Koskisen Corporation
BOARD OF DIRECTORS' REPORT AND FINANCIAL STATEMENTS
1 January - 31 December 2022
(Unofficial translation of Finnish original)
Name or other identifier of the reporting entity Koskisen Corporation
Description of the change in the name or other identifier of the reporting entity after the end of the previous reporting period no changes
Domicile of the entity Kärkölä
Legal form of the entity Public limited liability company
Home state Finland
Registered address of the entity Tehdastie 2, 16600 Järvelä
Principal place of business Kärkölä
Description of the nature and main activities of the entity Wood sawing, planing and impregnation
Name of the parent company Koskisen Corporation
Name of the parent company of the entire Group Koskisen Corporation
Koskisen Corporation, Group
The Report of the Board of Directors and Financial Statements 2022
Jan 1 - Dec 31, 2022
Table of Contents
The report of the Board of Directors
Calculation formulas for key figures
Reconciliation of alternative performance measures
Consolidated Financial Statements (IFRS)
Consolidated statement of comprehensive Income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the Consolidated Financial Statements
1. General information and basis of preparation
2. Segment information and revenue
3. Financial risk and capital management
4. Other operating income
5. Materials and services
6. Employee benefit expenses
7. Share-based incentives
8. Depreciation, amortisation and impairment
9. Other operating expenses
10. Finance income and expenses
11. Income tax
12. Property, plant and equipment
13. Forest assets
14. Leases
15. Intangible assets
16. Inventories
17. Other receivables
18. Equity
19. Earnings per share
20. Financial assets and liabilities
21. Provisions
22. Other payables
23. Group structure
24. Related party transactions
25. Contingent liabilities and commitments
26. New standards
27. Events after the balance sheet date
Parent company's Financial Statements (FAS)
Income statement
Balance sheet
Statement of cash flows
Notes to the financial statements of parent company
Signatures
List of records and materials
Auditor´s report
Independent Auditor’s Reasonable Assurance Report on Koskisen Oyj’s ESEF Financial Statements
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Koskisen Corporation, Group
The report of the Board of Directors
Koskisen is a Finnish wood processing company with more than one hundred years of operating history. The main raw material used by Koskisen in its production is wood, which is processed by Koskisen into, for example, sawn goods, plywood and chipboard.
Koskisen has two business segments: Sawn Timber Industry and Panel Industry. The Sawn Timber Industry business segment produces sawn and further processed timber and the Panel Industry business segment produces birch plywood, thin plywood, veneers, chipboards and interior solutions for light and heavy commercial vehicles under the Kore brand. Koskisen’s Wood Procurement function is part of the Sawn Timber Industry business segment. The Wood Procurement function is responsible for procuring wood for Koskisen’s own production facilities, delivers residues from Koskisen’s own production for bioenergy production to power plants located at Koskisen’s production facilities owned and operated by Loimua Oy and to several other nearby power plants, as well as supplies raw material (chips and fibre wood) to paper and pulp manufacturers.
Koskisen’s production facilities are located in Järvelä and Hirvensalmi, Finland, and Toporów, Poland. Koskisen is currently building a new wood processing unit in Järvelä, Finland, where production is expected to begin in stages during 2023 and 2024.
The company's shares are listed on the main list of Nasdaq Helsinki Oy from 1 December 2022.
Economic development
The Group’s revenue for January–December 2022 increased and amounted to EUR 317.7 (311.5) million. In the Sawmill Industry, the decrease in revenue was especially due to reduced sales volumes. In the Panel Industry, revenue was increased especially by the favourable development of sales prices and volumes of plywood products.
Adjusted EBITDA improved and amounted to EUR 66.6 (62.3) million. The improvement in adjusted EBITDA was mainly due to the better profitability of the Panel industry compared to the comparison period. The prices of raw materials were at a higher level than in the comparison period.
Operating profit amounted to EUR 58.2 (52.7) million. Depreciation, amortisation and impairment amounted to EUR 8.1 (9.5) million. Profit before income tax amounted to EUR 57.8 (47.9) million and income tax for the period to EUR 11.8 (9.4) million. The profit for the financial period amounted to EUR 46.0 (38.5) million and earnings per share was EUR 2.48 (2.32).
Segments
The revenue of the Sawmill Industry segment was EUR 165.4 (188.0) million and the EBITDA EUR 41.6 (50.7) million. The revenue of the Panel Industry segment was EUR 152.1 (123.3) million and the EBITDA EUR 29.3 (14.1) million.
Balance sheet, cash flow and financing
At the end of the review period, Koskisen’s equity ratio was 52.7 (29.5) per cent and gearing was -21.0 (57.9) per cent.
Cash flow from operating activities for January–December amounted to EUR 47.2 (48.8) million. The impact of the change in working capital amounted to EUR 12.3 (-6.1) million. Cash flow from financing activities amounted to EUR 15.1 (-6.3) million. Cash flow from investment activities amounted to EUR -18.4 (-19.6) million.
Interest-bearing liabilities at the end of the period amounted to EUR 56.0 (74.6) million and liquid assets to EUR 74.5 (30.5) million. Interest-bearing net liabilities amounted to EUR -28.5 (34.1) million. Koskisen entered into a new financing agreement and the loan amount of the new financing agreement was EUR 14 million less than the loan amount of the old financing agreement. Koskisen paid interest on the capital loans due during the entire loan period amounting to EUR 5.8 million in June and repaid the capital loans of EUR 7.0 million at the end of the year.
Koskisen’s liquidity has remained strong. At the end of the review period, available liquidity amounted to EUR 84.4 (40.5) million, comprising cash and cash equivalents of EUR 74.5 (30.5) million and fund investments of EUR 9.9 (10.0) million.
Key figures
EUR million 2022 2021 0
Revenue 317.7 311.5 2
EBITDA 66.3 62.2 6.5
EBITDA, % 20.9 20
Adjusted EBITDA 66.6 62.3 7
Adjusted EBITDA, % 21 20
Operating profit (EBIT) 58.2 52.7 10.4
Operating profit (EBIT), % 18.3 16.9
Profit for the period 46 38.5 19.3
Basic earnings per share, EUR 2.48 2.32
Diluted earnings per share, EUR 2.47 2.32
Gross investments 26.6 9.4
Equity per share, EUR 5.9 9.3
Return on capital employed (ROCE), % 35.7 44.4
Working capital, end of period 28.9 37
Net cash flow from operating activities 47.2 48.8
Equity ratio, % 52.7 29.5
Gearing, % -21 57.9
Investments
The gross investments for the review period amounted to EUR 26.6 (9.4) million. The most significant parts of the increase in investments related to the construction of the new wood processing unit in Järvelä. During the period, approximately EUR 5.5 million worth of fixed assets were taken into use, the most significant of which, amongst others, was a stick stacker of EUR 3.3 million. Advance payments and construction in progress include EUR 21.6 million related to the construction of the new sawmill, of which EUR 15.8 million incurred in 2022. In addition, construction in progress also includes EUR 1.3 million related to the construction of the stormwater system in the Mäntsäläntie industrial area.
Value creation
Koskinen's ability to generate value is based on a material-efficient and integrated value chain from the forest to the final product. Koskisen’s efficient and integrated operating model enables at optimised use of wood as a raw material at its production facilities, and Koskisen’s Wood Procurement function enables the availability of high-quality wood raw material.
Koskisen’s integrated operating model is based on interconnected processes that form the basis of Koskisen’s business, from the forest through production to the finished products. Koskisen’s whole value chain from harvesting to end products is designed around synergistic material flows and an agile operating model allowing utilisation of raw material from diverse sources.
In Koskisen’s integrated operating model, its Wood Procurement function procures the raw materials that are delivered to Koskisen’s production facilities for processing. The by-products generated in the early stages of the production process, such as tree bark, are used for the heat production of the processes of production facilities in Järvelä and Hirvensalmi, totalling for approximately 96 per cent of the process heat of these production facilities. By-products generated in the Sawn Timber Industry business segment and Koskisen’s birch plywood production, such as part of the wood chips and sawdust, is further utilised in Koskisen’s chipboard production. In Koskisen’s view, it is the only company in the mechanical wood industry in Finland with the integration level described above.
Strategy
Koskisen’s strategy is the cornerstone of all of the company’s operations. Koskisen’s growth is based on close customer relationships, quality, responsibility and agility, which are key focus areas in the strategy.
Strategic priorities
Understanding and exceeding customer expectations
Koskisen strives to be a creative and agile party to the wood product market and to continuously develop new innovative solutions for its current and potential customers. Providing high-quality and customised products and customer-oriented services enables higher product prices.
Agile business model
Besides high quality, agility is at the core of Koskisen’s strategy. The ability to respond to customer requests with agility and as a high-quality service distinguish Koskisen from many of its competitors. Koskisen’s production is flexible, as Koskisen can manufacture end products in smaller batches that can be tailored to the customer’s needs. Koskisen’s flexible business model, which focuses largely on direct sales to customers, reduces Koskisen’s sensitivity to the cyclical nature of the market and enables more flexible customer service and faster reactions to changes in market demand and conditions.
Aiming to be a forerunner in sustainability
Koskisen strives to be a forerunner in sustainability in the wood product industry globally. This goal is achieved by reducing the already small carbon footprint of Koskisen’s operations and by increasing the carbon handprint by developing products based on renewable raw materials. Koskisen takes sustainability into account at all stages of its operations and considers sustainability to be one of its primary values. Koskisen is committed to the continuous improvement of its sustainability.
The construction of the new wood processing unit, systematic product development, organic and inorganic growth and ensuring the sales organisation’s competence and capability are key strategic measures for the strategy period ending at the end of 2027.
Financial objectives for 2027
Koskisen’s Board of Directors has confirmed the following long-term financial targets extending over the business cycle, which the company aims to achieve by the end of 2027.
Growth: revenue of EUR 500 million on the financial period ending 31 December 2027, including both organic and inorganic growth.
Profitability: adjusted EBITDA margin averaging 15 per cent over the cycle
Balance sheet: maintaining a strong balance sheet
Dividend policy: attractive dividend of at least one-third of the net profit each year
Personnel
The Koskisen Group had an average of 925 (909) employees in January–December 2022 and 899 (931) employees at the end of December.
Wages and salaries paid to personnel in 2022 were EUR 37.4 (36.7) million.
Incentive schemes for the management and key personnel
Koskisen has a share-based incentive program in place for its key employees for the years 2022 to 2026. The objective of the incentive program is to connect goals of the Company’s shareholders and key employees for increasing value of the Company in a long-term time period as well as to engage the key employees in the Company and offer them a competitive incentive program based on earning and the accumulation of Shares.
The incentive program consists of three three-year earning periods, which are from 2022 to 2024, from 2023 to 2025 and from 2024 to 2026. Key employees eligible for the incentive program as well as the earning criteria and targets, which can be based on financial performance measures strategy or other targets, are determined by the Board of Directors of the Company for each earning period. Bonuses paid under the incentive program are also determined by the Board of Directors of the Company for each participating key employee and are paid as shares and as cash in order for the participating key employee to pay taxes related to the share bonus. The Board of Directors of the Company has the right to decide whether the bonus will be paid as cash in full or in part.
Members of the executive board of Koskisen are obliged to hold a certain amount of their holdings until the end of their membership in the executive board of Koskisen. The Board of Directors of the Company resolved on April 25, 2022, on the criteria and targets as well as the key employees eligible for the incentive program for the first earning period. During the first earning period of the incentive program, the key employees eligible for the incentive program may earn a maximum of 138,000 shares in total, or a cash amount corresponding to their value (before taxes are deducted) if the bonus is decided to be paid in cash.
Remuneration report
Koskisen’s Remuneration Report 2022 will be published as a separate report from the Report of the Board of Directors.
Research and development
Koskisen’s main product groups include sawn and processed timber in the Sawmill Industry segment and birch plywood, thin plywood, veneer, chipboard and interior solutions for light and heavy duty utility vehicles under the Kore brand in the Panel Industry segment.
Koskisen’s product development aims to improve the functionality and properties of products in accordance with the principles of responsible and sustainable development and focuses on material efficiency, recyclability and fossil-free raw materials. Koskisen’s product development focuses on improving long-term use, renewability and safety, as well as on developing new products.
In 2022, Koskisen launched the world’s first fully wood-based Zero furniture panel. In the new furniture panel, both the basic raw material sawdust and the cohesive binder come from the side streams of the domestic forest industry.
The Group’s research and development expenditure amounted to EUR 0.3 (0.4) million, or 0.1 (0.1) per cent of revenue.
Risks and uncertainties and their management
The Board of Directors of Koskisen Corporation has confirmed the Group’s risk management policy and risk management principles. All Group companies and businesses regularly assess and report on the risks related to their business operations and the adequacy of the required control methods and risk management measures. The purpose of these risk assessments is to ensure adequate measures to manage risks. Risk management frameworks, policies and principles are regularly assessed and developed.
Short-term risks
Koskisen’s most significant short-term risks are related to the availability of raw materials and the management of price changes, the functioning of the financial markets, the solvency of customers and the purchasing power of consumers, the delivery capability of suppliers and service providers, the labour market situation and changes in business areas and customer relationships.
Russia’s military operations
The end of imports from Russia has tightened the wood market situation in Finland, mainly with regard to pulpwood and forest converted chips. The procurement of the company’s key raw material, birch raw material from Finland, has been reasonably successful, even though the raw material market has remained tight.
In 2022, the wood raw material procured by Koskisen came mainly from Finland at 98.6 (97.2) per cent. Of the raw material, 1.4 (2.8) per cent (birch) was imported from Russia. The import of wood from Russia ceased completely in March 2022, after which all wood used in production has been procured entirely from Finland.
EU sanctions on Russia affect the supply of sawn timber and birch plywood on the market, significantly restricting it.
Koskisen sold its fully-owned Russian subsidiary OOO Koskisilva, which accounted for the majority of the company’s business in Russia, to a local party on 21 June 2022. The process of winding down Koskisen’s logistics and timber procurement company in Russia is underway. Currently, it is not possible to foresee the timing of its implementation due to the processes of the local authorities. Russian logistics and wood procurement operations’ share of the Group’s revenue was small, approximately 0.1 per cent, and the financial impact of the closure of operations will be minor. The unit had four employees.
The most significant risks related to Koskisen’s operations
The following table provides a brief summary of the most significant risks related to Koskisen’s operations. Together or separately, the risks may have a positive or negative impact on Koskisen’s operations, performance, financial position, competitiveness and reputation. The risks are presented in a random order in the table.
Risks related to Koskisen’s operating environment
Description of the risk Risk management and factors that mitigate uncertainty
Koskisen operates in the cyclical sawmill and panel industry markets, and the uncertainty and unfavourable development of the economic situation may reduce the demand for Koskisen’s products or the profitability of its operations, which may have an adverse effect on Koskisen’s business operations, operating result and financial position. Koskisen has two business segments with partially countercyclical markets. This softens the impact of cyclicality at the Group level.
Fluctuations in wood prices, disturbances in wood supply and impacts on the availability of wood may cause significant costs, disturbances in production and adversely affect Koskisen’s profitability. Koskisen has an extensive and professional wood procurement organisation with decades of experience in the industry. Wood procurement aims to proactively react to potential risks related to wood raw material.
The effects of general cost inflation on production costs and thus Koskisen’s profitability. The procurement organisation closely monitors the development of production costs and engages in close dialogue with production and sales regarding the possible impact of costs on the pricing of final products. In accordance with its hedging policy, Koskisen uses hedging instruments to control key production factors, such as electricity price fluctuations.
The impact of the COVID-19 pandemic or other similar epidemics can disrupt Koskisen’s operations and result in significant costs. Koskisen aims to prevent and, if necessary, minimise the impact of the pandemic on the health and safety of personnel and ensure an undisturbed supply chain with various exceptional arrangements, such as the use of different types of protective equipment or restrictions on group sizes.
Environmental impacts and climate change, as well as their mitigation, may have impacts on Koskisen’s
operations, performance and reputation. Such impacts may include changes in consumer behaviour, business processes, material damage, technology change needs, increased regulation and increased environmental taxation.		 The direct environmental and climate impacts of Koskisen’s own operations are managed in many different ways, for example by increasing energy efficiency, increasing the use of renewable energy sources, improving material efficiency and using water and other natural resources responsibly. In its raw material procurement, Koskisen ensures that sustainable forest management practices are implemented. Koskisen monitors the development of regulations related to the topic and takes them into account in its own operations.
Risks related to Koskisen’s business
Description of the risk Risk management and factors that mitigate uncertainty
Significant disruptions or interruptions in Koskisen’s production or deliveries, damage to, destruction or closure of Koskisen’s production facilities, or disruptions in the transfer of production to the new Järvelä unit would materially impair Koskisen’s ability to deliver its products to customers and would have an adverse effect on its business operations and operating result. Koskisen manages its integrated production and supply chain taking risk factors into account. Koskisen has prepared for any disruptions in production and business caused by accidents through comprehensive insurance policies. The commissioning of the new wood processing unit has been planned in such a way that it takes place in stages and that during the ramp-up of the new process, production can also be continued on the old production line.
Koskisen may lose significant customers, which may have a material adverse effect on Koskisen’s business operations and profitability. Koskisen’s customer base is geographically diversified and spread over different industries. There are no individual customers in the customer base whose share of revenue would be significant.
Koskisen’s business operations involve risks related to environmental contamination and environmental damage. Koskisen’s production operations require a valid environmental permit. Koskisen monitors, supervises and reports the environmental impacts of its operations systematically. Koskisen has quality, environmental and safety management certificates audited annually by a third party.
Koskisen’s business operations involve safety and health risks, such as accident and damage risks in its production facilities, which, if realised, could lead to Koskisen’s obligation to compensate for damages and delay or interfere with the delivery of Koskisen’s products and services. Koskisen has comprehensive insurance policies in case of accidents and damage. The need for insurance is assessed annually and whenever necessary due to particular changed circumstances.
Failure to recruit competent management or personnel or loss of key personnel could have a materially detrimental effect on Koskisen’s ability to operate its business. Koskisen manages risk through interesting tasks, competitive reward, investments in personnel development and training and more. In addition, annual personnel surveys are used to survey the work community’s well-being, motivation and related development needs.
Difficulties in maintaining and updating IT infrastructure, shortcomings in IT systems and external cyber attacks related to IT systems may have a detrimental effect on Koskisen. Koskisen is prepared for increased cybercrime and information system disruptions. The purpose of systematic monitoring is to ensure that the company is able to react quickly to incidents.
The weakening of Koskisen’s reputation could affect its business operations. The Code of Conduct is the foundation of Koskisen’s business operations. The company’s Code of Conduct guide to operating honestly, transparently, lawfully and ethically with all stakeholders.
Industrial action, such as strikes, can disrupt Koskisen’s business operations. Koskisen respects the freedom of association. Koskisen maintains an open and active dialogue with different labour market parties.
Risks related to the financial position and financing
Description of the risk Risk management and factors that mitigate uncertainty
The covenants included in Koskisen’s financing agreements may limit Koskisen’s business operations and financial flexibility, and Koskisen may have difficulties in complying with the terms of its financing agreements, which may lead to the financing agreements falling prematurely due or increased costs. Koskisen takes care of its solvency, sufficient and functional funding relationships and the structure of financing. Koskisen actively and proactively monitors the development of its solvency and financial position.

The management of financial risks is discussed in more detail in Note 3 to the financial statements.
Exchange rate fluctuations may have a material adverse effect on Koskisen. Koskisen uses currency hedging instruments in accordance with the hedging policy approved by the Board of Directors.
Credit losses may have a detrimental effect on the operating result of Koskisen. In accordance with its policy, Koskisen has comprehensive credit risk insurance policies and well-functioning risk management processes.
Governance
Composition of the Board of Directors
On 31 December 2022, Koskisen Corporation’s Board of Directors had the following six members: Juha Vanhainen (Chair of the Board of Directors), Eva Wathén, Kari Koskinen, Kalle Reponen, Hanna Maria Sievinen and Karoliina Koskinen.
Corporate Governance Statement
Koskisen Corporation’s Corporate Governance Statement 2022 will be published as a separate statement from the Report of the Board of Directors.
Changes in Group structure and ownership base
Koskisen’s Annual General Meeting decided on 26 April 2022 on the merger of Koskisen Oy with Koskitukki Oy. The merger took place on 31 May 2022. After the merger, the name of Koskitukki Oy was changed to Koskisen Oy. The purpose of the merger was to harmonise Koskisen’s operations, simplify the Group’s structure, strengthen the parent company’s balance sheet, support Koskisen’s brand and prepare the company for a possible IPO. After the merger, all subsidiaries will be 100% owned by the parent company, Koskisen Corporation.
The company sold its fully owned subsidiary OOO Koskisilva in Russia to a local party on 21 June 2022.
Koskisen Corporation was listed on the main list of Nasdaq Helsinki Oy on 1 December 2022. In the public offering, subscriptions were received from more than 4,000 investors. The company received gross proceeds of approximately EUR 32 million from the Initial Public Offering.
Shares and ownership
Koskisen’s share capital is EUR 1,512,000 and the total number of issued and outstanding shares on 31 December 2022 was 23,002,659. The company has one series of shares. One share caries one vote at the general meeting. The shares have no nominal value. The company’s shares have been listed on Nasdaq Helsinki Oy as of 1 December 2022.
