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Neova Interim Report January–March 2024

A strong start to the year for the Group

Neova Group’s net sales, operating margin and operating profit grew in the first quarter. The results of cost savings programmes were reflected in improved profitability of operations.

January–March 2024 in brief:

  • The Group’s net sales amounted to EUR 155.3 million (EUR 146.8 million).
  • The operating margin (EBITDA) was EUR 26.9 million (EUR 10.4 million), or 17.4% (7.1%) of net sales.
  • Adjusted EBITDA was EUR 28.2 million (EUR 14.7 million). EBITDA included a total of -1.3 million (-4.3) of non-recurring items relating to efficiency improvement measures.
  • Operating profit was EUR 21.3 million (EUR 1.4 million), or 13.7% (1.0%) of net sales, including EUR -1.3 million (EUR -7.8 million) in non-recurring items that were mainly related to the restructuring of operations.
  • Free cash flow before taxes was EUR 29.1 million (EUR 5.7 million).
  • Gross investments totalled EUR 5.7 million (EUR 7.6 million).
  • Earnings per share were EUR 668.6 (EUR -94.2).
  • The ratio of interest-bearing net debt to EBITDA was 2.7 (4.0)
  • Return on invested capital (previous 12 months): 3.3 (3.8)

Figures in brackets refer to the corresponding period in 2023 unless otherwise stated.

CEO Pekka Tennilä:

A strong start to the year for the Group

Neova Group’s net sales, operating margin and operating profit grew in the first quarter. Net sales in the January–March period amounted to EUR 155.3 million (EUR 146.8 million in January–March 2023). Kekkilä-BVB’s net sales grew by a little over one per cent, and Neova Terra’s net sales grew by 12 per cent. Fuel demand was significantly higher than in the comparison year, despite the cold weather at the start of the year. The spring’s political strikes and the resulting closure of Finnish ports made horticultural peat, growing media and activated carbon more difficult to export from Finland to global markets.

Neova Group carried out several cost savings programmes in 2023. Last year, Kekkilä-BVB rationalised its production structure by closing down two growing media factories and optimising its logistics. The new operating model also made the organisation lighter and improved operational efficiency. These measures are now reflected in a significant improvement in the profitability of operations. The Group’s adjusted operating margin (EBITDA) was EUR 28.2 million (EUR 14.7 million). Kekkilä-BVB’s adjusted operating margin was EUR 15.9 million (EUR 6.4 million). The improved operating margin was in particular due to sales growth in the Central Europe business area and better cost management in the entire segment. Neova Terra’s adjusted operating margin was EUR 13.4 million (EUR 9.6 million). The positive development of the operating margin was supported by fuel demand and the security of supply stockpiling of energy peat.

The Novactor activated carbon production, included in the Neova Terra segment, is off to a good start. The quality of the activated carbon is even higher than expected, and demand is also good. In Neova’s new projects, both biostimulants and animal feed materials have advanced to the commercialisation phase. The sales and marketing of peat-based biostimulant has started in Spain. The latest cultivation tests yielded results such as a 24% increase in highbush blueberry harvests using the biostimulant marketed under the NeoCore brand, compared with the reference cultivation using the same irrigation and fertilisation without the biostimulant. Neova is to start production of peat-based products suitable for animal feed for Hankkija. The production will be started this year at a pilot scale at Neova’s Ilomantsi production plant. 

Neova Group has clarified its management model and the segmentation of its financial reporting

In the first quarter, Neova Group’s management model was clarified, and its businesses were divided into two divisions, which are more independent than before. Kekkilä-BVB serves professional and amateur growers and landscapers through an organisation based on geographical regions, and is responsible for the sales animal bedding material and horticultural raw material to external customers. The Kekkilä-BVB division is led by Neova Oy’s CEO Pekka Tennilä.

The Neova Terra division is responsible for the peat production in Finland, Sweden and Estonia, and for the sales of energy peat to energy customers. The division is also responsible for the cultivation of peat, reed canary grass and other products required for high added-value products for the needs of the Group’s internal customers, as well as real estate development, the energy pellet business, the activated carbon business, and the product development and commercialisation of new products based on organic wetland biomass. Neova Terra is led by Deputy CEO Markus Tykkyläinen from 1 March 2024.

Towards the 2024 season

The first quarter gave 2024 a good start, but the quarter cannot be assumed to be directly indicative of the entire year’s profit performance.

Kekkilä-BVB’s most important sales months are still ahead. We believe that the professional grower market’s demand is recovering after a consistent downward trend for many quarters, but the success of seasonal sales also depends on the spring weather, as shown by the previous year.

The spring has been cold, and the start of peat production is late in all regions except Estonia. The success of the peat production season and the coming autumn’s temperatures will define much of Neova Terra’s financial success. Old energy peat stockpiles have now sold, so the energy peat harvest volumes and corresponding deliveries are based on volume commitments in commercial contracts concluded with energy companies this spring.

Outlook for 2024

During the current financial period, Kekkilä-BVB will invest in more efficient operations, an increase of its product portfolio, a profitable increase of its international sales and improvements in profitability.

For Neova Terra, the demand for energy peat as a fuel is expected to continue to decline. The demand for horticultural peat is also 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 million1–3/20241–3/20231–12/2023
Net sales155.3146.8495.9
Operating result (EBIT)21.31.4-5.3
% of net sales13.71.0-1.1
Operating result (EBIT) before impairment21.3-2.0-0.7
% of net sales13.7-1.4-0.1
Result for the period20.0-2.9-8.2
 Operating margin (EBITDA)26.910.429.2
+/- Change in working capital-0.9-12.15.4
   – Net investments3.17.431.2
Free cash flow before taxes29.15.73.4
Gross investments5.77.640.2
Return on invested capital % *3.33.8-1.3
Return on invested capital % before impairment *3.05.8-2.4
Return on equity % *4.92.5-2.7
Total assets716.5740.9737.3
Total equity311.9303.5293.1
Interest-bearing net debt121.1149.6144.4
Equity-to-assets ratio %**43.741.140.1
Interest-bearing net debt/EBITDA2.74.04.9
Gearing %38.849.349.3
Average number of employees844940936
*) 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

Interim report in its entirety