Saga Furs Oyj : Financial Statements Bulletin 1.11.2020-31.10.2021

Brokerage sales and net turnover increased

significantly, strong performance improvement

Financial Statements Bulletin 1 November 2020-31 October 2021

26 January 2022

Financial Statements Bulletin 26 January 2022

2020-2021

SAGA FURS OYJ

FINANCIAL STATEMENTS BULLETIN 1 NOV 2020-31 OCT 2021

Brokerage sales increased by 150 per cent, strong growth of net turnover and profit

• Thanks to the higher price level and increased number of pelts sold, Saga Furs' brokerage sales in- creased by 150 per cent from the previous financial year, totalling EUR 392 million (2019-2020: MEUR 157).
• The company's key performance indicators and financial position strengthened significantly.
• Consolidated net turnover increased by 81 per cent, amounting to EUR 51 million (MEUR 28).
• Operating expenses remained at the level of the comparison period, amounting to EUR 43 million (MEUR 43).
• Consolidated operating profit increased to EUR 11 million (MEUR −13).
• Consolidated net financial income increased to EUR 5.6 million (MEUR 2.2).
• Consolidated profit before tax stood at EUR 17 million (a loss of MEUR −10).
• Earnings per share were EUR 3.63 (−2.37).
• The Board of Directors proposes to the Annual General Meeting that a total dividend of EUR 1.00 per A share and EUR 1.28 per C share be paid.

Growth in brokerage sales accelerated in the second half of the financial year

• During the half-year period 1 May 2021-31 October 2021, the company's brokerage sales increased to
  EUR 248 million (MEUR 112 for the comparable period).
• Consolidated net turnover increased by 62 per cent, amounting to EUR 30 million (MEUR 18 million).
• Operating expenses increased to EUR 25 million (MEUR 20).
• Consolidated operating profit increased to EUR 7.2 million (−50,000).
• Consolidated profit before taxes increased to EUR 9.0 million (MEUR 0.5)

Business outlook

• Saga Furs expects to offer 12.5 million mink, 1.6 million fox and 110,000 Finnraccoon pelts in the auc- tions of the financial year 2021-2022. These volumes include the previously graded 1.6 million mink, 420,000 fox and 31,000 Finnraccoon pelts which were carried over from the previous financial year.
• Due to the COVID-19 situation, it is premature to assess the development of Saga Furs' net turnover in the financial year 2021-2022. Personnel costs are expected to increase as a result of the increase in the number of pelts to be graded. The Group's costs are also increased by higher energy prices and transport costs. The projected decrease in the financial volume will significantly reduce the Group's con- solidated net financial income. Due to the uncertainty of the market situation, the company is not provid- ing a forecast of the result for the financial year.

Consolidated key figures	5/21-10/21	11/20-10/21	5/20-10/2011/19-10/20
	6 mo	12 mo	6 mo	12 mo
Total sales, MEUR	247.8	391.9	111.6	156.9
Total amount of skins sold, million pcs	6.2	10.0	6.4	8.0
Net turnover, MEUR	29.9	51.0	18.5	28.2
Operating profit/loss, MEUR	7.2	11.0	0.0	-12.6
Profit before taxes, MEUR	9.0	16.6	0.5	-10.4
Earnings per share, EUR	1.90	3.63	0.07	-2.37
Return on equity, (ROE) %	7.7 %	15.3 %	0.3 %	-10.2 %
Return on investment, (ROI) %	8.6 %	13.5 %	1.3 %	-5.0 %

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Financial Statements Bulletin 26 January 2022

2020-2021

Business overview

In the context of the COVID-19 pandemic that continued during the financial year of 2020-2021, Saga Furs Oyj focused on its core business that consists of collecting, grading and brokering fur pelts to customers, mainly through auc- tions.

The pelt collecting, grading and storage activities proceeded almost as normal. The number of collected mink pelts was almost at a record level (around 10 million pelts), while the number of collected fox pelts, around 840,000, remained only at half of the normal amount due to the decrease in fox fur production. The pelts were supplied by both European and North American fur farmers. In accordance with its sustainability policy, Saga Furs received mink, fox and Finnrac- coon pelts only from fur farms for which the certification related to the welfare of the production animals was valid. Pelt grading was increasingly concentrated on the second half of the financial year. The quantity of pelts to be graded and auctioned during future sales seasons remained at a relatively high level during the period. Compared to the previous financial year, a smaller number of graded mink and fox pelts were transferred to be stored and sold in the next financial year.

Saga Furs' brokerage of North American mink pelts remained significant. Most North American mink pelts were offered as a separate collection, and they were graded in the grading centre operating in Wisconsin, USA.