Treasury shares
The company does not hold any treasury shares.
Share price and turnover
A total of 698,874 company shares were traded on the Helsinki Stock Exchange between 1 and 31 December 2022, which was 3.0 per cent of the total number of shares. The highest share price was EUR 7.30 and the lowest EUR 6.14. The average price of the shares traded was EUR 6.46. The share turnover was EUR 4,523,935. At the end of the review period, the market capitalisation of the company was EUR 144,681,698.
Authorisations of the Board of Directors
On 31 October 31 2022, the Board of Directors of the Company was authorised in the extraordinary general meeting of the shareholders of the company to resolve upon a directed share issue with consideration. Pursuant to the authorisation, up to 10,000,000 new shares can be issued in one or several instalments in deviation from the shareholders’ pre-emptive subscription right. As a part of the offering, the shares can be offered to the personnel at a lower subscription price than to other investors. The authorisation of the Board of Directors of the company will remain in force until 30 June 30 2023.
On 31 October 31 2022, the Board of Directors of the company was authorised with the extraordinary general meeting of the shareholders of the company to resolve upon a directed share issue. The number of shares to be issued in one or several instalments on the basis of the authorisation shall not exceed an aggregate maximum of 6,000,000 new shares. The authorisation of the Board of Directors of the company will remain in force until 30 June 2023. The above-mentioned authorisation is related to the over-allotment option and share issue and share return arrangement in connection with the offering.
On 31 October 31 2022, the Board of Directors of the company was authorised with a resolution of the extraordinary general meeting of shareholders of the company to resolve upon the issuance of new shares and the issuance of special rights entitling to shares referred to in chapter 10, Section 1 of the Finnish Companies Act. The number of new shares to be issued on the basis of the authorisation shall not exceed an aggregate maximum of 3,000,000 shares, which corresponds to approximately 10 per cent of all the current Shares in the company. The Board of Directors of the company is entitled to decide on all the terms and conditions of the issuance of shares and special rights entitling to shares and is entitled to deviate from the shareholders’ pre-emptive subscription rights. The authorisation of the Board of Directors of the company will remain in force until 30 June 30 2023.
Flagging notifications
Koskisen did not receive any flagging notifications in 2022.
Estimate of probable development
Koskisen’s revenue for 2023 is not expected to exceed the level of 2022. The adjusted EBITDA margin is expected to be 12–14 per cent.
The profitability of the Sawn Timber Industry segment is expected to decrease compared to the level of 2022. The profitability of the Panel Industry segment is expected to remain unchanged or improve compared to the level of 2022.
Board of Directors’ proposal for the distribution of profits
The parent company’s distributable funds as at 31 December 2022 were EUR 117,617,967.94.
The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.43 per share is paid for the financial year 2022, i.e. a total of EUR 10 million. The Board of Directors has assessed the company’s financial situation and liquidity before making the proposal. The company’s financial position has not changed significantly since 31 December 2022, the company’s liquidity is still good and the proposed dividend will not endanger the company’s solvency.
Non-financial disclosures
Impacts of operations
Koskisen’s business is based on forests, which is why taking care of nature and the environment is at the core of Koskisen’s business and strategy. The company also has a significant direct impact as an employer and user of materials and services, and an indirect impact as a taxpayer. In 2022, the company had some 900 employees.
The company’s operations are based on sustainable forestry and skilled wood procurement, the processing of wood into bioeconomy products and green construction, and the creation of added value for customers and other stakeholders. The customer’s needs and quality perceived by the customer are the starting point for all operations, as is working in close cooperation with various stakeholders. Koskisen’s most important customer groups are the construction industry, wholesalers and retailers, manufacturers of transport equipment and various furniture and furnishings. Other important stakeholders include forest owners, investors, logging and transport companies, the reseller network and material suppliers. The company is engaged in active dialogue with its stakeholders.
The Koskisen Group has integrated sustainable development into its business operations. The key areas of responsibility are a healthy environment, fair partnerships and meaningful work. Through these focus areas, the company minimises negative impacts and optimises its positive social and environmental impacts.
The company is involved in the development of local communities, for example, through cooperation with educational institutions and selected cooperation forums. The company’s focus is on supporting the well-being of children and young people through various community-based recreational activities.
Koskisen’s raw material supply chain consists of wood procurement and the procurement of other raw materials and services. The responsibility of the most critical procurement is ensured through third-party-certified processes, such as various certificates, and audits of key material suppliers.
Koskisen is PEFC CoC and FSC CoC certified for managing the origin of wood. In 2022, 81.2 per cent of the wood procured by Koskisen was certified, and Koskisen’s target for the share of certified wood is 85 per cent in the future. The import of wood from Russia ceased completely in March 2022, after which all wood used in production has been procured entirely from Finland.
Environment
Koskisen’s environmental management system is based on identified environmental considerations for which environmental protection goals and targets have been set. Both the general and production unit-specific environmental considerations were updated in 2022. The environmental management system compliant with the ISO 14001 principles is guided by the environmental policy ratified by the management.
Key environmental aspects include functioning waste management, air and water system protection, noise abatement and the prevention of chemical accidents. Protective measures and unit-specific operating instructions have been drawn up for these in the company’s operating system to prevent environmental incidents and promote environmental protection, as well as to continuously improve operations and the state of the environment.
An environmental dashboard has been created for the company and production unit levels, and its results are monitored on a quarterly basis. Employees are informed about topical environmental issues and the achievement of environmental objectives through Koskisen’s internal channels. The company’s goal is to have active and proactive employees who take environmental issues into account in their work, which is achieved through the continuous development of their environmental knowledge and competence.
Koskisen’s operations in the Tehdastie and Mäntsäläntie plant areas in Järvelä, as well as the production plant operations in Hirvensalmi, have been granted environmental permits valid until further notice, which are supervised by the local ELY Centres (business, transport and environment). The emission limit values set in environmental permits are continuously monitored and any deviations are immediately reacted to.
Koskisen offers PEFC group certification to its timber seller customers to ensure sustainable forestry.
Koskisen participates in environmental research and development activities in the mechanical forest industry and contributes to raising environmental awareness in the sector.
Environmental risks
Environmental risks have been identified on a unit-by-unit basis. The risks include noise, oil spills and air emissions. Environmental risks and plans for their management are updated regularly. In 2022, the environmental risk analysis of Koskisen’s operations in Järvelä was updated.
Environmental incidents
No serious environmental damage was caused in the operations of Koskisen’s production units in 2022. The Järvelä production unit suffered three minor environmental incidents related to local oil spills. The incidents were recorded in Koskisen’s Continuous Development application and corrective actions were taken. The incidents did not result in permanent environmental pollution.
Key indicators
Indicator 2022 2021 2020
Share of biofuels
of heat production		 96.40 % 97.70 % 96.70 %
Wastewater volume, m3 87,922 62,926 63,431
Total energy consumption, MWh 362,938 377,509 343,926
Social aspects
Employees
As an employer with approximately 900 employees, Koskisen invests in its employees’ competence, motivation and experience of meaningful work. These are supported by ensuring a safe working environment, excellent working conditions, fair treatment, continuous competence development and seeing to well-being at work. Principles in HR management include equality, non-discrimination, remuneration, training and development, and occupational health, which are guided through the HR policy and also the Group’s operating policy.
Koskisen is one of the largest employers in the Päijät-Häme region. The company works closely with several harvesting and transport companies as well as industrial service providers. In addition to the approximately 900 Koskisen employees, the company employs some 4,000 people indirectly. In addition, Koskisen offers summer jobs to nearly 100 young people each year.
During 2022, work community activities – a discussion forum between management and personnel – were developed. The work community activities regularly discuss issues such as the equality plan, substance abuse programme, personnel structure, occupational healthcare, training and competence development.
In order to develop the competence of skilled personnel, a vocational and specialist qualification in the sawmill industry was launched in connection with the investment in the new production plant. In 2022, a pilot project for senior Koskisen employees was carried out. The aim of the pilot project was to support the coping of employees over 50 years of age, to ensure the continuation of their careers and to increase overall well-being during and after their careers.
As a result of forest salaried employees’ collective bargaining negotiations, the first company-specific collective agreement for 2023–2025 was reached. The pay system in the sawmill industry was revised, involving approximately one hundred employees, in close cooperation with employer and employee representatives. The reform also included an update of the criteria for remuneration and rewards.
In late 2022, the Board of Directors approved the Group’s new remuneration policy, which will be presented at the Annual General Meeting in spring 2023.
Risks to employees
Psychosocial stress and occupational health and safety have been identified as risks related to employees. The assessment of psychosocial stress is part of the workplace survey, which is carried out every three years. Preventive work in occupational health is carried out with the help of a mental concern service and the guidance of an occupational physiotherapist in occupational healthcare to prevent musculoskeletal disorders. Early support processes also support employment and motivate employees. Occupational safety risk prevention is based on occupational safety observations and initiatives, safety tours, accident investigations, communications and continuous personnel training.
Respecting human rights and combatting corruption and bribery
The Koskisen Group respects the UN Universal Declaration of Human Rights. The Group does not accept the use of child labour or forced labour, or discrimination of any kind on the grounds of race, age, gender, nationality or sexual orientation.
Corruption, bribery and illegal payments and the receiving of such are prohibited in the Group’s operations.
The Koskisen Group requires compliance with the Code of Conduct in its own operations and supply chain. The Koskisen Group’s operating policy also guides ethical and responsible operations. The Group has not carried out a human rights impact assessment.
A whistleblowing channel for anonymous reports was deployed in 2022. The Whistleblowing channel is available on the Koskisen website (koskisen.fi). In 2022, two reports were received through it and examined by independent experts. They were not cases of human rights violations or cases of bribery or corruption. All reports via the Whistleblowing channel are treated with absolute confidentiality.
Incidents related to social aspects
No severe incidents concerning employees, human rights or corruption took place in 2022.
Key indicators
Indicator 2022 2021 2020
Employee satisfaction survey overall index 3.85 3.71 3.69
Employee satisfaction survey response rate 76 % 63 % 72 %
Employee satisfaction survey eNPS* 12 -2 -
Average sick leave rate 6.26 % 3.76 % 4.04 %
Accident frequency (LTA1)** 19.3 13.2 9.9
*Employee Net Promoter Score (eNPS) is an internationally comparable recommendation index.
**Number of accidents leading to absence per one million working hours.
Sustainability reporting principles
Koskisen has identified the sustainability themes relevant to its operations and set targets for them. In 2023, the company will deepen the analysis of relevant topics and make updates to their definition.
The measures and results for 2022 are reported in the responsibility section of Koskisen’s annual report for 2022.
EU Taxonomy Report
The EU taxonomy is a classification system for sustainable economic activities as defined in Regulation (EU) 2020/852 of the European Parliament and of the Council (Taxonomy Regulation), which aims to increase the transparency of sustainable investment and to channel capital flows to technologies and businesses considered to be sustainable. The Taxonomy Regulation will be gradually supplemented by delegated acts, and the criteria for making a significant contribution to the EU’s climate change objectives for selected sectors and the requirements for the format of related reporting have so far entered into force.
Starting from the 2022 financial period, companies subject to the reporting obligation must report not only taxonomy eligibility (the share of their own activities that corresponds to the activities listed in the classification system) but also taxonomy alignment, i.e. the extent to which the taxonomy-eligible activities meet the technical criteria for a) making a significant contribution to the sustainability objective related to climate change, b) avoiding significant harm to the achievement of other environmental objectives (Do No Significant Harm (DNSH)), and c) the adequacy of the minimum safeguards for their own activities and supply chain to avoid social violations (Minimum Safeguards).
In its current form, the EU taxonomy classifies economic activities that are considered to be key to the EU economic area’s efforts to mitigate and adapt to climate change. Early in the regulatory entity, primarily energy, transport and construction activities have been included. For this reason, the majority of Koskisen’s products are so far excluded from the taxonomy review, as the evaluation focuses mainly on Koskisen’s forest management services, energy efficiency improvements in production plants and properties, as well as forest biomass-based energy production. However, this does not mean that Koskisen’s operations are unsustainable from the EU taxonomy point of view, but that the majority of the operations are not currently among the activities that the EU perceives to be used to achieve the most immediate and significant climate benefits in relative terms in its economic area. In many taxonomy-eligible functions, meeting the criteria for taxonomy alignment requires information on detailed consideration of climate aspects and often also on their independent verification on a scale that has not hitherto been used. Therefore, for the time being, taxonomy alignment is not formally demonstrated due to the lack of data, but as the taxonomy criteria become established and various parties take these into account in their operations, the availability of data is expected to improve. During 2023, Koskisen will evaluate ways to improve the Group-level ability to meet the criteria.
In the coming years, the EU taxonomy will expand to cover other environmental aspects (e.g. protection of biodiversity and mitigation of pollution) and may later also cover climate-neutral, environmentally-neutral and negative activities.
Accounting principle
Koskisen’s consolidated financial statements have been prepared in accordance with the accounting standards (IFRS) adopted in the EU (for more information, see the note “accounting policies” to the financial statements). The percentage ratios of the taxonomy have been calculated by allocating the financial figures presented in the consolidated financial statements (Revenue, capital expenditure (CapEx) and certain operating expenses (OpEx)) to the businesses deemed taxonomically eligible in accordance with the delegated act on the reporting format of the Taxonomy Regulation. While further legislation on the subject is still under preparation, the minimum safeguards against social offenses were assessed by comparing the performance with the recommendations of the Final Report on Minimum Safeguards, published in October 2022 by the Platform on Sustainable Finance (responsible for preparing the technical details of the EU taxonomy).
Taxonomy assessment
Taxonomy eligibility and taxonomy alignment were established by comparing Koskisen’s activities that generated revenue and were the target of investments during the 2022 financial period with the descriptions of the economic activities listed in the taxonomy and their technical criteria. With a large part of Koskisen’s operations currently being outside the scope of the taxonomy, taxonomy assessment is limited to the following taxonomy-eligible economic activities:
1.3. Forest management
Forest management services provided to forest owners include activities such as soil preparation, planting of seedlings and seeds, early weeding, tending of seedling stands and preclearing. Koskisen’s timber harvesting operations also generate revenue, the share of which can be broken down from invoicing in connection with the sale of timber on behalf of forest owners. The activities cannot yet be considered to be in line with the taxonomy, as formal climate benefit estimates in accordance with the requirements are not yet available in the forest management plans of the forest parcels concerned by the activities.
3.5. Manufacture of energy efficiency equipment for buildings
The cladding panels manufactured by Koskisen from wood were considered to be a key part of the insulation of the building concerned and thus energy efficiency. They are not yet taxonomy-aligned, as the material’s thermal conductivity (W/mK) exceeds the limit value of the technical criterion for significant climate change mitigation.
3.6. Manufacture of other low carbon technologies
During the financial period 2022, Koskisen allocated research and development expenditure to the Zero furniture panel, in which wood-based lignin replaces the fossil-based binder conventionally used in similar products, being a lower-emission alternative to ordinary furniture panels, and therefore it has been interpreted to correspond to the manufacture of other low carbon technologies referred to in the taxonomy. Not all the verification data required by the taxonomy is available yet.
4.24. Production of heat/cool from bioenergy
The Sermet and BIO8 boiler plants at Koskisen’s Mäntsäläntie plant area produce district heat for the plant’s own needs from 100.0% wood biomass, utilising the by-products of its own process. Not all the required data concerning the source of the wood biomass are currently available, so it is not yet possible to verify that the activities are taxonomy-aligned.
4.20. Cogeneration of heat/cool and power from bioenergy
The Koskipower boiler plant at Koskisen’s Tehdastie plant area produces heat and electricity from 94.2% wood biomass. In special cases (for example during maintenance work), the boiler plant may also fire fossil fuels, but this proportion has not been calculated in the taxonomy eligibility ratio. Not all the required data concerning the source of the wood biomass are currently available, so it is not yet possible to verify that the activities are taxonomy-aligned.
5.1. Construction, extension and operation of water collection, treatment and supply systems
During the financial period 2022, a significant investment was made in the stormwater system. The technical energy consumption data required to prove taxonomy alignment were not yet available.
7.3. Installation, maintenance and repair of energy-efficient equipment
More energy-efficient LED lights have been installed at Koskisen’s properties, and the possibilities of charging electric vehicles have been improved, among other measures. For the time being, with the absence of the required data, not all of the technical criteria for avoiding sustainability disadvantages have been demonstrated.
The EU taxonomy requires companies to disclose how they have avoided duplicate accounting when allocating the shares of turnover, capital expenditure (CapEx) and certain operating expenses (OpEx) to economic activities (numerator items) that are taxonomically eligible (and aligned). The functions listed above correspond to the cost and income items of the business areas that are separately monitored in Koskisen’s accounting, which makes it possible to allocate financial figures to parts of operations that are considered taxonomy eligible.
Minimum safeguards
By minimum safeguards, the Taxonomy Regulation refers to a company’s procedures to ensure that its operations and supply chain comply with (a) OECD Guidelines for Multinational Enterprises, (b) UN Guiding Principles on Business and Human Rights (UNGP), (c) the declaration on Fundamental Principles and Rights at Work of the International Labour Organisation (ILO) and (d) the United Nations Universal Declaration on Human Rights.
In practice, adherence to the above principles requires the company to have in place administrative processes for a) the realisation of human rights and good working conditions (in accordance with the UN Guiding Principles and the OECD Guidelines), b) combatting corruption and bribery, c) safeguarding fair competition and d) the payment of taxes to avoid violations, and that the company or its management has not been convicted of illegal activity in relation to the topics.
Koskisen has no illegal violations against the aforementioned matters and the Group’s current governance structures, practices and controls are designed to ensure compliance with them. Koskisen invests in many ways in its social responsibility priorities: occupational safety, employee well-being and maintaining good and fair partnerships with customers and forest owners. The aim is to prevent negative impacts through various policies, guidelines and risk assessments. Various indicators of occupational safety and customer satisfaction are monitored and the results are reported on an annual basis. Koskisen also has a Whistleblowing channel on its website, which can be used to anonymously report any violations. Read more about Koskisen’s responsible business assurance methods in the NFI disclosures.
Koskisen monitors the development of relevant EU legislation, in particular the Corporate Sustainability Due Diligence (CSDD) and the Corporate Sustainability Reporting Directive (CSRD) with detailed reporting requirements, and assesses the need for updating the minimum safeguards referred to in the Taxonomy Regulation on the basis of these.
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Additional information about taxonomy ratios
The taxonomy-eligible turnover for the 2022 financial period consisted of invoicing in accordance with customer agreements for products and services deemed taxonomy-eligible. The denominator of the ratio is the Group’s total revenue for 2022.
The taxonomy-eligible CapEx capital expenditure (CapEx ratio numerator) consists of increases in tangible and intangible capital related to activities assessed as taxonomy eligible during the financial period. Correspondingly, the taxonomy eligible proportion of the OpEx operating expenses referred to in the Delegated Act on the reporting format supplementing the EU Taxonomy Regulation has been calculated in terms of the costs essential for the continuity of operations assessed as taxonomy eligible connected to maintenance and repairs, short-term leasing contracts and research and development expenses. The corresponding financial figure presented in Koskisen’s consolidated financial statements has been included in its entirety in the denominator of both ratios.
Shares and shareholders
Major shareholders on 30 December 2022
Number of shares % Number of votes %
KOSKINEN KARI JUHANI 4,208,988 18.3 4,208,988 18.3
KOSKINEN MARKKU KALEVI 3,728,988 16.2 3,728,988 16.2
WATHÉN EVA-JOHANNA 2,228,988 9.7 2,228,988 9.7
KOSKINEN SIRKKA-LEENA KUOLINPESÄ 1,704,468 7.4 1,704,468 7.4
PAKSUNIEMI ELLA EMILIA 1,220,000 5.3 1,220,000 5.3
PAKSUNIEMI KAISA ESTER 1,220,000 5.3 1,220,000 5.3
PAKSUNIEMI LAURA JOHANNA 1,220,000 5.3 1,220,000 5.3
KESKINÄINEN TYÖELÄKEVAKUUTUSYHTIÖ ELO 814,332 3.5 814,332 3.5
KESKINÄINEN TYÖELÄKEVAKUUTUSYHTIÖ VARMA 814,332 3.5 814,332 3.5
KOSKINEN EEVA KAROLIINA 780,000 3.4 780,000 3.4
KOSKINEN LASSE ILARI 780,000 3.4 780,000 3.4
STEPHEN INDUSTRIES INC OY 498,599 2.2 498,599 2.2
KESKINÄINEN ELÄKEVAKUUTUSYHTIÖ ILMARINEN 485,000 2.1 485,000 2.1
KOKKO-PARIKKA RIITTA LEENA 191,052 0.8 191,052 0.8
KOSKINEN ARTO ANTERO 191,052 0.8 191,052 0.8
KOSKINEN JUHA MATTI 191,052 0.8 191,052 0.8
PENSIONSFÖRSÄKRINGSAKTIEBOLAGET VERITAS 145,000 0.6 145,000 0.6
SIJOITUSRAHASTO UB SUOMI 144,299 0.6 144,299 0.6
ANMIIL OY 129,372 0.6 129,372 0.6
UB METSÄ GLOBAL ERIKOISSIJOITUSRAHASTO 100,000 0.4 100,000 0.4
20 largest, total 20,795,522 90.2 20,795,522 90.2
Breakdown of share ownership by scale on 30 December 2022
Lower limit Upper limit Number of shareholders Share of shareholders, % Total number of shares Share of shares, %
1 100 2,555 55.2 190,417 0.8
101 500 1,670 36.1 322,729 1.4
501 1,000 188 4.1 147,301 0.6
1,001 5,000 146 3.2 307,476 1.3
5,001 10,000 19 0.4 126,410 0.6
10,001 50,000 22 0.5 487,713 2.1
50,001 100,000 5 0.1 343,135 1.5
100,001 500,000 9 0.2 2,357,382 10.2
500,001 11 0.2 18,720,096 81.4
Total 4,625 100 23,002,659 100
Breakdown of share ownership by shareholder category on 30 December 2022
Share of shareholders, % Share of shares, %
Companies, total 3.2 4.4
Financial and insurance institutions, total 0.3 1.7
Public sector, total 0.1 9.8
Households, total 96.1 82.1
Non-profit organisations, total 0.2 0.3
Foreign shareholders, total 0.1 -
All in total 100 98.3
Nominee-registered 1.7
Total 100
Calculation formulas for key figures
1. Items affecting comparability are unusual material items outside the ordinary course of business that relate to (i) costs related to the Reorganisation, (ii) impairment charges, (iii) the gain or loss from the sale of businesses or significant fixed assets and (iv) costs related to the Listing. Items affecting comparability is presented to reflect the underlying business performance of Koskisen and to enhance comparability between periods. Koskisen believes that items affecting comparability provide meaningful supplemental information by excluding items outside the ordinary course of business that reduce comparability between periods.
