant and equipment 0 0 0 0 9 9

Proceeds from sale of financial assets 0 0 0 0 1 1

Net cash flows from investing activities -25 -33 -56 -98 -118 -76

Financing activities

Change in bank overdraft facility - -51 - -18 -18 -

Proceeds from borrowings - 859 25 859 813 -21

Repayment of borrowings - -758 -25 -758 -758 -25

Net cash flows from financing activities - 50 - 83 37 -46

Cash flow for the period 47 30 1 23 102 80

Cash and cash equivalents at beginning of period 134 74 179 80 80 105

Exchange rate differences in cash and cash equivalents 1 1 2 2 -3 -3

Cash and cash equivalents at end of period 182 105 182 105 179 182


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SEKmShare

capital

Contributions of other

capital ReservesRetained earnings Total

Non- controlling

interestsTotal

equity

As at 1 January 2016 0 0 -172 531 359 0 359

Profit for the period - - - 89 89 0 89

Other comprehensive income - - 43 - 43 0 43

As at 30 September 2016 0 0 -129 620 491 0 491

SEKmShare

capital



Non- controlling

interestsTotal

equity

As at 1 January 2015 0 0 -118 469 351 0 351


Other comprehensive income - - -11 0 -11 0 -11

As at 30 September 2015 0 0 -129 512 383 1 384

SEKmShare

capital



Non- controlling

interestsTotal

equity

As at 1 January 2015 0 0 -118 469 351 0 351


Other comprehensive income - - -54 0 -54 0 -54

As at 31 December 2015 0 0 -172 531 359 0 359


PARENT COMPANY INCOME STATEMENT

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Net sales - - - - - -

Cost of goods sold - - - - - -

Gross profit - - - - - -

Selling and distribution expenses - - - - - -

Administrative expenses -2 -1 -5 -3 -3 -5

Other operating income 6 5 15 13 17 19

Other operating expenses -6 -5 -16 -15 -23 -24

Operating (EBIT) -2 -1 -6 -5 -9 -10

Financial income 13 8 45 26 47 66

Financial expenses -15 -44 -29 -80 -100 -49

Group contribution received - - - - 62 62

Profit excluding tax -4 -37 10 -59 0 69

Income tax expense 1 8 -2 13 0 -15

Profit for the period -3 -29 8 -46 0 54

Attributable to shareholders of the parent company -3 -29 8 -46 0 54

Total -3 -29 8 -46 0 54

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Profit for the period -3 -29 8 -46 0 54

Other comprehensive income

Items that may be reclassified in the income statement:

Translation differences - - - - - -

Other comprehensive income, net of tax - - - - - -

Total comprehensive income for the period -3 -29 8 -46 0 54

Attributable to shareholders of the parent company -3 -29 8 -46 0 54

Total -3 -29 8 -46 0 54

Earnings per share before and after dilution, SEK -0.1 -1.0 0.3 -1.5 0.0 1.8


PARENT COMPANY STATEMENT OF FINANCIAL POSITION

SEKm30 Sep

201630 Sep

201531 Dec

2015

ASSETS

Non-current assets

Financial assets 1,180 1,167 1,166

Deferred tax assets 14 30 16

Total non-current assets 1,194 1,197 1,182

Current assets

Other current assets 31 21 1

Cash and cash equivalents 132 0 105

Total current assets 163 21 106

TOTAL ASSETS 1,357 1,218 1,288

EQUITY AND LIABILITIES

Equity

Share capital 0 0 0

Retained earnings including profit for the period 311 257 302

Total 311 257 302

Non-controlling interests - - -

Total equity 311 257 302


Interest bearing liabilities 822 865 806

Total non-current liabilities 822 865 806

Current liabilities

Trade payables 8 5 11

Other current liabilities 216 91 169

Total current liabilities 224 96 180

TOTAL EQUITY AND LIABILITIES 1,357 1,218 1,288


NET SALES BY SEGMENT, EXTERNAL CUSTOMERS

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Nordics 303 284 979 930 1,225 1,274

Europe 179 171 550 500 675 725

Other Markets 178 183 475 479 630 626

Resilient Global 48 51 154 148 194 200

Net sales, Group, external customers 708 689 2,158 2,057 2,724 2,825

OPERATING PROFIT EXCL. NON-RECURRING ITEMS (ADJ. EBIT) BY SEGMENT

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Nordics 37 25 101 85 101 117

Europe 21 18 56 36 65 85

Other Markets 4 11 7 29 41 19

Resilient Global -3 2 9 10 10 9


OPERATING PROFIT (EBIT) PER SEGMENT

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Nordics 32 19 93 80 78 91

Europe 19 15 51 33 56 74

Other Markets 2 8 4 27 31 9

Resilient Global -3 5 9 13 7 3


NOTES

NOTE 1. ACCOUNTING POLICIES

This interim report is prepared in accordance with the Swedish Annual Accounts Act and IAS34, Interim Financial Reporting. For information regarding the accounting poli-cies applied, see the Consolidated Financial Statements for fiscal year 2015.

The preparation of the financial reports in accordance with IFRS requires management to make judgments and estimates, as well assumptions, which affect the application

The information provided below is provided from the per-spective of management, which means that it is presented in the manner used in internal reporting. Identification of reportable segments is based on internal reporting to the chief operating decision-maker. The Group has identified the CEO as the chief operating decision-maker. The Company’s management and reporting are based on operating profit by operating segment, i.e., geographic region for Hardwood

of the accounting principles and the carrying amounts in the income statement and statement of financial position. Estimates and assumptions are based on historical experi-ence and a number of factors that seem reasonable under current circumstances. The results of these estimates and assumptions are then used to determine the carrying amounts of assets and liabilities that otherwise are not clearly indicated by other sources. Actual outcomes may deviate from these estimates and judgments.

