NEO INDUSTRIAL PLC: TURNOVER LOWER THAN PREVIOUS YEAR,

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NEO INDUSTRIAL PLC: TURNOVER LOWER THAN PREVIOUS YEAR, OPERATING RESULT IN ACCORDANCE WITH FINANCIAL GUIDANCE

NEO INDUSTRIAL PLC           FINANCIAL STATEMENT RELEASE    12 February 2018 at 10.50 am

NEO INDUSTRIAL PLC: TURNOVER LOWER THAN PREVIOUS YEAR, OPERATING RESULT IN ACCORDANCE WITH FINANCIAL GUIDANCE

January-December: - The Neo Industrial Group's turnover was EUR 103.8 million (110.9 million) - The operating result was EUR 1.0 (5.1) million. The costs affecting the comparability burdened the operating result by EUR 0.6 million and IAS 19 pension bookings increased personnel costs by EUR 0.6 million - The Cable segment's operating result was EUR 1.9 million (5.6 million). - The Group's result for the period was EUR -0.5 million (3.0 million) - ROI was 8.4 (25.4) percent

KEY FIGURES

  1-12/2018 1-12/2017
Turnover, EUR million 103,8 110,9
Operating result, EUR million 1,0 5,1
Operating result before change in the value of open customer derivatives 1,1 4,9
Result for the period, EUR million -0,5 3,0
Earnings per share, EUR -0,09 0,51
ROI, % 8,4 25,4
IAS 19 corrected Equity ratio, % 25,5 30,4

MANAGING DIRECTOR RALF SOHLSTRÖM: The weaker than expected demand for cables in July, which is normally the peak in cable sales, reduced turnover and operating profit from the previous year.

Due to the weak earnings trend in the early part of the year, Neo Industrial's subsidiary Reka Cables Ltd (“Reka Cables”) started a business development program in September with the objective of improving the company's competitiveness and profitability. To increase competitiveness and ensure profitability, Reka Cables is investing more and more in sales and product development.

As part of the business development program, Reka Cables improves its presence in the market by reorganizing domestic sales and establishing two new regional sales offices, with domestic sales currently centered at the company's Hyvinkää office.

Reka Cables also invests increasingly in product development and productivity improvement. In October, the company launched a new installation product family with higher fire performance classification, its main market areas being Finland and the Baltics. Reka Cables has also launched other new products in its main market area in the Nordic countries.

The good reputation of Reka Cables in the market together with sales and product development efforts create good opportunities for increasing market share in the future.

The fourth quarter operating result without items affecting comparability was EUR 0.3 million higher than previous year, which provides a good starting point for 2019.

The nature of Neo Industrial's business includes large variations between quarters and may differ from one year to another.

TURNOVER AND OPERATING RESULT The Neo Industrial Group’s turnover in 2018 was EUR 103.8 million (110.9 million). Its result for the full year was EUR -0.5 million (3.0 million).

The adoption of IFRS 15 as of January 1, 2018 partially changed the revenue recognition timing of Neo Industrial Group's turnover for cable accessories, cable drums. The effect of the change on turnover for 2018 was EUR 0.5 million and on the result EUR 0.4 million. The impact on the opening balance Equity was EUR - 0.9 million.

IFRS 9 Financial Instruments standard came into force on 1 January 2018. As a result of this standard, for customer-specific hedges, hedge accounting is used after January 1, 2018. In Hedge accounting the change in open customer-specific derivatives is recorded to equity via the comprehensive income. Previously, the changes were recorded through income statement. The handling of other hedges was not changed.

BALANCE SHEET AND FINANCING At the end of the financial year the interest-bearing liabilities were EUR 13.0 (9.8) million, of which other than finance lease liabilities were EUR 9.7 (6.2) million. In the end of the financial period the balance sheet total stood at EUR 46.3 million (43.2). During the year the value of the stocks was high, and money employed by stocks affected the liquidity from time to time.

In preparation for the 2019 peak season, the company agreed during the financial period on a new EUR 3 million limit loan. Limit loan was in full usage at the end 2018.

MAJOR EVENTS DURING THE FINANCIAL PERIOD In September, Neo Industrial Plc’s ("Neo Industrial" or "Company") subsidiary Reka Cables Ltd ("Reka Cables") received a significant contract for underground power cables of a total value of approximately EUR 7 million. The deliveries will be spread over the years 2019-2021. Underground power cables are used when building power grids that are not vulnerable to weather conditions.

In September 2018, Reka Cables launched a business development program aimed at developing the company's competitiveness and profitability. As part of the program, co-operation negotiations led to the dismissal of a total of 18 people from the company's Hyvinkää, Riihimäki and Keuruu locations. In addition, termination of fixed-term employment contracts and pension arrangements timed for 2019 will reduce the company's wage costs from 2019 onwards. The cost savings of the personnel reductions will be approximately EUR 0.7 million in 2019.

To increase competitiveness and ensure profitability, Reka Cables is investing increasingly in sales and product development. Reka Cables improves its presence in the market by reorganizing sales in Finland and establishing two new regional sales offices.