2. EBITDA = Operating profit (loss) + Depreciation, amortisation and impairments
EBITDA is an indicator used to measure Koskisen’s performance.
3. EBITDA margin, per cent = EBITDA
-------------------------------------------------------------------------------------------------- x 100
Revenue
EBITDA margin is an indicator used to measure Koskisen’s performance.
4. Adjusted EBITDA = EBITDA + Items affecting comparability
Adjusted EBITDA is an indicator used to measure Koskisen’s performance. Adjusted EBITDA is presented in addition to EBITDA to reflect the underlying business performance and to enhance comparability between periods. Koskisen believes that adjusted EBITDA provides meaningful supplemental information by excluding items outside the ordinary course of business that reduce comparability between periods.
5. Adjusted EBITDA margin, per cent = Adjusted EBITDA
-------------------------------------------------------------------------------------------------- x 100
Revenue
Adjusted EBITDA margin is an indicator used to measure Koskisen’s performance. Adjusted EBITDA margin is presented in addition to EBITDA margin to reflect the underlying business performance and to enhance comparability between periods. Koskisen believes that adjusted EBITDA margin provides meaningful supplemental information by excluding items outside the ordinary course of business that reduce comparability between periods.
6. EBIT margin, per cent = Operating profit (loss)
-------------------------------------------------------------------------------------------------- x 100
Revenue
EBIT margin is an indicator used to measure Koskisen’s performance.
7. Adjusted EBIT = Operating profit (loss) + Items affecting comparability
Adjusted EBIT is an indicator used to measure Koskisen’s performance. Adjusted EBIT is presented in addition to operating profit (loss) to reflect the underlying business performance and to enhance comparability between periods. Koskisen believes that adjusted EBIT provides meaningful supplemental information by excluding items outside the ordinary course of business that reduce comparability between periods.
8. Adjusted EBIT margin, per cent = Adjusted EBIT
-------------------------------------------------------------------------------------------------- x 100
Revenue
Adjusted EBIT margin is an indicator used to measure Koskisen’s performance. Adjusted EBIT margin is presented in addition to EBIT margin to reflect the underlying business performance and to enhance comparability between periods. Koskisen believes that adjusted EBIT margin provides meaningful supplemental information by excluding items outside the ordinary course of business that reduce comparability between periods.
9. The earnings per Share, basic, and earnings per Share, diluted, figures for the three months ended December, 2022 and 2021, and for the years ended 31 December, 2022 and 31 December, 2021, have been adjusted retrospectively for the effects of the share issue without consideration as resolved by the extraordinary general meeting of shareholders of the Company as at 31 October, 2022. The earnings per Share, basic, and earnings per Share, diluted, figures for the three months ended 31 December, 2022 and 31 December, 2021, and for the years ended 31 December, 2022 and 2021, have been adjusted retrospectively for the effects of the proportion without consideration of the directed share issue as resolved unanimously by the shareholders of the Company as at 25 August, 2022, and for the share issue without consideration as well as the directed share issue as resolved by the extraordinary general meeting of shareholders of the Company as at 26 April, 2022. Taking into account the abovementioned share issues, the number of Shares used to calculate earnings per Share, basic for the twelve months ended 31 December, 2022 (and 31 December, 2021 ), was 16,043,440 (12,600,000) and earnings per Share, diluted, was 16,069,899 (12,600,000). Weighted average number of shares used to calculate earnings per share basic, and diluted for the three months ended December, 2022 and 2021 was 19,545,389 (12,600,000) and 19,597,208 (12,600,000) respectively. At the end of the financial period, the number of Shares was 23,002,659.
10. Earnings per Share, basic, EUR = Profit (loss) for the period attributable to owners of the parent company
-----------------------------------------------------------------------------------------------------------
Weighted average number of ordinary Shares outstanding during the period
Earnings per Share, basic, reflects the distribution of Koskisen’s results to its shareholders.
11. Earnings per Share, diluted, EUR = Profit (loss) for the period attributable to owners of the parent company
-----------------------------------------------------------------------------------------------------------
Weighted average number of ordinary Shares outstanding during the period + Weighted average number of all dilutive instruments potentially to be converted into Shares
Earnings per Share, diluted, reflects the distribution of Koskisen’s results to its shareholders.
12. Net investments = Purchases of property, plant and equipment and intangible assets - Proceeds from sale of non‑current assets
Net investments is a measure used to assess Koskisen’s investments to right-of-use assets and intangible assets.
13. Net investments as share of revenue, percent = Net investments
------------------------------------------------------------------------------------------------ x 100
Revenue (last 12 months)
Net investments as share of revenue is a measure used to assess the amount of Koskisen’s net investments as a share of revenue.
14. Cash flow before financing = Net cash flows from operating activities + Net cash flows from investing activities
Cash flow before financing reflects the amount of cash flow Koskisen generates or uses from carrying out its operating and investing activities.
15. Number of full‑time equivalent employees at the end of the period = Total number of hours worked by Koskisen’s employees at the end of the period
------------------------------------------------------------------------------------------------------
The total number of scheduled hours for a full‑time employee at the end of the period
Number of full‑time equivalent employees at the end of the period presents the number of Koskisen’s full‑time equivalent employees at the end of the period.
16. Average number of full‑time equivalent employees during the period = Total number of hours worked by Koskisen’s employees during the period
-----------------------------------------------------------------------------------------------------
The total number of scheduled hours for a full‑time employee during the period
Average number of full‑time equivalent employees during the period presents the average number of Koskisen’s full‑time equivalent employees during the period.
17. Production volume, cubic metres = Volume of finished goods produced during the period.
Production volume reflects the level and development of Koskisen’s production volume.
18. Sales volume, cubic metres = Volume of finished goods sold during the period.
Sales volume reflects the level and development of Koskisen’s sales volume.
19. Capital employed = Total assets - Current liabilities
Capital employed reflects the capital tied to Koskisen’s operations and it is used to calculate return on capital employed.
20. Liquid assets = Current financial assets at fair value through profit or loss + Cash and cash equivalents
Liquid assets reflects the amount of cash and other assets that are readily convertible to cash.
21. Net debt = Borrowings + Lease liabilities - Liquid assets
Net debt is an indicator used to assess Koskisen’s total external debt financing.
22. Net debt/EBITDA, ratio = Net debt
------------------------------------------------------------------------------------- x 100
EBITDA (last 12 months)
Net debt/EBITDA is an indicator used to assess the level of Koskisen’s financial risk and the level of Koskisen’s indebtedness.
23. Operative net working capital = Inventories + Trade receivables + Other receivables - Advances received - Trade payables - Trade payables, payment system
Operative net working capital is an indicator used to monitor the level of direct net working capital tied to Koskisen’s operations.
24. Operative net working capital as share of revenue, per cent = Operative net working capital
---------------------------------------------------------------------------------------- x 100
Revenue (last 12 months)
Operative net working capital as share of revenue reflects net working capital/Koskisen’s revenue.
25. Equity ratio, per cent = Total equity
---------------------------------------------------------------------------------------- x 100
Total assets - Advances received
Equity ratio measures Koskisen’s solvency and ability to meet its liabilities in the long term.
26. Gearing, per cent = Net debt
------------------------------------------------------------------------------------------- x 100
Total equity
Gearing is a measure used to assess Koskisen’s financial leverage.
27. Return on capital employed, per cent = Operating profit (loss) (last 12 months)
------------------------------------------------------------------------------------------- x 100
Capital employed (average for the last 12 months)
Return on capital employed reflects the return of capital tied to Koskisen’s operations.
28. Return on equity, per cent = Profit (loss) for the period (last 12 months)
-------------------------------------------------------------------------------------- x 100
Total equity (average for the last 12 months)
Return on equity is a measure used to assess Koskisen’s profitability and the efficiency of Koskisen’s profit generation.
29. Depreciation related to leases = Depreciation of right‑of‑use assets
Depreciation related to leases reflects depreciation of right-of-use assets recognised from leases.
30. Additions from leases = Additions to right‑of‑use assets
Additions from leases reflect additions of right of use-assets recognised from leases.
31. The item “Borrowings” includes the Capital Loans.
Reconciliation of alternative performance measures
The following table sets forth a reconciliation of the Alternative Performance Measures as at the dates and for the periods indicated:
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Items affecting comparability
Costs related to the Reorganisation 430 -
The gain (-) or loss (+) from sale of businesses or significant fixed assets -2,485 -
Costs related to the Listing 2,428 34
Items affecting comparability 373 34
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
EBITDA
Operating profit (loss) 58,168 52,711
Depreciation, amortisation and impairments 8,083 9,525
EBITDA 66,251 62,236
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
EBITDA margin
EBITDA margin 66,251 62,236
Revenue 317,651 311,464
EBITDA margin, per cent 20.9 % 20.0 %
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Adjusted EBITDA
Operating profit (loss) 58,168 52,711
Depreciation, amortisation and impairments 8,083 9,525
Items affecting comparability 373 34
Adjusted EBITDA 66,624 62,270
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Adjusted EBITDA margin
Adjusted EBITDA 66,624 62,270
Revenue 317,651 311,464
Adjusted EBITDA margin, per cent 21.0 % 20.0 %
Koskisen Corporation, Group
Consolidated statement of comprehensive Income
EUR thousand Note Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Revenue 2 317,651 311,464
Other operating income 4 4,316 912
Change in inventories of finished goods and work in progress 16 -634 -26
Change in fair value of forest assets 13 -19 91
Materials and services 5 -161,770 -165,115
Employee benefit expenses 6 -46,269 -44,443
Depreciation, amortisation and impairments 8 -8,083 -9,525
Other operating expenses 9 -47,025 -40,648
Operating profit (loss) 58,168 52,711
Finance income 10 5,998 2,403
Finance expense 10 -6,408 -7,170
Finance costs, net -410 -4,767
Profit (loss) before income tax 57,757 47,944
Income tax expense 11 -11,784 -9,398
Profit (loss) for the period 45,973 38,546
Other comprehensive income:
Items that may be reclassified to profit or loss
Translation differences 186 -129
Other comprehensive income for the period, net of tax 186 -129
Total comprehensive income for the period 46,159 38,417
Profit (loss) for the period attributable to:
Owners of the parent company 39,746 29,240
Non-controlling interests 6,227 9,306
Profit (loss) for the period 45,973 38,546
Total comprehensive income for the period attributable to:
Owners of the parent company 39,929 29,114
Non-controlling interests 6,230 9,302
Total comprehensive income 46,159 38,417
Earnings per share for profit attributable to the ordinary equity holders of the parent company:
Basic earnings per share, EUR 1) 19 2.48 2.32
Diluted earnings per share, EUR 1) 19 2.47 2.32
1)The basic and diluted earnings per share for profit attributable to the ordinary equity holders of the parent company for periods presented have been adjusted retrospectively for the effects of the free share issues (splits) determined on 26 April 2022 and 31 October 2022. More information is presented in note 19: Earnings per share.
The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Koskisen Corporation, Group
Consolidated balance sheet
EUR thousand Note Dec 31, 2022 Dec 31, 2021
ASSETS
Non-current assets
Property, plant and equipment 12 76,275 55,142
Forest assets 13 2,731 2,750
Right-of-use assets 14 22,702 27,814
Intangible assets 15 923 620
Financial assets at fair value through profit or loss 20 1,752 223
Other receivables 17 79 174
Deferred tax assets 11 129 61
Total non-current assets 104,590 86,783
Current assets
Inventories 16 34,174 38,062
Trade receivables 20 25,541 29,544
Other receivables 17 9,534 5,418
Financial assets at fair value through profit or loss 20 9,892 9,958
Income tax receivables 11 354 3
Cash and cash equivalents 20 74,527 30,538
Total current assets 154,022 113,523
TOTAL ASSETS 258,612 200,306
EQUITY AND LIABILITIES
Equity
Share capital 18 1,512 1,512
Legal reserve 18 16 16
Reserve for invested unrestricted equity 18 73,843 -
Cumulative translation difference 18 -191 -374
Retained earnings 20,886 5,246
Profit (loss) for the period 18 39,746 29,240
Total equity attributable to owners of the parent company 135,811 35,641
Non-controlling interests - 23,179
Total equity 135,811 58,820
Non-current liabilities
Borrowings 20 24,150 40,831
Lease liabilities 14, 20 25,294 27,578
Derivative liabilities 20 - 1,765
Other long-term employee benefits 6 3,020 3,670
Defered tax liabilities 11 3,734 1,729
Provisions 21 100 120
Total non-current liabilities 56,299 75,693
Current liabilities
Borrowings 20 4,500 4,000
Lease liabilities 14, 20 2,015 2,154
Advances received 20 756 631
Trade payables 20 32,263 28,792
Trade payables, payment system 20 7,316 6,604
Other payables 22 19,501 15,348
Income tax liabilities 11 130 8,264
Provisions 21 20 -
Total current liabilities 66,501 65,792
Total liabilities 122,800 141,486
TOTAL EQUITY AND LIABILITIES 258,612 200,306
The consolidated balance sheet should be read in conjunction with the accompanying notes.
Koskisen Corporation, Group
Consolidated statement of changes in equity
Attributable to owners of the parent company
EUR thousand Note Share-capital Legal reserve Reserve for invested unrestricted equity Cumulative translation differences Retained earnings Total equity attributable to owners of the parent company Equity attributable to non-controlling interests Total equity
Equity at Jan 1, 2022 1,512 16 - -374 34,486 35,641 23,179 58,820
Profit (loss) for the period - - - - 39,746 39,746 6,227 45,973
Other comprehensive income for the period
Cumulative translation differences - - - 183 -0 183 3 186
Total comprehensive income - - - 183 39,746 39,929 6,230 46,159
Transactions with owners:
Share issue (merger) 18 - - 43,252 - -13,842 29,409 -29,409 0
Directed share issue, personnel offering 18 - - 345 - - 345 - 345
Share based payments 18 - - - 242 242 - 242
Share issue 18 - - 32,029 - - 32,029 - 32,029
Transaction expenses, share issue 18 - - -1,783 - - -1,783 - -1,783
Total transactions with owners - - 73,843 - -13,601 60,242 -29,409 30,833
Equity at Dec 31, 2022 1,512 16 73,843 -191 60,631 135,811 - 135,811
Attributable to owners of the parent company
EUR thousand Note Share-capital Legal reserve Reserve for invested unrestricted equity Cumulative translation differences Retained earnings Total equity attributable to owners of the parent company Equity attributable to non-controlling interests Total equity
Equity at Jan 1, 2021 1,512 16 - -248 5,246 6,526 13,877 20,403
Profit (loss) for the period - - - - 29,240 29,240 9,306 38,546
Other comprehensive income for the period
Cumulative translation differences - - - -126 - -126 -3 -129
Total comprehensive income - - - -126 29,240 29,114 9,302 38,416
Equity at Dec 31, 2021 1,512 16 - -374 34,486 35,641 23,179 58,820
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Koskisen Corporation, Group
Consolidated statement of cash flows
EUR thousand Note Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Cash flow from operating activities
Profit (loss) for the period 45,973 38,546
Adjustments:
Depreciation, amortisation and impairment 8 8,083 9,525
Change in the fair value of the forest assets 13 19 -91
Gains and losses from sale of subsidiaries -2,209 -
Gains and losses from sale of non-current assets -396 -74
Interest and other finance income and expense 10 410 4,767
Income taxes 11 11,784 9,398
Change in other long-term employee benefits -678 -105
Other adjustments 238 10
Adjustments total 17,251 23,430
Changes in net working capital:
Change in trade and other receivables 17, 20 661 -8,931
Change in trade and other payables 20, 22 8,120 8,164
Change in inventories 16 3,527 -5,375
Utilised provision 21 1 -18
Interest received 163 21
Interest paid -9,227 -4,837
Other financial items received 163 210
Arrangement fees and other financing costs paid -1,080 -1,238
Income taxes paid -18,326 -1,135
Net cash flow from operating activities 47,225 48,836
Cash flow from investing activities
Purchases of property, plant and equipment and intangible assets 12, 14 -22,046 -9,733
Proceeds from sale of non-current assets 491 101
Payments for financial assets at fair value through profit or loss 20 - -10,000
Proceeds from financial assets at fair value through profit or loss - 10
Proceeds from sale of subsidiary, net of cash sold 3,136 -
Net cash from investing activities -18,418 -19,622
Cash flows from financing activities
Proceeds from issue of shares 30,591 -
Proceeds from borrowings 20 29,000 35,000
Repayment of borrowings 20 -43,988 -39,000
Proceeds from a change in a lease contract 3,000 -
Repayments of lease liabilities 20 -3,511 -2,291
Net cash from financing activities 15,092 -6,291
Net change in cash and cash equivalents 43,898 22,923
Cash and cash equivalents at the beginning of the period 30,538 7,881
Effects of exchange rate changes on cash and cash equivalents 91 -265
Cash and cash equivalents at the end of period 74,527 30,538
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
1. General information and basis of preparation
General information of the Group
Koskisen Corporation (the company, the parent company) together with its consolidated subsidiaries (Koskisen, the Group) is a Finnish public company active in the sawn timber and panel industries where it manufactures a wide range of wooden products such as sawn goods, plywood and chipboard. Koskisen aims to be a sustainable partner with both the forest owners as well as its customers. Koskisen was founded in 1909. Its headquarters is in Järvelä, Finland and it has offices in Finland and Poland. Koskisen has more than 900 employees.
Koskisen Corporation is a Finnish public limited liability company, with a corporate identity number, 0148241-9, domiciled in Kärkölä, Finland. The registered address is Tehdastie 2, 16600 Järvelä, Finland. The parent company's / Koskisen Corporation's shares are listed on the main list of Nasdaq Helsinki Oy from 1 December 2022.
The Board of Directors of Koskisen has approved these consolidated financial statements for issue on 14 April 2023. A copy of the consolidated financial statements is available in the Internet at www.koskisen.com.
Basis of preparation
Koskisen’s consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, and the IAS and IFRS standards as well as interpretations issued by the SIC and the IFRIC as at 31 December 2022. The notes to the consolidated financial statements also comply with the requirements under the Finnish accounting and company legislation complementary to the IFRS.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
The consolidated financial statements have been prepared primarily under the historical cost convention unless otherwise indicated. Financial assets at fair value through profit or loss, derivative liabilities and forest assets, as well as assets and liabilities regarding benefit-based plans and share-based payments have been measured at fair value.
The consolidated financial statements are presented in thousands of euros, which is the functional and presentation currency of the parent company.
All amounts disclosed in the consolidated financial statements and notes have been rounded off to the nearest thousand unless otherwise stated, therefore the sum of individual figures may deviate from the presented total figure.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in euros, which is the company’s functional and presentation currency.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income.
Foreign exchange gains and losses relating to the ordinary course of business, as well as, foreign exchange gains and losses relating to financial items are presented in finance costs, net in the statement of comprehensive income.
Group companies
The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency. Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet. Income and expenses for each statement of comprehensive income are translated at average exchange rates. All resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. When a foreign operation is sold or otherwise disposed of, the associated exchange differences are reclassified to the statement of comprehensive income, as part of the gain or loss on sale.
Fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
The effects of the Russian war of aggression
Russia's war of aggression against Ukraine has caused Koskisen to review the estimates and assumptions used in preparing the consolidated financial statements. When the war started, it had a negative impact on logging and logistics costs. The continuation of the war has removed Russian plywood from the European market, which has reflected upward pressure on plywood prices. The possible effects of the situation caused by the war on relevant factors have been taken into account in each estimate. The impact of the war on the estimates presented in the financial reporting is based on the best judgement of the management.
The company sold its subsidiary Koskisilva OOO to a third party and is closing its second subsidiary Koskiles OOO.