NOTE 2. SEGMENT

Flooring and global division for Resilient Flooring. The Group divides Hardwood Flooring into three geographic segments: Nordics, Europe and Other Markets. The largest markets in the Nordics are Sweden, Norway and Finland. In the Europe segment, the largest markets are Germany, the UK and Switzerland, and in the Other Markets segment, the largest markets are the US, Russia and China. Total assets/liabili-ties per segment are not reported to the chief operating decision-maker.


NOTE 3. NON-RECURRING ITEMS

NOTE 4. INTEREST BEARING LIABILITIES

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016


Production footprint changes -9 -5 -15 -3 -25 -37

Other non-recurring items 0 -4 -1 -4 -20 -17


SEKm30 Sep

201630 Sep

201531 Dec

2015


Shareholder loans 1 210 194 199

Finance lease 3 111 4

Loan Facility A 250 275 275

Loan Facility B 467 464 452

Financing costs 2 -16 -17 -19

Revolving Credit Facility (RCF) 50 71 25

Utilised investment credit 55 55 55

Other loans 0 0 0

Total non-current interest bearing liabilities 1,019 1,153 991

Current liabilities

Finance lease 1 3 1

Other loans 1 1 1

Total current interest bearing liabilities 2 4 2

Total interest bearing liabilities 1,021 1,157 993

1 Shareholder loans to Nanna II S.C.A., interest compounded annually 2 Accrued financing costs spread over the term of the loans


CONSOLIDATED KEY PERFORMANCE INDICATORS

SEKmJul-Sep

2016Jul-Sep

2015Jan-Sep

2016Jan-Sep

2015Jan-Dec

2015Oct 2015- Sep 2016

Net sales 708 689 2,158 2,057 2,724 2,825

Operating profit excl. depreciation and non-recurring items (adjusted EBITDA) 81 78 241 231 314 324

Operating profit excl. depreciation and non-recurring items (adjusted EBITDA), % 11.4% 11.3% 11.2% 11.2% 11.5% 11.5%


Operating profit excl. non-recurring items (adjusted EBIT), % 8.3% 8.0% 8.0% 7.7% 8.0% 8.2%




Profit for the period, % 3.0% -2.2% 4.1% 2.1% 2.3% 3.8%


Investments 22 33 53 98 118 73

Total cash flow 47 30 1 23 102 80

Total assets 2,187 2,169 2,187 2,169 2,002 2,187

Cash and cash equivalents at end of period 182 105 182 105 179 182

Net working capital 842 807 842 807 676 842

Net debt 615 857 615 857 600 615

Equity 491 384 491 384 359 491

Capital employed 825 1,051 825 1,051 799 825

Equity ratio, % 22.5% 17.7% 22.5% 17.7% 18.0% 22.5%

Return on equity, % 23.0% 12.0% 23.0% 12.0% 17.5% 23.0%

Return on capital employed, % 18.9% 16.1% 18.9% 16.1% 21.1% 18.9%

Interest coverage ratio, times 11.6 6.1 11.6 6.1 7.1 11.6

Net debt/EBITDA ratio, times 1.9 2.8 1.9 2.8 1.9 1.9

Number of employees at end of period 1,645 1,562 1,645 1,562 1,549 1,645


DEFINITIONS

KÄHRS HOLDING AB (PUBL)

Kährs Holding AB (publ) is a world-leading flooring manufacturer in hardwood and resilient flooring with a number of strong brands in its product portfolio, including Kährs, Karelia and Upofloor. The Company’s innovations have shaped the industry throughout history and Kährs Group is dedicated to providing the market with innovative new flooring solutions. Kährs Group, which delivers products to more than 70 countries, is the market leader in Sweden, Finland, Norway and Russia and holds a strong position in other key markets, such as the UK and Germany. The Group has approximately 1,600 employees and annual sales of EUR 300 million.

www.kahrsgroup.com

OPERATING PROFIT (EBIT)

Earnings before financial items and tax

OPERATING MARGIN, EBIT IN PER CENT

Calculated as EBIT above as a percentage of net sales for the period

OPERATING PROFIT EBITDA

Operating profit before depreciation/amortization

ADJUSTED EBIT

Operating profit excl. non-recurring items

ADJUSTED EBITDA

Operating profit before depreciation/amortization and non-recurring items

NET DEBT

Net interest-bearing debt (excluding shareholder loans) and interest-bearing assets, as well as cash and cash equivalents

NET SALES

The Group’s total income, after deduction of bonuses and discounts, VAT and other taxes related to sales

NET DEBT/EBITDA RATIO

Net debt excluding finan-cial leasing in relation to operating profit before depreciation/amortization and non-recurring items (Adjusted EBITDA)

NET WORKING CAPITAL

Inventories and trade receivables, less trade payables

RETURN ON EQUITY

Profit after tax for the period as a percentage of average equity excluding shares without controlling interests

RETURN ON CAPITAL EMPLOYED

Operating profit (EBIT) as a percentage of average capital employed. Capital employed refers to net debt plus share capital plus shareholder loans

EQUITY RATIO

Equity as a percentage of total assets

INTERIM REPORT - Cisionmb.cision.com/Main/4841/2120995/588693.pdf · JANUARY – SEPTEMBER 2016 ABOUT THE KÄHRS GROUP The Kährs company was founded in 1857 by Johan Kähr, who began

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