In October 2018, Reka Cables brought new installation cable products to market. Reka Cables invests in product development by focusing especially on the development of new Cca-compliant cables in accordance with the new construction regulations.

SEGMENTS Neo Industrial's business segment is Cable Industry.

CABLE SEGMENT

  H2/2018 H2/2017 Change 2018 2017 Change
Turnover, EUR million 49,2 52,9 -7,0 % 103,8 110,9 -6,4 %
Operating result, EUR million 0,5 1,8 -72,2 % 1,9 5,6 -66,1 %

The Cable segment’s turnover was EUR 103.8 million (110.9). Operating profit was EUR 1.9 million (5.6 million). The costs affecting comparability burdened the operating result by EUR 0.6 million. In addition, IAS 19 pension bookings increased personnel costs by EUR 0.6 (0.3) million.

In 2018, the sales volumes were lower than previous year in Reka Cables' main market, the Nordic countries. Sales volumes in other market areas also decreased from previous year.

The industry's key raw materials are copper, aluminum and plastics. At the beginning of the year the price of copper was EUR 5,967 and the price of aluminum was EUR 1,869 per tonne. At the end of the December 2018, the price of copper was EUR 5,206 and the price of aluminum EUR 1,632.

At its highest point, the daily price of copper during the review period was EUR 6,182 per tonne in June 2018, and at its lowest in September, at EUR 5,024. The price of aluminum has been at its highest in April 2018, when it was EUR 2,102 per tonne, and its lowest in April, when it was EUR 1,605.

In purchasing metals, partial price hedging is utilized through commodity derivatives.

Investments fulfilled, EUR 2.4 million (2.9 million in 2017) were mainly targeted at improving productivity. Also, maintenance investments were made.

Turnover for Nestor Cables Ltd, an associated company in the Cable segment, was EUR 36.0 million (29.4 million). The operating result was positive and higher than year before.  The company’s value on the consolidated balance sheet is zero and the result of the company is not included in the Group figures. The Group does not carry any liabilities regarding Nestor Cables Ltd. MAJOR EVENTS AFTER THE REVIEW PERIOD

According to the company, the sanctions imposed by the USA on Rusal ended in January 2019.

In February 2019, Reka Cables agreed on a new EUR 1.5 million short term working capital loan from related party.

RISKS AND UNCERTAINTY FACTORS Neo Industrial’s financial risks include currency, interest rate, commodity, liquidity, credit and investment risks. Financial risks and the related protection measures are described in more detail in notes to the financial statements. The company’s future risk factors are related to the business development of its portfolio companies. The uncertainty of the international economy and financial markets poses a risk to the Group’s financial arrangements. In the Cable segment, the most significant risks are related to market development, fluctuations of raw material prices and currencies as well as working capital management in various situations. During considerable seasonal changes, suppliers’ terms of payment effect significantly on the ability to ensure competitive delivery times through sufficient inventories. Also, operation models are being developed in order to balance out the effects of seasonal changes on the load rates of factories.

In the Cable Segment the key raw materials are metals (copper and aluminum) and plastics. In the metals purchases partial price hedging is used with the aid of commodity derivatives. Important with metals are the development of both the dollar-denominated price and the USD / EUR exchange rate. Partial price fixing is used with electricity.

The Group has carried out and is carrying out the simplifications of the Group structure with mergers. Tax authority has questioned the tax neutrality of the subsidiary merge carried out in 2015. Neo Industrial has filed for changes in its tax assessment notice. Neo Industrial has the opinion that the merge is universal succession and therefore tax neutral. The difference of opinion of the Neo Industrial and tax authority is EUR 1.2 million.

NEAR-TERM OUTLOOK For the financial year 2019, Neo Industrial's operating result without items affecting comparability is expected to increase from the year 2018.

DIVIDEND POLICY Neo Industrial aims to distribute at least 30 percent of its net earnings as dividends.

ANNUAL GENERAL MEETING 2019 Neo Industrial Plc's Annual General Meeting will be held in Helsinki on 28 March 2019 at 1.00 p.m. A separate invitation will be published on 28 February 2019.

DISCLOSURE PROCEDURE OF FINANCIAL REVIEW Neo Industrial follows the disclosure procedure enabled by Standard 5.2b published by the Finnish Financial Supervision Authority, and discloses relevant information related to its Financial Statement Release with this Stock Exchange Release. Neo Industrial's Financial Statement Release is attached to this release and is also available on company’s website at www.neoindustrial.fi.

Hyvinkää, 12 February 2019

Neo Industrial Plc Board of Directors

Further information: Ralf Sohlström, Managing Director, tel. +358 40 770 2720

www.neoindustrial.fi/en

Neo Industrial's strategy is to invest mainly in industrial companies with similar synergic benefits. The aim of investments is with active ownership to develop the purchased companies and establish additional value. Returns are sought through both dividend flow and an increase in value. Neo Industrial's class B shares are listed on the main list of NASDAQ Helsinki Stock Exchange. Neo Industrial's business segment is Cable Industry.

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