Key estimates and management judgement
The preparation of financial statements in conformity with IFRS requires management to use certain critical estimates and exercise judgement, which have an impact on the amount of assets and liabilities as well as the amount of income and expenses recognised for the financial year presented in these consolidated financial statements. In addition, the management is required to use judgement in the application of the accounting policies.
The estimates and judgement are continually evaluated and are based on the management’s best knowledge, historical experience and expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are presented in the following notes to the consolidated financial statements:
Note Key estimates and judgements
13. Forest assets Valuation of forest assets
14. Leases Embedded leases
14. Leases Lease term determination
14. Leases Determination of incremental borrowing rate
21. Provisions Estimation of the amount and timing of the provision
2. Segment information and revenue
Koskisen's chief operative decision-maker (CODM) is the Board of Directors which monitors the results of the Group and allocates resources to the segments. Koskisen’s operating segments, which also are the Group’s reportable segments are the Panel Industry and the Sawn Timber Industry. The Board of directors monitors each segment’s performance on the basis of revenue and EBITDA. Transactions between operating segments are based on arm’s length terms, and they are eliminated on consolidation.
The Panel Industry provides tailored high quality panel board solutions to our customers. The Panel Industry revenue comprises sales of plywood, chipboard, thin plywood and veneer as well as optimised van interior solutions.
The Sawn Timber Industry provides sawn timber and further-processed products that are produced from high-quality wood raw material. The Sawn Timber Industry revenue comprises sales of sawn timber and further processed timber as well as wood procurement side products for pulp and paper industry and bioenergy for several power plants.
Other consists of Kosava-Kiinteistöt Oy, 100% owned subsidiary providing facility management related services to the parent company, as well as some of the Group central functions which are not allocated to the segments.
Revenue by segments
                                         1.1.2022-31.12.2022                                      1.1.2021-31.12.2021
EUR thousand External Internal Total External Internal Total
Panel Industry 152,111 1,873 153,984 123,281 3,290 126,571
Sawn Timber Industry 165,426 23,637 189,063 187,980 22,114 210,094
Segments total 317,537 25,510 343,048 311,261 25,405 336,665
Other 114 581 695 204 525 729
Elimination of internal sales - -26,092 -26,092 - -25,930 -25,930
Total 317,651 - 317,651 311,464 - 311,464
Koskisen generates revenue mainly from the sale of goods, i.e. sawn timber and panel. Majority of the Koskisen’s revenue is recognised at a point in time when customer obtains control of the goods based on the applicable delivery terms. The payment terms in Koskisen’s customer contracts typically vary between 30 and 60 days, and the contracts do not include significant financing components. The contracts may include variable payments such as cash discounts or other discounts.
In 2022 and 2021 Koskisen had no external customers from which revenue recognised would have been over 10% of the Group’s total revenue.
Revenue by countries
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Finland 124,553 119,203
Japan 39,950 42,612
Germany 20,822 22,271
Poland 11,742 12,936
Other EU countries 81,718 67,321
Other countries 38,866 47,122
Yhteensä 317,651 311,464
EBITDA by segments
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Panel Industry 29,279 14,063
Sawn Timber Industry 41,557 50,652
Segments total 70,835 64,715
Other -4,747 -2,413
Eliminations 162 -66
Total 66,251 62,236
Reconciliation of EBITDA to operating profit (loss)
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
EBITDA 66,251 62,236
Depreciation, amortisation and impairments -8,083 -9,525
Operating profit (loss) 58,168 52,711
Contract assets and liabilities
EUR thousand Dec 31, 2022 Dec 31, 2021
Contract liabilities 1) 598 471
1) Included in Advances received in the balance sheet
Revenue was recognised for the majority of the amount included in the contract liability balance at the beginning of the period.
Non-current assets by geographical area
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Finland 101,898 81,876
EU countries 2,493 2,428
Other countries 42 2,416
Total 104,434 86,720
Accounting policy
Based on contracts with customers, sales of goods are distinct performance obligations. In addition, Koskisen applies various delivery terms based on Incoterms 2020, which are the official rules for the interpretation of trade terms as issued by the International Chamber of Commerce (ICC). Control of goods sold transfers at a point in time, typically when the title for the goods or physical possession of the goods has transferred to the customer, the customer has accepted the goods or Koskisen has right to payment.
When control of goods has transferred to the customer, but Koskisen still has responsibility to arrange for delivery or insurance, these services are considered as distinct performance obligations; and, if material, recognised over time, while the service is being performed. Koskisen considers that the customer is able to benefit from these services by simultaneously receiving and consuming the benefits provided by such a service.
The more widely used delivery terms are Carriage and Insurance Paid to (CIP), Carriage Paid to (CPT), Cost, Insurance and Freight paid to (CIF) or Cost and Freight paid to (CFR): with revenue for goods recognised at the point of handing over the goods to a carrier in accordance with relevant term; for Free of Carriage (FCA) sale of goods is recognised at the point of handing the goods over to the buyer’s carrier; and for Delivered at Place (DAP) at the point of delivery to destination.
Koskisen recognises revenue from contracts with customer to the amount that it expects to receive from the customer net of any sales taxes. Any variable considerations, such as discounts, included in the customer contract are estimated and included in the revenue only to the extent that it is highly probable that no significant reversal in the amount of cumulative revenue recognised will not occur. The amount of variable consideration is estimated at the end of each reporting period. When a contract contains more than one performance obligation, the consideration included in the contract is allocated to the performance obligations based on stand-alone selling prices. Koskisen does not have significant warranty or return obligations.
Koskisen does not recognise material contract assets arising from contracts with customers, as right to consideration typically meets the definition of trade receivables on initial recognition. Trade receivables are recognised when the control of the goods is transferred to the customer, and the consideration included in the contract is unconditional except for the passage of time. In Koskisen’s customer contracts the period between the transfer of the goods or services to the customers and the receipt of payment is less than 12 months. Koskisen has elected to use the practical expedient not to adjust revenue for the effect of financing components. Any advance payments received from the customers are recognised on the balance sheet (contract liability).
For any sales commissions paid, Koskisen applies a practical expedient, and recognises the cost as an expense as incurred as the amortisation period of the related assets would have been one year or less.
3. Financial risk and capital management
Financial risks are divided into credit risk covering business-related credit risk and financial credit risk, liquidity risk and market risk covering foreign exchange risk and interest rate risk. These financial risks are managed by the Koskisen Group Finance department in accordance with the Koskisen Treasury Policy. Koskisen Treasury Policy is approved by the Board of Directors of Koskisen Corporation.
The objective for treasury activities is to guarantee sufficient funding at all times and to identify, evaluate and manage financial risks.
Credit risk
Credit risk arises from cash and cash equivalents, funds measured at fair value through profit or loss (FVPL), favourable derivative financial instruments as well as trade receivables. The Group’s credit risks or counterparty risks are realised when the customer or other counterparty is unable to fulfil its commitments to the Group.
Regarding trade receivables Koskisen applies the expected credit loss model to assess impairment loss for the doubtful trade receivables since the trade receivables do not contain a significant financing component. To measure the lifetime expected credit losses, trade receivables have been grouped based on aging category and measured based on historical loss rates adjusted by forward looking estimates and individual assessment. Trade receivables is written off as impaired when receivership or bankruptcy is confirmed or when it is otherwise obvious that the customer will be unable to meet its payment obligations. Changes in impairment loss for doubtful trade receivables are recognised under other operating costs in the statement of comprehensive income. According to the principles of credit management, the quality of receivables is assessed on the basis of customer-specific analysis. Credit risks related to customers are managed by credit insurance, advance payment terms and/or by expecting bank guarantees or confirmed letters of credit for customer payments.
Koskisen is also exposed to counterparty risks related to financial institutions, through the significant amounts of liquid funds deposited with financial institutions, in the form of financial investments and in derivatives. Financial investments are made only with counterparties with high creditworthiness. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.
Loss allowance
Under 30 30-60 61-90 Over 90
EUR thousand Not due days days days days Total
Dec 31, 2022
Expected loss rate 0.1 % 0.1 % 0.2 % 1.6 % 100.0 %
Trade receivables, gross 22,043 3,369 125 31 15 25,584
Loss allowance -12 -2 -0 -0 -15 -30
Trade receivables, net 22,031 3,367 125 31 - 25,554
Under 30 30-60 61-90 Over 90
EUR thousand Not due days days days days Total
Dec 31, 2021
Expected loss rate 0.1 % 0.1 % 0.2 % 1.6 % 100.0 %
Trade receivables, gross 27,233 2,080 223 26 24 29,585
Loss allowance -15 -1 -1 -0 -24 -41
Trade receivables, net 27,217 2,079 222 26 - 29,544
Loss allowance reconciliation
EUR thousand 2022 2021
Opening loss allowance at Jan 1 41 219
Increase in loss allowance recognised in the statement of comprehensive income during the financial year 30 41
Receivables written off during the financial year as uncollectible -4 -96
Unused amount reversed -37 -123
Closing loss allowance at Dec 31 30 41
Liquidity risk
Cash flow from operations is the principal source of Koskisen’s financing. External funding, as well as cash and financial investments, are managed centrally by Koskisen Group Finance according to the Koskisen Treasury Policy. Financial investments are made mainly in short-term instruments to ensure continuous liquidity
Koskisen ensures sufficient liquidity at all times by efficient cash management and by maintaining sufficient available committed and uncommitted credit lines that are available until 2025. Refinancing risk is managed by having a sufficiently long loan portfolio. The Group’s existing credit facilities include committed revolving credit facility totalling to EUR 8.0 million as at 31 December 2022 (31 December 2021: EUR 10.0 million).
At the end of 2022, the funding of Koskisen was guaranteed by existing committed credit facilities, cash and financial investments. The Group had cash and cash equivalents totalling EUR 74.5 million as at 31 December 2022 (31 December 2021: EUR 30.5 million).
Committed revolving credit facilities, as well as the long-term loans, include a financial covenants described below in capital management section.
Maturities of financial liabilities
Total
contractual Carrying
EUR thousand 2023 2024 2025 2026 2027 2028- cash flows amount
Dec 31, 2022
Loans from financial institutions 1) 5,650 6,265 6,357 11,309 657 2,227 32,465 28,650
Lease liabilities 4,090 3,759 3,355 2,766 2,584 27,311 43,865 27,309
Trade payables 32,263 - - - - - 32,263 32,263
Trade payables, payment system 2) 7,316 - - - - - 7,316 7,316
Total 49,319 10,024 9,712 14,075 3,241 29,538 115,909 95,538
Total
contractual Carrying
EUR thousand 2022 2023 2024 2025 2026 2027- cash flows amount
Dec 31, 2021
Loans from financial institutions 1) 5,216 6,045 6,119 29,825 - - 47,206 32,695
Capital loans 1) - - - 14,241 - - 14,241 12,136
Lease liabilities 4,249 3,699 3,505 3,272 2,783 30,728 48,236 29,732
Derivative liabilities 750 500 350 100 - - 1,700 1,765
Trade payables 28,792 - - - - - 28,792 28,792
Trade payables, payment system 2) 6,604 - - - - - 6,604 6,604
Total 45,611 10,245 9,974 47,439 2,783 30,728 146,780 111,724
1) Included in Borrowings in the balance sheet
2) Trade payables under the payment system are payable on demand, so the company reports them as short-term debt.
Market risk
Commodity price risk
Prices of panel board and sawn wood products as well as timber used as raw material fluctuates based on international market conditions exposing Koskisen revenue and profitability to negative fluctuations. Koskisen hedges against electricity price risk fluctuations by entering partly in fixed price contracts. For the purchases between 1 to 12 months forward, the range of the price fixing is between 65% to 90% and for the following 13 to 24 months, the range of the price fixing is between 35% to 75%. The Group’s aim is to ensure that a sufficiently large proportion of the purchases is protected from fluctuations in the market price. The significant volatility of the electricity prices is an additional risk for production costs and its importance for market competition depends on the realisation of the risk in relation to competitors.
Foreign exchange risk
Koskisen’s headquarters is in Finland and Koskisen also has foreign subsidiaries in Poland and Russia. The Group is exposed to both transaction and translation foreign exchange risks. The Group’s business and results from operations are exposed to changes in exchange rates between the euro, the presentation currency, and other currencies, such as the U.S. dollar (USD) and British pound (UKP). The magnitude of foreign exchange exposures changes over time as a function of revenue and costs in different markets, as well as the prevalent currencies used for transactions in those markets. Significant changes in exchange rates may also impact Koskisen’s competitive position and related price pressures through their impact on our competitors.
The majority of Koskisen’s revenue and results are in the group companies’ functional currencies, hence Koskisen’s exposure to risks, other than risks arising from USD, is limited. Additionally, Koskisen is exposed to risks related to liquidity and payment discipline of its customers, which may impact cash flow or lead to credit losses
As shown in the table below, Koskisen is primarily exposed to changes in EUR/USD exchange rate. The sensitivity of profit or loss to changes in the exchange rates arises mainly from revenue, outstanding trade receivables in USD, and a bank account in USD. The timing of USD denominated sales was different in 2022 compared to 2021 hence the open USD receivables was significantly lower than 2021. The statement of comprehensive income was less sensitive to movements in EUR/USD exchange rate in 2022 than 2021. Koskisen’s exposure to other foreign exchange movements is not material.
To mitigate the impact of changes in exchange rates on Koskisen’s results, Koskisen hedges the foreign exchange exposure by entering into foreign exchange forward contracts. The Koskisen policy is to fix 100% of the USD denominated sales within the current quarter, 50% in the next quarter and 25% of the third quarter. The nominal amount of the outstanding USD foreign exchange forward contracts was EUR 2,404 thousand on 31 Dec 2022 (31 December 2021: EUR 9,435 thousand). The group’s open USD position as well as the derivatives and the sensitivity analysis of the position are presented in the tables below. At the balance sheet date, the open USD position is higher than the average during the financial period.
31.12.2022 31.12.2021
EUR thousand USD exposure
Trade receivables 523 3,567
Cash and cash equivalents 4,688 18,470
Trade payables 46 26
Foreign currency forwards (nominal value) 2,404 9,435
Foreign currency forwards (fair value) 82 -223
Impact on post-tax profit
EUR thousand 2022 2021
EUR strengthens against US dollar 10% -2,740 -3,056
EUR weakens against US dollar 10% 2,740 3,056
As Koskisen has entities where the functional currency is other than the euro, the shareholders’ equity is exposed to fluctuations in foreign exchange rates. Changes in shareholders’ equity caused by movements in foreign exchange rates are shown as currency translation differences in the consolidated financial statements. The Group does not hedge this risk
Interest rate risk
Koskisen borrows money from financial institutions and the interest rates of these loans are based on floating markets rates which exposes Koskisen to an increase in its financing costs (cash flow interest rate risk).
Koskisen hedges its exposure to changes in interest rates with interest rate swaps. These hedges cover 100% (91%) of the open balance of variable rate loans from the change of the market rates. Their nominal amount is EUR 30.0 million during the periods presented. The interest rate swap agreements are valid 2022 – 2025, and accordingly effectively fix interest rates partly to predetermined level for the whole loan period.
The following sensitivity analysis covers both variable rate loans and the interest rate swap contracts.
Impact on post-tax profit
EUR thousand 2022 2021
Interest rates – increase by one percentage points* - -30
Interest rates – decrease by one percentage points* - 30
*Holding all other variables constant
Capital management
Koskisen aims to manage its capital in a way that supports the profitable growth of operations by securing an adequate liquidity and capitalisation of the Group at all times. The target is to maintain a capital structure that contributes to the creation of shareholder value. Management monitors the capital structure with leverage (Net Debt to EBITDA).
The assets employed in Koskisen’s business consist principally of net working capital, fixed assets, and financial investments which are funded by equity and net debt. Koskisen aims to maintain low net working capital to ensure a healthy cash flow even when the business is growing and to maintain a high return on assets employed.
Koskisen has not defined a specific quantitative target for its capital management or capital structure, but the aim is to ensure strong credit quality to provide for ample access to external funding sources and to support the growth ambitions of the business. Koskisen considers its current capital structure to be a strength, as it allows for capturing potential value creating business opportunities, should such opportunities arise.
Koskisen completed an overall refinancing of their loans from financial institutions in April 2022. The key terms of the modified loans were:
- Interest 6 months Euribor
- Margin, which varies depending on financial performance
- Semi-annual repayments
- Covenants: Leverage, Equity ratio
- Termination date of the loan agreement 14 April, 2026
The loan was initially recognised at fair value, net of transaction costs incurred.
Koskisen's new loans include covenant conditions regarding the company's indebtedness and self-sufficiency (31 December, 2021 loans: indebtedness, equity ratio, cash flow adequacy and investments). The covenants are calculated from the figures according to Koskinen's Finnish accounting regulations and are reported to the financiers twice a year.
The table below combines the covenants of the new loans 31 December, 2022, and the old loans (31 December, 2021). The covenants were met throughout the reporting periods.
Dec 31, 2022 Dec 31, 2021
Actual Threshold Actual Threshold
Leverage -0.21 3.5 -0.13 3.5
Equity Ratio 52.50 % 30 % 43.30 % 30 %
Cash Flow Coverage - - 5.26 1
The Board of Directors of the company has adopted a dividend policy pursuant to which Koskisen aims to pay an attractive dividend in accordance with its strategy, investment requirements, financial position and market outlook. Koskisen aims to pay a dividend equal to no less than one third of its net profit annually.
4. Other operating income
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Sale of subsidiary 2,209 -
Sale of emission allowances 765 231
Grants received 350 211
Gains on disposal of property, plant and equipment 396 74
Firewood sales to forest owners 281 217
Lease income 99 108
Insurance claims 2 19
Other 213 51
Total 4,316 912
Koskisen participates in the European Union emission trading scheme in which it has received free emission allowances for a defined period. Koskisen was granted 43,675 units of CO2 emission rights for the year 2022 (2021: 0 units were granted). The rights in excess of the Group’s needs have been transferred to the following financial period. In 2022, Koskisen returned emission rights totalling 3,285 units (2021: 2,651 units were returned)
Koskisen’s CO2 credits as at 31 December 2022 amounted to 35,203 units (31 December 2021: 4,813 units) and their market value was approximately EUR 3,037 thousand (31 December 2021: EUR 390 thousand). Koskisen sold emission rights in 2022 amounting to EUR 765 thousand (2021: EUR 231 thousand). No rights have been purchased (2021: no purchases).
Accounting policy
Emission rights
Koskisen participates in the European Union's Emissions Trading Scheme aimed at reducing greenhouse gas emission and receives allowances, free of charge, for a defined period to emit a fixed tonnage carbon dioxide. Allowances received are initially and subsequently measured at cost (nominal amount). The related liability is measured at the carrying amount of the allowances. Any emissions exceeding the allowances received is measured at the market value of the excess emissions. Gains arising from the sale of the emission right allowances are recorded in other operating income in the statement of comprehensive income.
Government grants
Government grants are recognised when there is reasonable assurance that the conditions underlying the grants have been met and that the grant will be received. Government grants to cover expenses incurred are recognised in the statement of comprehensive income proportionally over the periods during which the related expenses are recognised.
Government grants received, for which the expenses have not yet been recognised, are recognised as an advance received in the consolidated balance sheet. The grant component for eligible expenses already incurred during the reporting period, for which the grant will be received in subsequent reporting periods, is recognised as grant income in the statement of comprehensive income and as other receivable in the consolidated balance sheet.
5. Materials and services
Materials and services comprise purchases of materials and supplies such as logs, coatings, glues, energy for production and other production materials. External services comprise log harvesting, transportation and machinery repair services.
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Purchases of materials and supplies 122,506 130,538
Change in inventories 2,979 -5,357
External services 36,285 39,934
Total 161,770 165,115
6. Employee benefit expenses
Koskisen employed an average of 925 employees in 2022, of which 809 employees were located in Finland and 74 in Poland. In addition, there were some 20 employees working in sales in different countries around the world. Koskisen’s employee benefit expenses are presented in the table below. The remuneration of the members of the Executive Board team, CEO and the members of the Board of Directors is presented in the note 24. Related party transactions.
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Wages and salaries 38,070 36,637
Pension costs - defined contribution plans 6,943 5,950
Social security costs 1,935 1,754
Other long-term benefits - service allowance -678 102
Total 46,269 44,443
Other long-term benefits consist of an annual service allowance plan. The cost of the plan is determined based on the advice of qualified actuary who carries out a full valuation of the plan on a regular basis using the projected unit credit method. Under this method, the costs of the plan are charged to the statement of comprehensive income to spread the regular costs over the working lives of the employees. Koskisen presents the service cost relating to defined benefit obligations in employee benefit expenses while the net interest is presented in finance costs
Average number of employees
Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Salaried employees 236 230
Workers 689 679
Average number of employees during the period 925 909
Accounting policy
Short-term employee benefits are recognised as expenses during the period in which related service is provided. A liability is recognised when the Group has a statutory and constructive obligation relating to employment relationship based on performance received and when an obligation can be measured reliably.
Koskisen has only defined contribution pension plans in the jurisdictions it operates. The Group pays contributions to external insurance companies and it does not have a legal or constructive obligation to make additional payments in case the recipient for pension contributions is unable to pay the pension benefits. The contributions are recognised as employee benefit expense in the statement of comprehensive income during the period to which the charge relates to.
Annual service allowance
Koskisen pays an annual service allowance to its production workers based on the collective agreements. The plan is accounted for as a long-term employee benefit plan according to IAS 19 Employee benefits, with items resulting from remeasurement, which include actuarial gains and losses, are recognised immediately in the consolidated balance sheet for the period through statement of comprehensive income (profit and loss) when they incur.
Past service costs are recognised as expenses at the earlier of the plan amendment or curtailment and when related restructuring costs or termination benefits are recognised. Net interest is calculated by applying the discount rate to the net liability or asset under the defined benefit plan. The Group recognises the changes in the net liability for the service cost in employee benefit expenses and net interest expense or income in finance costs, net.
The annual service allowance obligations and the related service costs have been calculated using the projected credit unit method by discounting the estimated future cash flows with the discount rate based on AA euro corporate bond yield curve which reflects the duration of the liability.
7. Share-based incentives
Share-based incentive plan 2022-2026
In March 2022, Koskisen established a share-based incentive program for its key employees for the years 2022 to 2024. The program consists of a three-year vesting period, 2022 to 2024. Key employees eligible for the program, related incentives paid, the vesting conditions and targets were determined by the Board of Directors in June 2022. The key employees eligible for the program (six individuals) can receive a maximum of 138,000 company shares (gross amount) if the terms of the program are met. The vesting conditions and the targets relate to meeting certain key figures (EBITDA and return on invested capital) and work obligation. The earned shares are given to the key employees after the vesting period ends. From the total number of shares, Koskisen withholds the withholding tax corresponding to the income tax liability of the key employee and pays it to the tax authorities. The arrangement has a net settlement feature of tax obligations and is classified as an equity-settled share-based transaction in its entirety. The arrangement is treated as an equity-settled share-based transaction.
Incentive plan related to the Initial public offering
In June 2022, Koskisen established a share-based incentive plan for key management. The Board of Directors has determined the employees eligible for the program, the incentives to be paid, and the vesting conditions and targets. The program includes two individuals who, if the conditions are met, can receive a maximum of 45,000 company shares. The earning criteria and goals are related to the listing and work obligation. The first part is paid two months after the listing and the second part 12 months after the first part is paid. The reward is paid half in shares and half in cash, which is determined by the value of the share at the time of payment. The arrangement is treated partly as an equity-settled and partly as a cash-settled share-based transaction.
Share-based incentive plan 2022-2026** Incentive plan related to the initial public offering** Total
Performance period 2022-2024 Installment 1 Installment 2 Tot/Wa
Maximum amount, pcs* 138,000 18,000 27,000 183,000
Initial allocation date Jul 1, 2022 Jun 21, 2022 Oct 6, 2022
Vesting date Apr 30, 2025 Feb 28, 2023 Feb 28, 2024
Maximum contractual life, years 2.8 0.7 1.4 1.6
Remaining contractual life, years 2.3 0.2 1.2 1.2
Number of persons at the end of reporting year 6 2 2
Payment method Equity and cash (net settlement) Equity and cash Equity and cash
*The amounts are presented in gross terms, i.e. the share reward figures both the reward paid in share and a number of shares corresponding to the amount of the reward paid in cash.
** Share-based incentive plan 2022-2026 and Incentive plan related to the initial offering amounts are adjusted by the share split carried out in November 2022.
Share-based incentive plan 2022-2026* Incentive plan related to the initial public offering*
Changes during the period Performance period 2022-2024 Installment 1 Installment 2 Total
Jan 1, 2022
Outstanding in the beginning of the period - - - -
Changes during period
Granted during period 138,000 18,000 27,000 183,000
Dec 31, 2022
Granted shares to which the right has not yet arisen 138,000 18,000 27,000 183,000
**Share-based incentive 2022-2026 and Incentive plan related to the initial public offering granted amounts are adjusted by the share split carried out in November 2022.
Fair value determination
The fair value of share-based incentives have been determined at grant date and the fair value is expensed until vesting. When calculating the expense, the fair value of the shares according to IFRS 2 is determined using the cash flow-based return value method. The pricing of the share based incentives granted during the period was determined by the following inputs and had the following effect:
Valuation parameters for instruments granted during 2022 Share-based incentive plan 2022-2026 Incentive plan related to the initial public offering
Instrument Performance period 2022-2024 Installment 1 Installment 2
Estimated market price of the share at the time of issuance, EUR 8.50 8.50 8.50
Maturity, years 2.8 0.7 1.4
Risk-free rate, % - - 1.68 %
Expected dividends, EUR - - 0.43
The fair value of the benefit per share at the time of grant, EUR 8.50 8.50 8.07
Share price at reporting period end, EUR 6.28 6.28 6.28
Effect  on the result and financial position
EUR thousand Jan 1 - Dec 31, 2022
Expenses for the financial year, share-based payments 241
Expenses for the financial year, share-based payments, equity-settled 164
Liabilities arising from share-based payments Dec 31, 2022 76
Estimated amount of cash to be paid for the tax withholding within the ongoing plans, Dec 31, 2022 217
Share issue directed to personnel
In September 2022, Koskisen carried out a directed share issue to its employees, in which all employees working in a permanent employment relationship could participate. The subscription price of the shares issued as part of the personnel offering (115,018) was lower than the fair value of the shares. Approximately 12% of Koskisen's employees subscribed shares in the personnel offering. The subsequent sale of the subscribed shares is limited and the shares are subject to an obligation to work for a period that ends with a separate decision of the Board of Directors, when two years have passed since the approval of the share subscriptions or when at least six months have passed since the listing, whichever occurs later.
Instrument Share issue directed to personnel*
Initial amount, pcs 260,000
Initial excercise price 3.00
Dividend adjustment No
Initial allocation date Sep 29, 2022
Vesting date Sep 29, 2024
Maximum contractual life, yrs 2
Remaining contractual life, yrs 1.7
Number of persons at the end of reporting year 112
Payment method Shares
*Share Issue Directed to Personnel 2022 initial amount is adjusted by the share split carried out in November 2022.
Changes during the period Share issue directed to personnel*
Jan 1, 2022
Outstanding in the beginning of the period -
Changes during period
Subscribed during period 115,018
Dec 31, 2022
Outstanding at the end of period 115,018
*Share Issue Directed to Personnel 2022 initial amount is adjusted by the share split carried out in November 2022.
Fair value determination
The issued shares are measured at fair value and the difference between the fair value of the shares issued less and subscription price is recognised as an expense over the employment obligation period. When calculating the expense, the fair value of the shares has been determined using the cash flow-based return value method, taking into account the estimate of the subscription price of a possible future share issue. The fair value was determined by the following inputs and had the following effect:
Valuation parameters for instruments granted during period 2022
Instrument Share issue directed to personnel
Estimated market price for the share at the time of the grant, EUR 8.50
Subscription price, EUR 3.00
Fair value of the benefit per share at the time of the grant, EUR 5.50
Share price at reporting period end, EUR 6.28
Effect on the result and financial position
Jan 1 - Dec 31, 2022
Expenses for the financial year, share-based payments, equity-settled 73
Liabilities arising from share-based payments Dec 31, 2022 -
Accounting policy
The Group's share-based incentive plans are classified as equity-settled or cash-settled share-based transactions. Transactions with the net settlement feature for tax obligations are classified in their entirety as equity-settled share-based transactions. Equity-settled share-based transactions are measured at the grant date fair value. The liabilities for the cash-settled share-based transactions are measured at the fair value on each reporting date. At the end of each reporting period, the company's management evaluates the probability of the fulfilment of the plan conditions (conditions based on the performance of the service and results), updates the estimate of the number of shares expected to finally vest and makes a corresponding adjustment on the expense recognised. Payments for share-based plans are expensed on a straight-line basis over the vesting period when the obligation has incurred. The expense is presented in the employee benefit expenses. For the equity-settled plans a corresponding amount is recognised as an increase in retained earnings, and for the cash-settled plans a corresponding liability is recognised in other liabilities on the balance sheet.
8. Depreciation, amortisation and impairment
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Property, plant and equipment, depreciation
Buildings and structures 1,063 1,265
Machinery and equipment 3,523 4,518
Other property, plant and equipment 215 250
Total 4,801 6,033
Property, plant and equipment, impairment
Buildings and structures 23 -
Machinery and equipment 54 -
Total 77 -
Right-of-use assets , depreciation
Power plants 1,658 1,844
Machinery and equipment 1,265 1,329
Land and water areas 49 49
Buildings 81 56
Total 3,053 3,278
Intangible assets, depreciation
Software 152 213
Total 152 213
Depreciation, amortisation and impairment total 8,083 9,525
Accounting policy
Depreciation and amortisation is recognised in the statement of comprehensive income on a straight-line basis over the estimated useful lives of property, plant and equipment and intangible assets. Right-of-use assets are depreciated over the shorter of the asset's useful life and the lease term. If Koskisen is reasonably certain on exercising a purchase option, the right-of-use asset is depreciated over its useful life.
9. Other operating expenses
Other operating expenses comprise costs related to sales freight, forwarding and chipping, expenses for property maintenance and IT expenses. Other expenses comprise among others travel, marketing and development costs
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Sales freight and forwarding 28,297 27,210
Maintenance of property 3,820 2,970
IT expenses 3,302 2,566
Listing costs 1) 1,830 -
Administrative expenses 1,825 1,414
Consulting and administrative services 1,728 1,229
Personnel related expenses 1,359 1,125
Sales commissions 902 989
Lease expenses 671 632
Other expenses 2) 3,290 2,513
Total 47,025 40,648
1) Expenses related to the listing on the main list of Nasdaq Helsinki Oy, other than those directly related to the issuance of new shares.
2) Other expenses include, for example, travel, marketing and development expenses.
Fees paid to the auditor of the Group performing the statutory audit for the years presented in the consolidated financial statements appointed by the annual general meeting are presented in the table below.
Auditor remuneration
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Audit 347 93
Tax and legal advisory services 74 10
Other services 1,178 23
Total 1,599 126
Auditor remuneration include the fees paid to the auditors of each Group company.
Accounting policy
Research costs are expensed as incurred in the other operating expenses in the statement of comprehensive income. Development costs are expensed as incurred unless they meet the criteria for internally developed intangible assets, in which case they are capitalised as intangible assets and amortised over their expected useful life. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
10. Finance income and expenses
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Interest income and other finance income
Foreign exchange gains 2,348 1,216
Gains on interest rate derivatives 3,010 1,164
Interest income 163 21
Gains on foreign currency derivatives 283 -
Other finance income 194 1
Total 5,998 2,403
Finance costs
Interest expenses from borrowings -421 -2,913
Interest expenses from lease liabilities -2,254 -2,301
Losses on foreign currency derivatives - -514
Losses on interest rate derivatives -396 -784
Foreign exchange losses -2,257 -509
Other finance expenses -1,081 -149
Total -6,408 -7,170
Finance income and costs total -410 -4,767
Foreign exhange gains in 2022 include EUR 877 thousand exchange rate gain from forward contract in rubles.
Other finance expenses in 2022 include commitment fees for renewed credit facility EUR 653 thousand and availability fees related to credit facility EUR 136 thousand.
11. Income tax
Income tax expense comprises current income tax based on the taxable income for the period and deferred tax expense.
Income tax expense
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Current tax on result for the period -9,844 -9,728
Adjustments for current tax of prior periods -5 151
Total current income tax expense -9,849 -9,577
Change in deferred tax assets -817 -167
Change in deferred tax liabilities -1,119 346
Total deferred tax expense -1,935 178
Income tax expense -11,784 -9,398
The difference between income taxes at the statutory tax rate in Finland (20%) and income taxes recognised in the statement of comprehensive income is reconciled as follows:
Reconciliation of the effective tax rate
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Profit (loss) before taxes 57,757 47,944
Tax calculated at Finnish tax rate 20 % -11,551 -9,589
Effect of other tax rates for foreign subsidiaries 10 26
Effect of the expenses not deductible for tax purposes -606 -45
Effect of the non-taxable income 377 8
Effect of utilisation of previously unrecognised deferred tax assets from tax losses - 50
Effect of unrecognised deferred tax assets from tax losses -9 -
Adjustment in respect to prior years -5 151
Income tax expense -11,784 -9,398
Deferred tax assets and liabilities
Recognised in profit or loss Reclassifi-cations Translation differences
EUR thousand At Jan 1 At Dec 31
2022
Deferred tax assets
Borrowings 1,030 -1,030 -
Other long-term employee benefits 734 -130 604
Derivatives 408 -353 -55 -
Tax losses 0 -0 -
Leases 384 710 -0 1,093
Provisions 24 -4 -0 20
Credit loss provision 8 -2 -0 6
Other items 173 -8 55 -2 219
Total 2,761 -817 - -2 1,942
Netting of deferred taxes -2,700 -1,814
Total 61 -817 - -2 129
Deferred tax liabilities
Accumulated depreciation differences 4,052 227 4,280
Intangible assets 168 -4 164
Derivatives - 306 306
Borrowings 95 531 626
Rental contracts 172 172
Other items 113 -113 -
Total 4,429 1,119 - - 5,547
Netting of deferred taxes -2,700 -1,814
Total 1,728 1,119 - - 3,734
Deferred tax liabilities, net 1,667 3,605
Recognised in profit or loss Translation differences
EUR thousand At Jan 1 At Dec 31
2021
Deferred tax assets
Borrowings 906 124 1,030
Other long-term employee benefits 753 -19 734
Derivatives 544 -122 -14 408
Tax losses 323 -323 0
Leases 186 197 384
Provisions 28 -4 24
Credit loss provision 44 -36 8
Other items 159 14 173
Total 2,943 -167 - -14 2,761
Netting of deferred taxes -2,939 -2,700
Total 4 61
Deferred tax liabilities
Accumulated depreciation differences 4,378 -326 4,052
Intangible assets 150 18 168
Derivatives 63 -63 -
Borrowings 41 54 95
Other items 143 -30 113
Total 4,774 -346 - - 4,429
Netting of deferred taxes -2,939 -2,700
Total 1,836 1,728
Deferred tax liabilities, net 1,832 1,667
Koskisen had EUR 243 thousand (31 December 2021: EUR 8,480 thousand) of tax losses carried forward for which no deferred tax assets are recognised of which EUR 214 thousand (31 December 2021: EUR 8,451 thousand) related to Koskisen’s operation in Russia. The tax losses will expire in 5 -10 years. In Russia there is no expiration for the tax losses, however, the Group expects not to utilise these losses.
Accounting policy
Income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income, based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and considers whether it is probable that a taxation authority will accept an uncertain tax treatment. The Group measures its tax balances either based on the most likely amount or the expected value, depending on which method provides a better prediction of the resolution of the uncertainty.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Deferred tax
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
12. Property, plant and equipment
Property, plant and equipment
EUR thousand Land Buildings and structures Machinery and equipment Other tangible assets Advance payments and construction in progress Total
Cost at Jan 1, 2022 2,730 65,881 93,572 6,661 6,797 175,642
Additions 81 435 4,803 34 21,267 26,621
Disposals -84 -5,542 -3,996 -706 12 -10,316
Reclassifications - 490 685 73 -1,329 -80
Translation differences 7 -24 15 -1 -8 -11
Cost at Dec 31, 2022 2,734 61,241 95,078 6,061 26,741 191,854
Accumulated depreciation and impairment at Jan 1, 2022 - -44,186 -71,252 -5,063 - -120,500
Depreciation - -1,063 -3,523 -215 - -4,801
Accumulated depreciation of disposals and reclassifications - 5,397 3,542 866 - 9,806
Impairment - -23 -54 - - -77
Translation differences - 4 -11 0 - -6
Accumulated depreciation and impairment at Dec 31, 2022 - -39,870 -71,297 -4,412 - -115,579
Carrying value at Jan 1, 2022 2,730 21,696 22,321 1,598 6,797 55,142
Carrying value at Dec 31, 2022 2,734 21,370 23,781 1,650 26,741 76,275
EUR thousand Land Buildings and structures Machinery and equipment Other tangible assets Advance payments and construction in progress Total
Cost at Jan 1, 2021 2,676 64,850 91,894 6,120 331 165,871
Additions 63 766 1,377 457 6,705 9,368
Disposals -12 -6 -55 -1 - -74
Reclassifications - 58 167 11 -236 -0
Translation differences 3 214 189 74 -3 477
Cost at Dec 31, 2021 2,730 65,881 93,572 6,661 6,797 175,642
Accumulated depreciation and impairment at Jan 1, 2021 - -42,546 -66,626 -4,765 - -113,937
Depreciation - -1,265 -4,518 -250 - -6,033
Accumulated depreciation of disposals and reclassifications - -0 46 1 - 47
Impairment - -1 - - - -1
Translation differences - -373 -154 -49 - -576
Accumulated depreciation and impairment at Dec 31, 2021 - -44,186 -71,252 -5,063 - -120,500
Carrying value at Jan 1, 2021 2,676 22,303 25,268 1,355 331 51,934
Carrying value at Dec 31, 2021 2,730 21,696 22,321 1,598 6,797 55,142
Other tangible assets comprise, amongst others, constructions of road, parking and warehouse areas and an art collection
The increase in machinery and equipment in 2022 is mainly related to the new Järvelä sawmill (stick stacker, EUR 3.3 million). Advance payments and construction in progress include EUR 21.6 million related to the construction of the new sawmill, of which the additions in 2022 amount to EUR 15.8 million. In addition, the increase in advance payments and construction in progress includes EUR 1.3 million related to the stormwater system in the Mäntsäläntie area.
The increase in machinery and equipment in 2021 relates mainly to veneer dryer modernisation (EUR 552 thousand) and in other tangible assets to the new road and warehouse area for the new sawmill in Järvelä (EUR 452 thousand). In buildings and structures EUR 375 thousand of the increase relates to the acquisition of neighbouring property for warehouse purposes in the new sawmill site. Additions to advanced payments and construction in progress include EUR 5.8 million related to the building of the new sawmill.
Koskisen is building a new sawmill in Järvelä. The production is expected to start in stages during 2023 and 2024. The new sawmill is expected to increase the production capacity in the Sawn Timber Industry. Koskisen has estimated that it will invest a total of approximately EUR 50 million between the years 2021 and 2024
Accounting policy
Land is recognised in property, plant and equipment at cost. Other property, plant and equipment is recognised at cost less accumulated depreciation and any impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated using the straight-line method over the estimated useful life of the asset.
The estimated useful economic lives of property, plant and equipment are
- Buildings and structures 10-50 years
- Machinery and equipment 5-15 years
- Other tangible assets 5-10 years
The residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income
Impairment
Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. The assets are tested at the cash generating unit (CGU) level, which is represents the lowest level for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets.
Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
13. Forest assets
Koskisen owns 813 hectares of forests land in Southern Finland at the end of the reporting period. The value of the forest assets, i.e. standing trees, is EUR 2.7 million as at 31 December 2022 (31 December 2021: EUR 2.8 million).
Forest assets
EUR thousand 2022 2021
Carrying value, at Jan 1 2,750 2,672
Gain (loss) arising from changes in fair value -19 91
Decreases due to sales - -12
Carrying value, at Dec 31 2,731 2,750
Koskisen uses forest certification and all of its own forests are certified by the Programme for the Endorsement of Forest Certification (PEFC). PEFC sets requirements for the monitoring of certified wood raw materials and wood products in supply chains. All wood raw material must come from certified forests. In addition, the certification requires safeguarding the diversity of forests, maintaining the health and growth of forests and the use of the forests for recreational use.
Accounting policy
The forest land is divided into the forest assets i.e. standing trees and land. Forest assets are recognised at fair value less cost to sell. Land is recognised at cost and presented in property plant and equipment.
The fair value of forest assets is calculated using the sum value method, in which the values of the soil base, saplings and standing trees are valuated separately and the total value is adjusted based on the special characteristics of the forests. The fair value of forest assets is classified as level 3 in the fair value hierarchy due to the use of the unobservable inputs, for example wood growth. Changes in the fair value of the forest assets is recognised in the operating profit (loss) in the statement of comprehensive income.
Key estimates and judgements
Valuation of forest assets
The valuation of forest assets is a complicated process and requires several management estimates and judgement on assumptions that have a significant impact on the value of the forest assets presented on the balance sheet. Factors requiring management estimates include estimates on wood growth, analysing the appropriateness of harvesting and stumpage prices and management review of the valuation related data provided by third-party service providers. Stumpage prices used in the calculations are based on prices from third-party valuation service providers and have been compared to Finnish statistical database prices.
14. Leases
Koskisen’s lease contracts comprise leases of real estates, including offices, apartments, warehouses and land areas, production machinery and equipment, cars and leases of other machinery and equipment, such as IT equipment. The lease terms are fixed or valid until further notice and may include extension or termination options. The lease contracts may include index clauses, which are typically based on the consumer price index. These are not included in the measurement of lease liability until they realise.
In addition, Koskisen has entered into an agreement for heat energy supply which includes a lease contract for power plants. Koskisen has right to receive substantially all the economic benefits from the use of the power plants. The agreement includes an option based on which at the end of the 15 years agreement period, or in case of a breaching event, Koskisen has the right and obligation, if the other party requires, to redeem the power plants for itself or for a third party. Due to restructuring the lease agreement during 2022 Koskisen received a payment of EUR 3.0 million which was recognised as decrease to the right-of-use assets.
Koskisen also has an agreement for sawn timber manufacturing. All payments for the agreement are variable, and therefore not included in the measurement of the lease liability but are recognised as cost in the statement of comprehensive income as incurred.
The balance sheet shows the following amounts relating to leases:
EUR thousand Dec 31, 2022 Dec 31, 2021
Right-of-use assets
Power plants 19,822 24,594
Machinery and equipment 2,274 2,674
Land and water areas 278 348
Buildings 328 197
Total 22,702 27,814
Lease liabilities
Non-current 25,294 27,578
Current 2,015 2,154
Total 27,309 29,732
Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Additions to the right-of-use assets during the financial year 1,022 1,066
The statement of comprehensive income shows the following amounts relating to leases:
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Depreciation charge of right-of-use assets
Power plants 1,658 1,844
Machinery and equipment 1,265 1,329
Land and water areas 49 49
Buildings 81 56
Total 3,053 3,278
Interest expense 2,254 2,301
Expense relating to short-term leases 1) 14 46
Expense relating to leases of low value assets
that are not short-term leases1) 345 364
Expenses relating to variable lease payments
not included in lease liabilities1) 1,466 2,529
1)Included in other operating expenses
Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
The total cash flow for leases in the financial year 7,326 7,531
The maturity of the lease liabilities is presented in note 3: Financial risk and capital management.
Accounting policy
At the contract inception, Koskisen assesses whether the arrangement is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Koskisen recognises a right-of-use asset and a corresponding lease liability at contract commencement for leases where it is a lessor. The contract commencement date is the date on which the asset is available for use by the lessee.
Koskisen measures the lease liability at the commencement by discounting the future lease payments to their present value. The lease payments include fixed payments, variable lease payments based on an index or a rate, residual value guarantees, which are expected to be payable by Koskisen and the exercise price of a purchase option, if Koskisen is reasonably certain to exercise the option. Penalties for terminating the lease are included in the lease liability measurement if the lease term reflects that Koskisen will use the termination option.
Koskisen discounts lease payments using the interest rate implicit in the lease. If that rate cannot be readily determined, Koskisen uses the incremental borrowing rate, i.e. the rate that Koskisen would have to pay to borrow over a similar term, and with a similar security to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Interest expense on lease liabilities is presented in the cash flow from operating activities.
After the lease commencement, lease liability is measured at amortised cost using the effective interest method. Lease liability is remeasured, when the lease payments change due to, for example, index change, exercising of option included in the lease are reassessed or to reflect other lease modifications.
Right-of-use assets are measured at cost comprising the initial amount of the lease liability, any lease payments made at or before the contract commencement, any initial direct costs and restoration costs. Right-of-use assets are depreciated using the straight-line method over the shorter of the asset’s useful life and lease term. If Koskisen is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the asset’s useful life.
Koskisen applies the short-term and low value asset exemptions provided by the standard. Short-term leases are leases with a lease term of 12 months or less. Low value assets include, among others, bicycles and ICT equipment. Lease payments associated with those leases are recognised as an expense on a straight-line basis. Koskisen does not separate non-lease components from lease components in the sawmill lease.
Koskisen has minor activities as a lessor by leasing its land areas and apartments. Koskisen classifies all of its leases as operating leases as the leases do not transfer substantially all of the risks and rewards incidental to ownership of an underlying assets.
Key estimates and judgements
Embedded leases
Koskisen has agreements for heat energy supply and sawn timber manufacturing for which management has assessed whether the agreements include a lease. When the agreements include an identified asset and Koskisen utilises substantially all of the capacity of the assets and therefore obtains substantially all of the economic benefits from the use of the assets, and if Koskisen also has right to direct the use of the asset for a period of time, Koskisen accounts the arrangement as a lease. In some arrangements all the payments for a lease are variable, not dependent on index or a rate, and not in-substance fixed. Accordingly, for such arrangements no lease liability nor right-of-use asset has been recognised in the balance sheet.
Lease term determination
Koskisen assesses the lease term on a lease-by-lease basis based on the contractual obligations, economic incentives, and nature of the asset. Koskisen’s lease contracts include contracts with fixed lease terms, extension and termination options and contracts that are valid until further notice.
If the contract contains a fixed lease term without option to extend or to terminate the lease, the lease term is set based on the fixed lease term. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
If the lease term is not stated clearly in the contract, or will continue in perpetuity until further notice, management assesses the enforceable period of the lease based on the contractual terms and reasonable certainty. In case there are no significant penalties involved in contracts where the lease term in not stated clearly or continues until further notice, the Group determines the lease term on a lease-by-lease basis reflecting the Group’s need for the underlying asset and its strategic planning period of five years.
The lease term is reassessed if a significant event or change in circumstances occurs.
Incremental borrowing rate determination
The incremental borrowing rate is determined based on recent third-party financing agreements as a starting point, adjusted to reflect the lease term, credit risk for leases, the leased asset and changes in financing conditions and operating environment since third-party financing was received.
15. Intangible assets
EUR thousand Softwares Advance payments and work in progress Total
Cost at Jan 1, 2022 3,185 160 3,345
Additions 100 275 374
Disposals -94 - -94
Reclassifications 225 -144 80
Cost at Dec 31, 2022 3,415 290 3,705
Accumulated amortisation and impairment at Jan 1, 2022 -2,726 - -2,726
Accumulated amortisation of disposals and reclassifications 95 - 95
Amortisation -152 - -152
Accumulated amortisation and impairment at Dec 31, 2022 -2,782 - -2,782
Carrying value at Jan 1, 2022 459 160 619
Carrying value at Dec 31, 2022 633 290 923
EUR thousand Softwares Advance payments and work in progress Total
Cost at Jan 1, 2021 2,791 185 2,976
Additions 246 123 369
Reclassifications 148 -148 -
Cost at Dec 31, 2021 3,185 160 3,345
Accumulated amortisation and impairment at Jan 1, 2021 -2,512 - -2,512
Amortisation -213 - -213
Accumulated amortisation and impairment at Dec 31, 2021 -2,726 - -2,726
Carrying value at Jan 1, 2021 279 185 464
Carrying value at Dec 31, 2021 459 160 619
Accounting policy
Software-related costs
Software costs are recognised as an asset if Koskisen has control over the underlying asset, at historical cost less accumulated amortisation and impairment losses. Amortisations are calculated on a straight-line method over the useful economic lives of the assets which is five years.
The assets’ useful lives and amortisation methods are reviewed at minimum at the end of each reporting period and adjusted, if appropriate, to reflect changes in the expected economic benefits. The amortisation of intangible assets is commenced when the asset is ready for its intended use.
Impairments are presented in note 12: Property, plant and equipment.
16. Inventories
EUR thousand Dec 31, 2022 Dec 31, 2021
Raw materials 20,111 23,000
Work in progress 4,019 3,342
Finished goods 10,044 11,720
Total 34,174 38,062
Write-downs of slow-moving inventories to net realisable value amounted to EUR 98 thousand in 2022 (2021: EUR 12 thousand). These were recognised as an expense during the financial year and included in changes in inventories of finished goods and work in progress in the statement of comprehensive income. The Group reversed EUR 12 thousand of a previous inventory write-down in 2022, based on the Group’s assessment of the net realisable values (2021: EUR 23 thousand). The amount reversed has been included in changes in inventories of finished goods and work in progress in the statement of comprehensive income.
Accounting policy
Inventories are stated at the lower of cost and net realisable value, the cost being determined by the weighted average cost method. The cost comprises raw materials, direct labour, depreciation and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale
A valuation allowance is made for old, slow-moving inventories based on the management’s best estimate of the expected net realisable value at the end of the reporting period.
17. Other receivables
EUR thousand Dec 31, 2022 Dec 31, 2021
Non-current assets
Other receivables - 1
Accruals of financial expenses 79 172
Total 79 174
Current assets
Advances of purchases of logs 2,273 2,277
VAT receivables 2,831 1,368
Other receivables 1,133 787
Other accrued income on expenses 3,297 986
Total 9,534 5,418
Other receivables total 9,613 5,592
18. Equity
EUR thousand Total number of shares outstanding (pcs) Share capital Reserve for invested unrestricted equity
Jan 1, 2021 630 1,512 -
Dec 31, 2021 630 1,512 -
Dec 31, 2021 630 1,512 -
Free share issue (split) 6,299,370 -
Share issue (merger)1) 2,532,294 - 43,252
Directed share issue, personnel 2) 57,509 - 345
Free share issue (split) 8,889,803 - -
Listing share issue 5,223,053 - 30,246
Dec 31, 2022 23,002,659 1,512 73,843
1) Additional information in note 23: Group structure
2) Additional information in note 7: Share-based incentive plans
Share capital
Koskisen Corporation has one series of shares and all shares are equally entitled to dividends. One share carries one vote at the general meeting. The company does not hold its own shares.
Koskisen carried out a free share issue (split) approved by the annual general meeting on 26 April 2022. The shares were entered in the share register on 31 May 2022. The shareholders were issued 9,999 shares for each old share. The total number of shares increased retrospectively to 6,300,000 shares.
Koskisen carried out a free share issue (split) approved by the extraordinary general meeting on 31 October 2022. The shares were entered in the share register on 11 November 2022. The total number of Koskisen’s shares increased to 17,779,606 shares as shareholders were issued one new share for each old share.
The free share issues did not impact the company's share capital or capital structure.
Trading in Koskisen Corporation shares began on 1 December 2022. In the initial public offering, 5,223,053 new shares were issued and the total number of shares in the company after the initial public offering is 23,002,659 shares. The new shares were registered in the Trade Register on 30 November 2022. Koskisen received gross proceeds of EUR 32 million from the IPO, which were recognised in the reserve for invested non-restricted equity. The company’s listing costs amounted to EUR 4.1 million. Of these, listing expenses recognised in equity were EUR 2.2 million less the tax impact of EUR 0.4 million and expenses recognised in profit or loss were EUR 1.8 million. The final subscription price was EUR 6.14 per share in the institutional and public offering and 10 per cent lower, or EUR 5.53 per share, in the personnel offering, based on which the company’s market capitalisation was approximately EUR 141 million immediately after the IPO. There was strong demand for the shares, and the share issue was oversubscribed. The trading code for Koskisen shares is KOSKI.
Legal reserve
The legal reserve comprises the amounts transferred from distributable funds under the articles of association or by decision of the general meeting.
Translation differences
Translation differences arising from the translation of the financial statements of foreign subsidiaries are recognised in the other comprehensive income and accrued in a separate equity reserve. The cumulative amount of translation differences is recognised in the consolidated statement of comprehensive income on the disposal of the net investment.
19. Earnings per share
Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Earnings per share
Profit (loss) for the period attributable to the owners of the parent company (EUR) 39,745,676 29,240,253
Weighted average number of shares outstanding during the period 16,043,440 12,600,000
Diluted weighted average number of shares outstanding during the period 16,069,899 12,600,000
Basic earnings per share (EUR) 2.48 2.32
Diluted earnings per share (EUR) 2.47 2.32
The basic and diluted earnings per share for profit attributable to the ordinary equity holders of the parent company for periods presented have been adjusted retrospectively for the effects of the free share issues (splits) determined on 24 April 2022 and 31 October 2022.
Koskisen carried out a free share issue (split) approved by the annual general meeting on 26 April 2022. The shares were entered in the share register on 31 May 2022. The shareholders were issued 9,999 shares for each old share. The total number of shares increased retrospectively to 6,300,000 shares.
Koskisen carried out a free share issue (split) approved by the extraordinary general meeting on 31 October 2022. The shares were entered in the share register on 11 November 2022. The total number of Koskisen’s shares increased to 17,779,606 shares as shareholders were issued one new share for each old share.
The free share issues did not impact the company's share capital or capital structure.
Accounting policy
Basic earnings per share is calculated by dividing the profit attributable to owners of the parent company by the weighted average number of ordinary shares outstanding during the financial period. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into consideration the Group’s potential commitment to issue new shares in the future.
20. Financial assets and liabilities
Financial assets and financial liabilities by category
Thousand eur Fair value hierarchy level Dec 31, 2022 Dec 31, 2021
Financial assets measured at amortised cost
Trade receivables - 25,541 29,544
Cash and cash equivalents - 74,527 30,538
Total financial assets measured at amortised cost 100,068 60,081
Financial assets measured at fair value through profit or loss
Money market funds 1 9,892 9,958
Derivatives 2 1,528 -
Other assets measured at fair value through profit or loss 3 223 223
Total financial assets measured at fair value through profit or loss 11,644 10,181
Financial liabilities measured at amortised cost
Loans from financial institutions 2 28,650 32,695
Capital loans 3 - 12,136
Lease liabilities - 27,309 29,732
Trade payables - 32,263 28,792
Trade payables, payment system - 7,316 6,604
Total financial liabilities measured at amortised cost 95,538 109,959
Financial liabilities measured at fair value through profit or loss
Derivative liabilities 2 - 1,765
Total financial liabilities measured at fair value through profit or loss - 1,765
The fair value of financial institution loans on 31 December 2022 was EUR 29.1 million (31 December 31 2021: EUR 33.0 million). The fair value of the loans has been determined by discounting the future cash flows at the estimated market interest rate at the time of reporting. The company has estimated that the contractual interest rate of the loans is reasonably close to the market interest rate, and has not made an adjustment to the discount rate at which the fair values are defined, in which case the fair values of the loans correspond to their nominal value. Since the company's loans from financial institutions have variable interest rates, the rise in market interest rates during the period has been directly reflected in the Group's interest expenses and has therefore not affected the fair value of the loans. Fair values of loans from financial institutions are classified in level 2 in the fair value hierarchy.
The capital loans and their due interest were paid off during financial year 2022. Their fair value on 31 December 2021 was EUR 12.1 million. Fair values of capital loans are classified as level 3 in the fair value hierarchy due to the use of unobservable inputs, which are own credit risk and estimated repayment and interest payment dates. If the credit spread on the measurement dates would be higher than estimated by the management, the fair values of the capital loans would be lower and vice versa.
The fair value of derivatives is estimated based on the present value of future cash flows using market prices on the valuation date, and fund investments based on counterparty quotes. Changes in the fair value of derivatives and fund investments are recorded in financial income and expenses, which are detailed below. The most significant part of the changes in the fair value arises from derivatives, and they are mainly due to the increase in market interest rates and the strengthening of the USD against the euro during the reporting period. The group's open USD balance position at the time of closing on 31 December 2022 is significantly lower than on 31 December 2021, consisting of trade receivables and a bank account, totalling EUR 7.0 million (31 December 2021: EUR 22.0 million). The nominal value of the hedging open futures on the reporting date is EUR 6.80 million (31 December 2021: EUR 11.6 million).
The hierarchy levels are as follows:
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.
Reconciliation of financial liabilities
Lease
Thousand eur Borrowings liabilities Total
Jan 1, 2021 48,361 30,957 79,318
Cash flows from financing
Proceeds 35,000 - 35,000
Repayments -39,000 -2,291 -41,291
Other changes -
New leases - 1,066 1,066
Interest paid 1) and interest expense 471 - 471
Dec 31, 2021 44,831 29,732 74,563
Cash flows from financing
Proceeds 29,000 - 29,000
Repayments -43,988 -3,445 -47,433
Other changes -
  Exportkredit loan 3) 3,846 - 3,846
New leases - 1,022 1,022
Interest paid 1) and interest expense -5,039 - -5,039
Dec 31, 2022 28,650 27,309 55,959
1)Included in the Net cash flow from operating activities
2) During the period interest of capital loan EUR 5.8 million was paid
3) No cash flow impact
Changes in financial liabilities
Koskinen entered into a new financing agreement in the second quarter of 2022 in order to simplify its financing structure, lengthen the average maturity of financial liabilities and lower its financing costs. There are three loans under the loan agreement, a term loan of EUR 19.0 million, a term loan of EUR 10.0 million and a standby credit of EUR 8.0 million, which is intended to finance the group's general working capital requirements. At the time of reporting, a total of EUR 29.0 million has been withdrawn from the loans. The overdraft has not been withdrawn in its entirety.
The loan agreement is valid for four years. The loan agreement includes the usual financial covenant and default terms. Financial covenants are measured every six months on a rolling basis for the past 12 months and are calculated from the Koskisen Group's financial information prepared in accordance with FAS. The interest on the loans is tied to the six-month Euribor, and they also have a margin, the level of which depends on the ratio of net debt to EBITDA.
As at 31 December 2021, Koskisen had capital loans of EUR 12.1 million (including cumulative unpaid interest) from the shareholders of the company of which certain shareholders having significant influence over the company. The loan capital and accrued interest was fully paid back during 2022.
Koskisen's loans from financial institutions expose the group's cash flow to interest rate risk, the importance of which has been emphasised during the period as market interest rates have risen considerably. There have been no changes in Koskisen's interest rate risk hedging policy, but the Group's management constantly evaluates the amount of open risk and the need for additional hedging. Koskisen has interest rate swaps with a total nominal value of EUR 30 million. The changes in the fair value of the interest rate swaps net out the profit effects of the loan's interest rate changes, protecting the group from interest rate risk, even though they are not one-to-one with the group's financial institution loans. The interest rate swap agreements are valid until 2025, and there were no changes to them in connection with the renewal of the financial loans.
The Group’s exposure to various risks associated with the financial instruments is discussed in the note 3: Financial risk and capital management. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above.
Accounting policy
The Group’s financial assets comprise trade receivables, money market funds and cash and cash equivalents. Money market funds are classified as financial assets at fair value through profit or loss and trade receivables and cash and cash equivalents are classified as financial assets measured at amortised cost, as assets are for collection of contractual cash flows, where those cash flows represent solely payment of principal and interest. Interest income from these financial assets is included in finance income using the effective interest rate method.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Any gain or loss arising on derecognition is recognised directly in the statement of comprehensive income and presented in other operating expenses.
Money market funds
Koskisen has invested in money market securities. The money market funds are measured at fair value through profit or loss as they don’t meet the solely payments of principal and interest (SPPI) test under IFRS 9 Financial instruments.
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into, and they are subsequently remeasured to their fair value at the end of each reporting period. The Group has entered into interest rate swap contracts and foreign currency forward contracts for hedging purposes, even though hedge accounting, as specified under IFRS, is not applied. The fair value of derivatives is estimated based on the present value of future cash flows using market prices on the measurement date.
Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and are therefore all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional, unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details on the Group’s impairment policies and the calculation of the loss allowance are provided in note 3: Financial risk and capital management.
Due to the short-term nature of the trade receivables, their carrying amount is considered to be the same as their fair value.
Cash and cash equivalents
Cash and cash equivalents presented in the balance sheet and cash flow statement consist of cash at bank and in hand. Any utilised credit limits are presented as current liabilities. Credit limits are a part of the liquidity 31 management. Liquidity risk and its management is described in note 3: Financial risk and capital
management.
Impairment of financial assets
For trade receivables and contract assets Koskisen applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.
To measure the expected credit losses, trade receivables have been grouped based on aging category. The expected loss rates are based on the actual performance over the comparison period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the
ability of the customers to settle the receivables. The factors considered include, but are not limited to, customers’ previous payment behaviour, available forecasts and their possible impact on the credit rating and payment behaviour of customers, as well as possible securities and credit insurances.
Receivables are derecognised as final credit losses when their payment cannot be reasonable expected. Indications that the payment cannot be reasonably expected include, unsuccessful collection efforts, bankruptcy notification etc.
Credit risk arising from financial assets, management of credit risk and the provision matrix of trade receivables are presented in note 3: Financial risk and capital management.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in the statement of comprehensive income as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.
Trade payables
Trade payables represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade payables are presented as current liabilities unless payment is not due within 12 months
after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. The carrying amount of trade payables is considered to equal their fair value due to their short maturity.
Trade payables, payment system
Koskisen provides, as part of its wood procurement process, a possibility for the seller to deposit the transaction price or part of the transaction price received from the sale of logs to Koskisen. Fixed interest rate is offered varying according to the length of the deposit period. The length of the deposit varies between one and three years. However, the seller has a right to withdraw the deposit whenever with a 45 days’ notice period. These payment system trade payables are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Due to the right to withdraw the deposit the payables are presented as current on the balance sheet. The carrying amount of the payment system trade payables is considered to equal their fair value due to their short maturity.
21. Provisions
EUR thousand Environmental provisions Others Total
Jan 1, 2022 120 - 120
Increase - 20 20
Used during the year -20 - -20
Dec 31, 2022 100 20 120
Non-current 100 - 100
Current - 20 20
Total 100 20 120
EUR thousand Environmental provisions Others Total
Jan 1, 2021 138 - 138
Used during the year -18 - -18
Dec 31, 2021 120 - 120
Non-current 120 - 120
Total 120 - 120
Koskisen has a provision to cover costs estimated still to incur from the cleaning of groundwater. As a consequence of the 1976 fire at the sawmill, a significant amount of chlorophenol ended up in groundwater around the factory. The Group has since committed funds to clean the contaminated ground and groundwater. Currently the chlorophenol content has been lowered to low levels, but Koskisen will continue the cleaning and monitoring work for some years to come.
Koskinen is closing down subsidiary OOO Koskiles in Russia. Koskisen has made a provision to cover the estimated closing costs totalling EUR 20 thousand.
Accounting policy
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are presented as current liabilities if amounts are expected to be settled within 12 months from the end of the reporting period. Otherwise provisions are presented as noncurrent liabilitie
Key estimates and judgements
Estimation of the amount and timing of the provision
An estimate of the financial impact of a past event requires judgement from the management. Koskisen’s management has estimated that the groundwater cleaning will continue for another 5-6 years. The expected costs have been estimated based on the historical costs and knowledge of similar events. The provision amounts are reviewed regularly and adjusted as necessary to reflect the best estimate at the end of the reporting period. Actual expenses may differ from the estimates.
22. Other payables
EUR thousand Dec 31, 2022 Dec 31, 2021
Current liabilities
Accrued employee expenses 10,051 10,031
Payroll tax liabilities 2,008 1,914
Subcontractor accruals 2,730 1,570
Accrued listing costs 1,765 -
VAT liabilities 338 398
Interest liabilities 466 536
Other liabilities 692 472
Other accrued liabilities 1,452 428
Total 19,501 15,348
Other liabilities total 19,501 15,348
23. Group structure
Subsidiaries belonging to the Group as at 31 December 2022 are presented in the following table:
Group Group
Country of ownership % ownership %
Subsidiary incorporation Dec 31, 2022 Dec 31, 2021
OOO Koskiles Russia 100 % 100 %
OOO Koskisilva Russia 0 % 100 %
Koskisen Oy Finland 0 % 75.2 %
Kosava-Kiinteistöt Oy Finland 100 % 75.2 %
Koskisen Sp z.o.o Poland 100 % 75.2 %
Koskisen has previously announced that it will divest its business operations in Russia. During the reporting period, Koskisen decided to shut down the Russian logistics and timber procurement company OOO Koskiles during the financial year 2023. Currently, it is not possible to foresee the timing of its implementation due to the processes of the local authorities. OOO Koskiles’ share of the Group’s revenue was small, and the financial impact of the closure of operations on the Group will be minor. Koskisen has written down OOO Koskiles’ assets, EUR 45 thousand in machinery and equipment and EUR 42 thousand in short-term receivables, in its financial statements on 31 December 2022. A provision of EUR 20 thousand has been made for the costs related to the winding down of the company.
Koskisen Oy, a subsidiary of Koskitukki Oy, merged with Koskitukki Oy on 31 May 2022. After the merger, Koskitukki Oy's name was changed to Koskisen Oy. In the merger, all the assets and liabilities of the merging company were transferred to the company receiving the liquidation procedure. In connection with the merger, the minority shareholders of Koskisen Oy became shareholders of Koskitukki Oy. Non-controlling shareholders were given 2,532,294 new shares of the receiving company as merger consideration. The shares were valued at fair value, which was EUR 17.08/share. The number of shares to be given as consideration has been calculated based on the mutual valuation of the shares of the merging company and the receiving company. The purpose of the merger was to harmonise Koskisen's operations, simplify the group's structure, strengthen the parent company's balance sheet, support Koskisen's brand and prepare the company for a possible listing. After the merger, all subsidiaries are 100% owned by the parent company, Koskisen Corporation.
Following the start of Russia's military actions in Ukraine, Koskisen shut down its operation in Russia. OOO Koskisilva, a fully owned subsidiary in Russia, was sold to Russian non-sanctioned buyer on 21 June 2022. A gain of EUR 2.2 million from the sales of the subsidiary has been recorded in other operating income. The company had a ruble-denominated forward contract related to the sale of the subsidiary, of which EUR 0.9 million was recorded as financial income in the financial period. OOO Koskisilva had on 31 December 2021, EUR 8,295 thousand (calculated with the RUB exchange rate on 31 December 2021) of tax losses carried forward for which no deferred tax asset were recognised in the consolidated financial statements. Koskisen cannot utilise these losses after the sale of the subsidiary.
Accounting policy
Subsidiaries are companies in which the Group has control. The Group has controlling power in a company when, by being part of it, it is exposed to its variable return or is entitled to variable return and it is able to influence this return by using its power over the company to direct its operations. Subsidiaries are combined in the consolidated financial statements in their entirety from the day the Group acquires control over them. The merger is terminated when control ceases.
Transactions between Group companies, including internal receivables and payables, income and expenses and unrealised profits, are eliminated. Unrealised losses are also eliminated, unless the transaction gives indications of a decrease in the value of the transferred asset.
24. Related party transactions
Koskisen’s related parties consists of the members of Board of Directors, the chief executive officer (CEO), members of the Executive Board and shareholders with significant influence over the company. The related parties also include the close family members of these aforementioned individuals and entities in which these individuals have either control or joint control.
Compensation and remuneration to the members of the management team and Board of Directors
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
CEO
Wages and salaries and other short-term employee benefits 581 328
Pension costs – defined contribution plans 43 28
Total 624 356
Management Team
Wages and salaries and other short-term employee benefits 925 767
Pension costs – defined contribution plans 78 59
Total 1,003 826
Board of Directors
Wages and salaries and other short-term employee benefits 274 138
Pension costs – defined contribution plans 7 4
Total 280 142
Total remuneration of the management and Board of Directors 1,907 1,324
The CEO has a possibility to have a profit-related bonus amounting to a maximum of 48 per cent of their annual basic salary. The amount of the profit-related bonus depends on the annual targets. The CEO’s term of notice is six months, and the severance pay equals six months’ salary. Pension obligations of the CEO and the Board Members are determined according to the employees’ pensions act. Other special conditions concerning the retirement or the amount of retirement allowance have not been agreed on. The statutory pension cost in the financial year 2022 was EUR 128 thousand (2021: EUR 114 thousand). Remunerations paid to the Board of Directors do not include the statutory retirement obligation.
Shareholding of the key management personnel
EUR thousand 2022 2021
Board of Directors, CEO and Executive Board
Common shares (pcs) 7,281,704 229
Shareholding, % 32 % 36 %
Total number of shares outstanding (pcs) 23,002,659 630
Additional information about changes in shares in note 18: Equity
On 31 December 2022, the members of the Board of Directors, CEO and Executive Board held altogether 7,281,704 shares. The figures include the holdings of their own, close family members and control entities. During the financial year no loans have been granted to the Group’s management. No pledges have been given or other commitments made on behalf of the company’s management and shareholders
Related party transactions
EUR thousand 2022 2021
Shareholders with significant influence*
Wages, salaries and pension costs -439 -533
Lease income 2 2
Income from sale of property, plant and equipment 400
Interest expense -304 -318
Total -341 -849
*Includes shareholders with more than 10% ownership and their close family members
Balances with related parties
EUR thousand 2022 2021
Shareholders with significant influence
Capital loan1) - 4,536
Accrued interest of capital loan1) - 3,429
1)Included in Borrowings in the balance sheet
The capital loan provided by the Shareholders of the Group, in total of EUR 12.8 million (including accumulated unpaid interest), was fully paid off during the year 2022.
During the reporting period, Koskisen has established a share-based incentive program for its key employees and key management. Employees eligible for the incentive programs can receive a maximum of 183,000 shares (gross amount) if the terms of the programs are met. In the financial period, EUR 241 thousand were recognised as expenses for the share-based incentive programs related to related parties. Of this, EUR 164 thousand were recognised in equity and EUR 76 thousand were recognised in current other liabilities. In addition, some of the members of the management team who are related parties have participated in Koskisen's personnel offering. The impact of the personnel offering is immaterial. More detailed information on the share-based incentive plans is presented in note 7: Share-based incentive plans.
During the financial period, the company sold a property to a member of the Board of Directors, who is a related party of the company. The purchase price was based on external estimates.
25. Contingent liabilities and commitments
EUR thousand Dec 31, 2022 Dec 31, 2021
Liabilities for which collaterals have been given
Loans from financial institutions 25,000 33,000
Account and guarantee limits in use at the balance sheet date
Account limit - -
Guarantee limit 267 138
Real estate mortgages 307,200 1,689,600
Company mortgages 181,551 181,551
Guarantees
Advance payment, delivery, etc. guarantees 267 138
Koskisen has committed to a total of EUR 30.0 million investments among others in the Järvelä new sawmill.
Legal disputes
As at 31 December 2022, there were no significant on-going legal disputes (31 December 2021: no legal disputes).
Accounting policy
Contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. A present obligation is considered as contingent liability when it is not probable that an outflow of resources is required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.
26. New standards
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for 31 December 2022 reporting periods and have not been early adopted by the Group. These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
27. Events after the balance sheet date
On 7 February 2023 Koskisen Corporation's Board of Directors decided on a free share issue directed to the company's CEO and CFO as part of management remuneration based on the authorisation given by the extraordinary general meeting on 31 October, 2022. The issued shares were registered in the trade register on 16 February 2023. The total number of shares increased to 23,011,659 shares when the CEO and CFO were given 9,000 new shares. The value of the first installment of the fee related to the completion of the listing to Koskisen's CEO corresponds to 12,000 shares, half of which is paid in cash to cover the withholding tax. The value of the first installment of the bonus to Koskisen's CFO corresponds to 6,000 shares, half of which is paid in cash to cover the withholding tax.
Koskisen Corporation
Income statement
1 EUR Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
REVENUE 227,616,416.16 131,624,456.09
Change in inventories of finished goods and work in progress -2,061,764.72 -
Production for own use 346,394.60 -
Other operating income 69,860,178.62 5,746,078.27
Materials and services
Materials, supplies, goods
Purchases during the period -106,593,303.03 -98,626,052.17
Increase / decrease in inventories -3,770,054.81 4,130,361.76
Materials, supplies, goods -110,363,357.84 -94,495,690.41
External services -29,707,855.40 -22,272,149.18
Materials and services -140,071,213.24 -116,767,839.59
Personnel expenses
Wages and salaries -21,763,228.06 -5,033,457.90
Pension costs -4,323,566.93 -637,921.46
Other social security costs -1,194,532.53 -107,792.21
Personnel expenses -27,281,327.52 -5,779,171.57
Depreciation, amortisation and impairment
Depreciation and amortisation -2,934,357.72 -174,337.42
Impairment on non-current assets -8,852.01 -
Depreciation, amortisation and impairment -2,943,209.73 -174,337.42
Other operating expenses -34,997,502.56 -12,183,234.37
OPERATING PROFIT (LOSS) 90,467,971.61 2,465,951.41
Finance income and expense
Other interest and financial income
From group undertakings 146,724.88 -
From others 1,939,611.42 13,375.78
Impairment on investments held as non-current assets -130,348.08 -
Interest expenses and other financial expenses
To group undertakings -316,369.64 -961,344.74
To others -14,238,449.09 -218,668.82
Finance income and expense -12,598,830.51 -1,166,637.78
PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES 77,869,141.10 1,299,313.63
Appropriations
Change in cumulative accelerated depreciation -3,182,457.13 8,448.31
Appropriations -3,182,457.13 8,448.31
Income taxes
Taxes for current and prior periods -2,665,093.42 -255,975.81
Deferred tax -137,989.65 -
Income taxes -2,803,083.07 -255,975.81
PROFIT (LOSS) FOR THE PERIOD 71,883,600.90 1,051,786.13
Koskisen Corporation
Balance sheet
1 EUR Dec 31, 2022 Dec 31, 2021
ASSETS
NON-CURRENT ASSETS
Intangible assets
Other intangible assets 1,082,300.41 385,788.39
Advance payments 289,934.75 -
Intangible assets 1,372,235.16 385,788.39
Tangible assets
Land and water areas 6,167,761.17 386,967.00
Buildings and structures 19,744,679.88 449,084.97
Machinery and equipment 23,498,607.18 13,639.18
Other tangible assets 1,620,178.42 380,600.00
Advance payments and work in progress 25,305,947.08 305,323.42
Tangible assets 76,337,173.73 1,535,614.57
Investments
Investments in Group companies 365,736.77 19,593,202.58
Other shares and equity interests 223,172.42 11,481.88
Investments 588,909.19 19,604,684.46
NON-CURRENT ASSETS 78,298,318.08 21,526,087.42
CURRENT ASSETS
Inventories
Materials and supplies 18,917,567.79 14,520,009.47
Work in progress 4,014,933.72 -
Finished goods 9,692,077.60 -
Inventories 32,624,579.11 14,520,009.47
Receivables
Non-current receivables
Receivables from Group companies 2,380,000.00 -0
Non-current receivables 2,380,000.00 -0
Current receivables
Trade receivables 23,520,930.53 6,177,799.50
Receivables from Group companies 745,504.66 9,127,557.25
Other receivables 6,065,120.57 2,403,979.69
Prepayments and accrued income 2,658,859.27 521,199.27
Current receivables 32,990,415.03 18,230,535.71
Receivables 35,370,415.03 18,230,535.70
Cash equivalents
Other securities 9,892,037.88 -
Cash equivalents 9,892,037.88 -
Cash and bank 73,750,180.73 134.56
CURRENT ASSETS 151,637,212.75 32,750,679.73
ASSETS 229,935,530.83 54,276,767.15
Balance sheet
1 EUR Dec 31, 2022 Dec 31, 2021
EQUITY AND LIABILITIES
EQUITY
Share capital 1,512,000.00 1,512,000.00
Revaluation reserve 70,222.30 70,222.30
Other reserves
Legal reserve 16,202.59 16,202.59
Reserve for invested unrestricted equity 58,825,127.65 -
Other reserves 58,841,330.24 16,202.59
Retained earnings -13,090,760.61 -14,142,546.74
Profit/loss for the period 71,883,600.90 1,051,786.13
EQUITY 119,216,392.83 -11,492,335.72
APPROPRIATIONS
Cumulative accelerated depreciation 21,401,457.94 74,535.04
APPROPRIATIONS 21,401,457.94 74,535.04
LIABILITIES
Non-current liabilities
Capital loans - 6,988,174.00
Loans from financial institutions 24,824,284.00 -
Liabilities to Group companies 605,791.63 27,714,796.53
Deferred tax liability 339,576.27 17,555.57
Non-current liabilities 25,769,651.90 34,720,526.10
Current liabilities
Loans from financial institutions 4,500,000.00 -
Advances received 752,198.50 -
Trade payables 31,913,757.46 12,910,939.61
Liabilities to Group companies 77,203.45 5,854,781.34
Other liabilities 10,272,487.02 7,758,044.88
Accruals and deferred income 16,032,381.73 4,450,275.90
Current liabilities 63,548,028.16 30,974,041.73
LIABILITIES 89,317,680.06 65,694,567.83
EQUITY AND LIABILITIES 229,935,530.83 54,276,767.15
Koskisen Corporation
Statement of cash flows
1 EUR Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Cash flow from operating activities
PROFIT (LOSS) FOR THE PERIOD 71,883,600.90 1,051,786.13
Depreciation, amortisation and impairment 2,943,209.73 174,337.42
Gains and losses of disposals of fixed assets and other non-current assets -1,732,104.89 -
Financial income and expenses 12,598,830.51 1,166,637.78
Appropriations 3,182,457.13 -8,448.31
Income taxes 2,803,083.07 255,975.81
Other adjustments -61,962,723.05 -
Operating cash flow before working capital changes 29,716,353.40 2,640,288.83
Working capital changes
Increase / decrease in inventories 5,831,819.53 -4,130,361.76
Increase / decrease in non-interest bearing receivables 7,841,311.74 -1,093,877.12
Increase / decrease in non-interest bearing liabilities 1,930,467.43 2,716,427.85
Cash flows from operations before financial items and taxes 45,319,952.10 132,477.80
Interest paid from operating activities -5,008,844.43 -1,212,081.82
Interest received from operating activities 198,273.59 13,375.78
Other financial items for operating activities -6,857,621.65 -4,208.13
Income taxes paid -3,787,004.92 -103,544.44
Loans granted - 3,001,036.56
Proceeds from repayments of loans - -1,072,114.73
Net cash from operating activities 29,864,754.69 754,941.02
Cash flows from investing activities
Purchase of tangible and intangible assets -14,699,101.60 -318,910.27
Proceeds from sale of tangible and intangible assets 436,011.61 -
Proceeds from sale of subsidiary 3,134,821.92 -
Loans granted -17,720,000.00 -
Net cash flow from investing activities -28,848,268.07 -318,910.27
Cash flows from financing activities
Proceeds from issue of share capital 32,374,021.61 -
Proceeds from non-current borrowings 35,490,751.00 -
Repayment of non-current borrowings - -436,074.95
Proceeds from current borrowings 2,126,652.13 -
Repayment of current borrowings -5,414,726.33 -
Repayment of capital loan -6,988,174.00 -
Net cash flow from financing activities 57,588,524.41 -436,074.95
Net change in cash and cash equivalents 58,605,011.03 -44.20
Cash and cash equivalents at the beginning of the period 134.56 178.76
Cash and cash equivalents at the end of the period 83,642,218.61 134.56
Cash and cash equivalents, other arrangements -25,037,072.77 -
Koskisen Corporation
Notes to the financial statements of parent company
Basis of preparation
Koskisen's financial statements for the financial year between 1 January to 31 December 2022, have been prepared in accordance with the provisions of the Finnish Accounting Act and other regulations and provisions regarding the preparation of financial statements valid in Finland.
Valuation of inventories
Inventories are valued at acquisition cost or lower net realisable value. The acquisition cost is determined using the weighted average cost method. Fixed costs are allocated to inventories.
Valuation of non-current assets
Intangible and tangible assets are recognised at acquisition cost less depreciation, amortisation and impairments, and increased by any revaluations. The revaluations are based on an external assessment, and their existence is justified based on the assessment of the company’s management. The deferred tax liabilities arising from the revaluations have been deducted from the revaluation reserve in equity and presented on the balance sheet in the ‘Deferred tax liabilities’. The acquisition cost includes the variable costs resulting from procurement and manufacturing. The depreciation has been calculated on a straight-line basis over the economic life time of the intangible and tangible assets. The depreciation starts from the month the asset was commissioned. The impairment is entered if the future income accrued by the asset is permanently below the book value.
Depreciation periods are:
Other intangible assets 5 years
Buildings 20-50 years
Structures 10 years
Machinery and equipment 5-15 years
Other tangible assets 5-10 years
Valuation of financial instruments and derivatives
In accordance with section 5:2 of the Accounting Act, financial assets are valued at the acquisition cost or at the lower probable fair market value. Financial liabilities are valued at their nominal value.
In accordance with the principles of risk management, the Group may use derivatives as protection from the price risks of goods, interest rates or currency. The derivative contracts in force at the time of the financial statements comprise both signed contracts and contracts that protect the bidding stage. Pursuant to statement 1963/13.12.2016 of the Accounting Board, the negative current value of interest and currency derivative contracts was entered in retained earnings and as a mandatory provision in 2016. The positive change in 2022 has been recorded in the income statement and to reduce provisions. The corresponding change in deferred tax assets is recorded in the income statement and to reduce deferred tax assets.
Electricity derivatives are used as protection against the price risk of highly probable current supply at market prices. The derivatives used will protect 25% to 95% of the current supply required for the operations of the next four years. The current values of the electricity derivative contracts are treated as off-balance sheet liabilities to the degree that the electricity derivative contracts can be deemed to meet the preconditions set forth in statement 1963/2016 of the Accounting Board for treatment as an off-balance sheet liability. The electricity derivative contracts are established and paid on a monthly basis in accordance with the contracts. The electricity derivative contracts have been deemed to meet the preconditions for treatment as an off-balance sheet liability.
Comparability of information from the previous financial year
Koskisen Corporation's subsidiary Koskisen Oy merged into the company on 31 May 2022. The information from previous financial year is therefore not comparable.
Foreign currency items
Receivables and liabilities in foreign currency have been converted into EUR subject to the exchange rate on the balance sheet date. The exchange rate gains or losses arising from the valuation of receivables or liabilities are entered in the profit and loss account according to their nature, either as a sales/purchase adjustment item or financial exchange difference.
Deferred taxes
Deferred tax liabilities or assets have been calculated for temporary differences between taxation and the financial statements on the basis of the tax rate of the next years confirmed at the time of the financial statements. The balance sheet includes the deferred tax liabilities in total as well as the deferred tax assets corresponding with the amount of the estimated probable receivable.
Koskisen Corporation
Notes to the income statement
Revenue by segments and geographical areas
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Distribution by industry
Panel Industry 85,816 -
Sawn Timber Industry 141,764 131,514
Other sales 37 111
Total 227,616 131,624
Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Geographical distribution
Finland 125,902 131,624
Japan 20,239 -
Germany 9,272 -
Poland 6,000 -
Other EU countries 43,144 -
Other countries 23,058 -
Total 227,616 131,624
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Other operating income
Gain from merger 61,963 -
Payment from Lahti-Energia regarding business resale 3,000 -
Gain on the sale of subsidiary 1,420 -
Gains on disposal of property, plant and equipment 177 -
Firewood sales to forest owners 166 217
Insurance claims 2 -
Grants received 185 -
Sale of emission allowances 198 -
External rental income 51 1,213
Service charges and rents from subsidiaries 2,314 4,316
Other operating income 385 0
Total 69,860 5,746
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Other operating expenses
Sales freight and forwarding -18,914 -8,684
Lease costs -4,520 -360
IT expenses -2,897 -1,370
Maintenance of property -2,391 -46
Consulting and administrative services -1,304 -325
Administrative expenses -964 -156
Personnel related expenses -886 -198
Sales commissions -463 -
Other expenses -2,660 -1,044
Total -34,998 -12,183
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Auditor remuneration
Audit -283 -4
Tax advisory services -73 -
Other services -1,177 -1
Total -1,533 -5
Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Average number of employees at parent company during the fiscal year
Salaried employees 149 68
Workers 353 -
Total 502 68
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Salaries and remuneration of management
Board members and CEO -904 -466
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Income tax
Taxes for the financial year -2,665 -256
Change in deferred tax assets -138 -
Total -2,803 -256
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Finance income
Interest income 310 13
Foreign exchange gain 526 -
Other finance income 1,250 -
Total 2,086 13
EUR thousand Jan 1 - Dec 31, 2022 Jan 1 - Dec 31, 2021
Finance costs
Impairment on investments held as non-current assets -130 -
Interest expenses -1,050 -1,176
Interest expenses from capital loans -5,765 -
Foreign exchange loss -1,533 -
Listing costs -4,059 -
Other finance expenses -2,147 -4
Total -14,685 -1,180
The exchange rate differences are due to changes in the exchange rates of the Russian ruble, the Polish zloty and the US dollar.
Koskisen Corporation
Notes to balance sheet
The acquisition cost, additions, disposals and accumulated depreciation of the fixed assets of the parent company
Intangible assets Tangible assets
EUR thousand Other long-term expenses Advance payments and work in progress Land Buildings and structures Machinery and equipment Other tangible assets Advance payments and construction in progress Investments Total
Cost at Jan 1, 2022 1,826 - 387 796 35 381 305 24,905 28,636
Additions 83 275 89 435 4,129 30 12,701 - 17,744
Internal reorganisations 2,451 - 5,721 57,831 90,765 5,109 13,343 577 175,797
Disposals - - -30 -220 -1,159 - -205 -24,763 -26,376
Reclassifications 189 15 - - 568 67 -839 - -
Cost at Dec 31, 2022 4,549 290 6,168 58,842 94,339 5,587 25,306 719 195,799
Accumulated depreciation and impairment at Jan 1, 2022 -1,440 - - -347 -22 - - -5,300 -7,109
Accumulated depreciation of disposals and reclassifications - - - 126 1,159 - - - 1,285
Depreciation -221 - - -634 -2,004 -76 - - -2,934
Internal reorganisations -1,805 - - -38,243 -69,965 -3,890 - - -113,903
Impairment - - - - -9 - - 5,170 5,161
Accumulated depreciation and impairment at Dec 31, 2022 -3,466 - - -39,098 -70,840 -3,966 - -130 -117,501
Carrying value at Jan 1, 2022 386 - 387 449 14 381 305 19,605 21,526
Carrying value at Dec 31, 2022 1,082 290 6,168 19,745 23,499 1,620 25,306 589 78,298
Intangible assets Tangible assets
EUR thousand Other long-term expenses Advance payments and work in progress Land Buildings and structures Machinery and equipment Other tangible assets Advance payments and construction in progress Investments Total
Cost 1.1.2021 1,430 - 387 796 35 381 383 24,905 28,317
Additions 56 - - - - - 263 - 319
Reclassifications 341 - - - - - -341 - -
Cost 31.12.2021 1,826 - 387 796 35 381 305 24,905 28,636
Cumulative amortisation and impairment 1.1.2021 -1,298 - - -320 -17 - - -5,300 -6,934
Amortisation -143 - - -27 -5 - - - -174
Internal reorganisations - - - - - - - - -
Cumulative amortisation and impairment 31.12.2021 -1,440 - - -347 -22 - - -5,300 -7,109
Carrying value at Jan 1, 2021 132 - 387 476 19 381 383 19,605 21,382
Carrying value at Dec 31, 2021 386 - 387 449 14 381 305 19,605 21,526
Koskisen Corporation
Group companies Registered office Parent company's ownership-%
Kosava-Kiinteistöt Oy Kärkölä, Finland 100 %
Koskisen Sp z.o.o Warsaw, Poland 100 %
OOO Koskiles St. Petersburg, Russia 100 %
EUR thousand Dec 31, 2022 Dec 31, 2021
Receivables from Group companies
Loan receivables:
Koskisen Sp z.o.o. 2,380 -
Total 2,380 -
Trade receivables:
Koskisen Oy - 7,647
Koskisen Sp z.o.o. 740 -
Kosava-Kiinteistöt Oy 6 2
Total 746 7,649
Other receivables:
OOO Koskiles - 1
OOO Koskisilva - 114
Total - 115
Accrued income:
Koskisen Oy 0 1,364
Total 0 1,364
EUR thousand Dec 31, 2022 Dec 31, 2021
Essential items included in accrued income
Other financial items 10 -
Tax accrual 337 -
Accrued personnel costs 2 2
Other accrued income 2,311 519
Total 2,659 521
EUR thousand Dec 31, 2022 Dec 31, 2021
Changes in equity
Share capital Jan 1 1,512 1,512
Share capital Dec 31 1,512 1,512
Revaluation reserve Jan 1 70 70
Revaluation reserve Dec 31 70 70
Legal reserve Jan 1 16 16
Legal reserve Jan 1 16 16
Total restricted equity 1,598 1,598
Reserve for invested unrestricted equity Jan 1 - -
Share issue 58,825 -
Reserve for invested unrestricted equity Dec 31 58,825 -
Retained earnings Jan 1 -13,091
Retained earnings Dec 31 -13,091 -14,143
Profit for the period 71,884 1,052
Total unrestricted equity 117,618 -13,091
Total equity 119,216 -11,492
Dec 31, 2022 Dec 31, 2021
Distributable unrestricted equity
Reserve for invested unrestricted equity 58,825 -
Retained earnings -13,091 -14,143
Profit/loss for the period 71,884 1,052
Total 117,618 -13,091
EUR thousand Dec 31, 2022 Dec 31, 2021
Payables to Group companies
The main bank accounts of the group's Finnish companies are connected to the Group account arrangement, the main holder of which is Koskisen Corporation.
Liabilities based on the group account arrangement:
Koskisen Oy - 19,060
Kosava-Kiinteistöt Oy 604 -
Koskisen Oy capital loan - 8,610
Total 604 27,670
Trade payables:
Kosava-Kiinteistöt Oy 49 -
Koskisen Oy - 2,939
Koskisen Sp z.o.o. 29 -
Total 77 2,939
Accrued expenses:
Koskisen Oy - 2,960
Kosava-Kiinteistöt Oy 1 -
Total 1 2,960
All in total 683 33,570
EUR thousand Dec 31, 2022 Dec 31, 2021
Essential items included in accrued expenses
Accrued personnel costs 9,137 575
Subcontractor's accrued expenses 2,730 1,570
Accrued listing costs 1,765 -
Interest accrual 466 397
Income taxes 0 290
Other short-term accrued expenses 1,934 1,619
Total 16,032 4,450
EUR thousand Dec 31, 2022 Dec 31, 2021
Deferred tax liability
From revaluations 340 18
Total 340 18
Koskisen Corporation
Commitments
EUR thousand Dec 31, 2022 Dec 31, 2021
Liabilities secured by real estate- or business mortgages
Loans from financial institutions 25,000 33,000
Account- and guarantee limits (EUR 8 million), of which in use at the balance sheet date: - -
Account limit - -
Guarantee limit 267 138
Given real estate mortgages 307,200 1,689,600
Given company mortgages 181,551 181,551
Securities given on behalf of group companies:
Given real estate mortgages - 153,600
Given company mortgages - 79,071
Guarantees
Advance payment, delivery guarantees etc. 267 138
Dec 31, 2022 Dec 31, 2021
Amounts payable from lease contracts
  Payable during following year 1,180 12
  Payable later 1,476 -
Total 2,656 12
Residual values of lease contracts
  Payable during following year 2 -
  Payable later - -
Total 2 -
The power plants sold to Lahti Energia by Koskisen Corporation have a repurchase obligation after the end of the contract period in October 2032. The repurchase price is estimated to be approximately EUR 15 million.
Koskisen Corporation's loan share of Asunto Oy Puumera on 31 December 2022 was EUR 142 thousand.
The audit obligation of real estate investments in the financial statements
2014 2015 2016 2017 2018 2019 2020 2021 2022 Total
Deducted VAT 22 143 28 36 16 7 8 93 22 375
Annual proportion of deducted VAT 2 14 3 4 2 1 1 9 2 38
Remaining years included in the review period 1 2 3 4 5 6 7 8 9
Refundable amount of deduction 2 29 8 14 8 4 6 74 20 166
Derivative contracts
In accordance with the principles of risk management, the Group can use derivatives to hedge against commodity, interest and currency price risks. The derivative contracts in effect at the time of the financial statements include both signed contracts and contracts protecting the offer phase. The negative fair value of interest rate and currency derivative contracts on the balance sheet date is recorded as a provision. Electricity derivative contracts have been deemed to meet the conditions for being treated as an off-balance sheet liability.
Derivative contracts valid at the balance sheet date
2022 2021 2022 2021
Fair Fair Nominal Nominal
EUR thousand value value value value
Interest rate swaps
   due 7 Mar, 2022 -57 10,000
   due 25 Feb, 2025 492 -359 10,000 10,000
   due 1 Jul, 2025 402 -633 10,000 10,000
   due 27 Oct, 2025 552 -515 10,000 10,000
Total, interest rate swaps 1,446 -1,564 30,000 40,000
Deferred tax asset - 313
Foreign exchange forward contracts
EUR-USD, due date 30 Mar, 2022 -42 1,500
EUR-USD, due date 30 Jun, 2022 -41 1,497
EUR-USD, due date 30 Sep, 2022 -20 1,075
EUR-USD, due date 30 Dec, 2022 -3 652
EUR-USD, due date 30 Mar, 2022 -54 1,706
EUR-USD, due date 30 Apr, 2022 22 2,140
EUR-USD, due date 30 Jun, 2022 -43 1,493
EUR-USD, due date 30 Sep, 2022 -12 864
EUR-USD, due date 30 Dec, 2022 -6 648
EUR-USD, due date 29 Mar, 2023 29 494
EUR-USD, due date 30 Mar, 2023 21 719
EUR-USD, due date 31 Mar, 2023 -3 462
EUR-USD, due date 26 Jun, 2023 28 491
EUR-USD, due date 29 Jun, 2023 6 238
Total, foreign exchange forward contracts 82 -201 2,404 11,575
Deferred tax asset - 40
Electricity forward contracts
Due in year 2022 2,794 2,018
Due in year 2023 5,217 454 2,649 1,260
Due in year 2024 1,254 91 1,248 563
Due in year 2025 113 203
Total, electricity forward contracts 6,583 3,339 4,100 3,841
Timber reserve
The company has entered into binding agreements with forest owners regarding future timber procurement (timber reserve). The amount of commitments at the time of closing the accounts is approximately EUR 24.3 million, of which the parent company's share is EUR 24.3 million (31 December 2021, EUR 28.5 million, of which the parent company's share is EUR 28.5 million).
Covenants
Loans from financial institutions include covenants. According to financing agreements, lenders can repay loans early if the covenant conditions are not met. Loans from financial institutions are presented on the balance sheet in accordance with the repayment plans of the financing agreements valid at the time of the financial statements. During the accounting period, the covenant conditions are reviewed every six months. The covenants were more than fulfilled in the 2022 fiscal year.
Share based incentives
Share-based incentive plan 2022-2026
In March 2022, Koskisen established a share-based incentive program for its key employees for the years 2022 to 2024. The program consists of a three-year vesting period, 2022 to 2024. Key employees eligible for the program, related incentives paid, the vesting conditions and targets were determined by the Board of Directors in June 2022. The key employees eligible for the program (six individuals) can receive a maximum of 138,000 company shares (gross amount) if the terms of the program are met. The vesting conditions and the targets relate to meeting certain key figures (EBITDA and return on invested capital) and work obligation. The earned shares are given to the key employees after the vesting period ends. From the total number of shares, Koskisen withholds the withholding tax corresponding to the income tax liability of the key employee and pays it to the tax authorities. The arrangement has a net settlement feature of tax obligations and is classified as an equity-settled share-based transaction in its entirety. The arrangement is treated as an equity-settled share-based transaction.
Incentive plan related to the Initial public offering
In June 2022, Koskisen established a share-based incentive plan for key management. The Board of Directors has determined the employees eligible for the program, the incentives to be paid, and the vesting conditions and targets. The program includes two individuals who, if the conditions are met, can receive a maximum of 45,000 company shares. The earning criteria and goals are related to the listing and work obligation. The first part is paid two months after the listing and the second part 12 months after the first part is paid. The reward is paid half in shares and half in cash, which is determined by the value of the share at the time of payment. The arrangement is treated partly as an equity-settled and partly as a cash-settled share-based transaction.
Share issue directed to personnel
In September 2022, Koskisen carried out a directed share issue to its employees, in which all employees working in a permanent employment relationship could participate. The subscription price of the shares issued as part of the personnel offering (115,018) was lower than the fair value of the shares. Subsequent sale of the subscribed shares is limited and the shares are subject to an obligation to work for a period that ends with a separate decision of the Board of Directors, when two years have passed since the approval of the share subscriptions or when at least six months have passed since the listing, whichever occurs later.
Events after the balance sheet date
On 7 February 2023, Koskisen Corporation's board of directors decided on a free share issue directed to the company's CEO and CFO as part of management remuneration based on the authorisation given by the extraordinary general meeting on 31 October 2022. The issued shares were registered in the trade register on 16 February 2023. The total number of shares increased to 23,011,659 shares when the CEO and CFO were given 9,000 new shares. The value of the first installment of the fee related to the completion of the listing to Koskisen's CEO corresponds to 12,000 shares, half of which is paid in cash to cover the withholding tax. The value of the first installment of the bonus to Koskisen's CFO corresponds to 6,000 shares, half of which is paid in cash to cover the withholding tax.
Signatures of the report of the Board of Directors and Financial Statements
In Helsinki on April 14, 2023
Juha Vanhainen Kari Koskinen
Chairman of the Board Board member
Eva Wathén Hanna Sievinen
Board member Board member
Kalle Reponen Karoliina Koskinen
Board member Board member
Jukka Pahta
CEO
The auditor's note
Our auditor's report has been issued today.
In Helsinki on April 19, 2023
PricewaterhouseCoopers Oy
Audit firm
Markku Launis
KHT
List of records and materials
Accounting book: Method of storage:
Financial statements Digital
Subledgers
-Purchase ledger Digital/Hard copies
-Sales ledger Digital/Hard copies
General ledger Digital
Diary Digital
Cash book Digital/Hard copies
Fixed asset accounting Digital/Hard copies
Inventory records Digital/Hard copies
Voucher types: Method of storage:
Financial account vouchers Digital/Hard copies
Contributory end vouchers Digital/Hard copies
Memo voucher Digital
Payroll accounting Digital/Hard copies
Dispatches Supply warehouse Digital
Arrivals supply warehouse Digital
Sales invoices Digital
Purchase invoices Digital
Receipts sales ledger Digital/Hard copies
Payents purchase ledger Digital/Hard copies
Opening balances Digital
Depreciation Digital/Hard copies
Accruals Digital
Image 'Tilintarkastuskertomus'!B41
Auditor’s Report (Translation of the Finnish Original)
To the Annual General Meeting of Koskisen Oyj
Report on the Audit of the Financial Statements
Opinion
In our opinion
- the consolidated financial statements give a true and fair view of the group’s financial position and financial performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
- the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report to the Audit Committee.
What we have audited
We have audited the financial statements of Koskisen Oyj (business identity code 0148241-9) for the year ended 31 December 2022. The financial statements comprise:
- consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated statement of cash flows and notes, including a summary of significant accounting policies
- the parent company’s balance sheet, income statement, cash flow statement and notes.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, the non-audit services that we provided to the parent company and to the group companies are in accordance with the applicable law and regulations in Finland and we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in note 9 Other operating expenses to the Financial Statements.
Our Audit Approach
Overview
- Overall group materiality: EUR 3 175 000, which represents 1% of net sales
- Audit scope: We have audited parent company and its Finnish subsidiary
- Revenue recognition
- Valuation of inventory
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial statements as a whole.
Overall group materiality EUR 3 175 000
How we determined it 1% of net sales
Rationale for the materiality benchmark applied We chose net sales as the benchmark because, in our view, the performance of the Group is most commonly measured by using this criteria, and it is a generally accepted benchmark. We chose net sales as the benchmark as we considered that this provides us with a consistent year-on-year basis for determining materiality.
How we tailored our group audit scope
We tailored the scope of our audit, taking into account the structure of the group, the accounting processes and controls, and the industry in which the group operates.
Our audit procedures covered all significant components of the group. The audit of the consolidated financial statements was focused on the most significant locations in Finland, where we performed an audit based on the size of the companies and the characteristics of the risks. In other group companies we have performed analytical audit procedures to mitigate the risk of material misstatements in the consolidated financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Key audit matter in the audit of the group and parent company How our audit addressed the key audit matter
Revenue recognition
Refer to accounting principles and to note 2 in the consolidated financial statements and to the notes of the parent company's financial statements. Our audit procedures to address the risk of material misstatement in respect of revenue recognition included among others:
The group’s net sales was EUR 317,7 million and the parent company’s net sales was EUR 227,6 million. We assessed the appropriateness of the group’s accounting policies over revenue recognition compared to IFRS standards.
The group’s net sales consist mainly of the sale of goods, i.e. sawn timber and panel. The group satisfies its agreed performance obligations and recognizes revenue when control over product is transferred to a customer. We tested a sample of sales transactions recorded during the financial year to verify that they reflect actual sales transactions.
We have considered the timing of revenue recognition as a key audit matter due to its materiality. We tested the accurate timing of revenue recognition of sales transactions recorded near the end of the financial period and after the financial period.
Valuation of inventory
Refer to accounting principles and to note 16 in the consolidated financial statements and to the notes of the parent company's financial statements. We assessed the compliance of the group’s accounting policies in comparison to applicable accounting framework and performed control testing and test of details to valuation and existence of the inventories.
Inventory is one of the most significant balance sheet items and amounted to EUR 34,2 million in the consolidated balance sheet and EUR 32,6 million in the parent company’s balance sheet at the balance sheet date. We tested a sample of inventory items to third party purchase invoices. We also tested management’s calculations on the absorption of relative share of indirect production overheads.
Inventories are stated at the lower of cost and net realisable value, the cost being determined by the weighted average cost method. The cost comprises raw materials, direct labour, depreciation and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. We attended stock takings in selected inventory locations to obtain audit evidence regarding existence of the inventory. During stock takes we assessed the appropriateness of the stock takes and performed independent test counts.

We compared the value of selected finished goods inventory items to the sales prices.
A valuation allowance is made for old, slow-moving inventories based on the managements best estimate of the expected net realisable value at the end of the reporting period.
Valuation of inventories is a key audit matter due to the size of the balance and the level of management judgement involved in the estimation process.
There are no significant risks of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014 with respect to the consolidated financial statements or the parent company financial statements.
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or to cease operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Reporting Requirements
Appointment
We were first appointed as auditors by the annual general meeting on 26 April 2022. Koskisen Oyj became a public interest entity on 1 December 2022. We have been the company’s auditors since it became a public interest entity.
Other Information
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises in the report of the Board of Directors and the information included in the Annual Report but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report and the Annual Report is expected to be made available to us after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion
- the information in the report of the Board of Directors is consistent with the information in the financial statements
- the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Helsinki 19 April 2023
PricewaterhouseCoopers Oy
Authorised Public Accountants
Markku Launis
Authorised Public Accountant (KHT)
Independent Auditor’s Reasonable Assurance Report on Koskisen Oyj’s ESEF Financial Statements
To the Management of Koskisen Oyj
We have been engaged by the Management of Koskisen Oyj (business identity 0148241-9) (hereinafter also “the Company”) to perform a reasonable assurance engagement on the Company’s consolidated IFRS financial statements for the financial year 1 January - 31 December 2022 in European Single Electronic Format (“ESEF financial statements”).
Management’s Responsibility for the ESEF Financial Statements
The Management of Koskisen Oyj is responsible for preparing the ESEF financial statements so that they comply with the requirements as specified in the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 (“ESEF requirements”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of ESEF financial statements that are free from material noncompliance with the ESEF requirements, whether due to fraud or error.
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
Our firm applies International Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Our Responsibility
Our responsibility is to express an opinion on the ESEF financial statements based on the procedures we have performed and the evidence we have obtained. 
We conducted our reasonable assurance engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether the ESEF financial statements are free from material noncompliance with the ESEF requirements. 
A reasonable assurance engagement in accordance with ISAE 3000 (Revised) involves performing procedures to obtain evidence about the ESEF financial statements compliance with the ESEF requirements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material noncompliance of the ESEF financial statements with the ESEF requirements, whether due to fraud or error. In making those risk assessments, we considered internal control relevant to the Company’s preparation of the ESEF financial statements.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion, Koskisen Oyj’s ESEF financial statements for the financial year ended 31 December 2022 comply, in all material respects, with the minimum requirements as set out in the ESEF requirements.
Our reasonable assurance report has been prepared in accordance with the terms of our engagement. We do not accept, or assume responsibility to anyone else, except for Koskisen Oyj for our work, for this report, or for the opinion that we have formed.
Helsinki 19 April 2023
PricewaterhouseCoopers Oy
Authorised Public Accountants
Markku Launis
Authorised Public Accountant (KHT)
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