In Saga Furs' main market Asia, particularly in China and South Korea, the normalisation of the fur garments market continued to suffer from the pandemic restrictions during the winter season 2020-2021. The retail volumes were clearly lower than before, and the price level of garments fell. Despite this, the local fashion houses actively organised new events presenting fur clothing collections, some of which Saga Furs also participated in. Saga Furs collaborated with both European and Chinese designers in the design of the Fur Vision 2022 collection, which was presented in autumn 2021.

Also, in other important market areas in Europe and North America, the fashion industry was still in difficulty in the winter season 2020-2021, and the business of customers using fur in their collections was smaller than usual due to the COVID-19 pandemic.

Saga Furs exclusively continued to use the BLACKGLAMA trademark for the marketing and sale of high-quality North American black mink. Marketing measures were taken in China in particular. The development of BLACKGLAMA pelt sales was good during the financial year.

The travel and gathering restrictions that continued during the financial year effectively prevented the organisation of auctions based on attendance. For this reason, Saga Furs continued to conduct online auctions that have proven to be effective and have earned the trust of the parties. During the uncertain market situation, online auctions also reduced costs for market participants and thus facilitated the recovery from the negative economic impact of the pandemic.

A total of 10 million pelts were sold at Saga Furs' auctions in the 2020-2021 financial year (2019-2020: 8 million pelts).

8.2 million of the sold pelts were mink, 1.6 million fox, 98,000 Finnraccoon and 54,000 Karakul lamb. Demand for pelts recovered during the period from the collapse of the previous financial year and, for example, the price level of mink pelts doubled. The purchases of fox and Finnraccoon pelts remained selective throughout the financial year, and the price level increased more cautiously compared to mink pelts.

Based on the results of the first two auctions of the period, Saga Furs issued a positive profit warning, according to which the company expected its result for the financial year to show a profit. In connection with the half-year financial report, the company estimated that the result for the financial year would be significantly better than previously estimated and clearly profitable. Following the September auction, the company announced that the sales for the financial year had risen clearly above the pre-pandemic level. The value of brokerage sales increased to EUR 392 million (MEUR 157) and net turnover totalled EUR 51 million (MEUR 28).

Saga Furs' financial position improved during the financial year as a result of increased pelt sales. Although more pelts were sold and at rising prices in the auctions of the financial year compared to the previous financial year, the need for buyer financing clearly decreased as buyers tried to redeem the pelts as quickly as possible. As a result of the acceleration in pelt sales and changes in the competitive situation, less prepayments were made to producers than in the previous financial year. The Group's liquidity remained good during the financial year.

Brokerage sales and turnover

During the financial year, the value of auction brokerage sales more than doubled and rose well above the pre-pandemic level. This increase was influenced both by the increase in the number of pelts sold and, in particular, by the doubling of the price level of mink pelts during the financial year.

All four auctions of the financial year were conducted online and were attended by buyers from all main markets. The pelts were sold mainly to China, but also to South Korea, the European fashion industry and Russia.

Due to the increased number of pelts sold and higher price level, Saga Furs' brokerage sales increased by 150 per cent from the previous financial year, totaling EUR 392 million (MEUR 157). During the financial year, the company brokered a total of 10 million fur pelts (2019-2020: 8 million pelts), of which 8.2 million were mink (7.4 million pelts), 1.6 million fox

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Financial Statements Bulletin 26 January 2022

2020-2021

(0.5 million pelts), and 98,000 Finnraccoon pelts (160,000 pelts). A significant number of mink and fox pelts were transferred for sale in the following financial year.

The Group's consolidated net turnover increased by 81 per cent during the financial year, amounting to EUR 51 million (MEUR 28 million) due to the increase in the value of brokerage sales.

Auctions

The value of the brokerage sales of the first auction of the financial year in December was EUR 28 million (12/2019: MEUR 12). More than 80 per cent of the more than 800,000 mink pelts on auction were sold, and the price level increased by approximately 50 per cent on average compared to the previous period. 100 per cent of the 120,000 Blue and Shadow fox pelts offered were sold, and the price level increased by approximately 20 per cent. Of the 100,000 mutation and Silver fox pelts offered, only one fifth was sold while the price level was steady.

In the March auction, the value of brokerage sales increased to EUR 104 million (04/2020: MEUR 32). More than 90 per cent of the 2.5 million certified mink pelts and 70 per cent of the 660,000 certified Saga® fox and Finnraccoon pelts on offer were sold at the auction. Strong demand continued to support the continued increase in the price level of mink pelts.

The value of brokerage sales in the June auction increased to EUR 188 million (07/2020: MEUR 20), which clearly exceeded the value of sales for the whole of the previous financial year (EUR 157 million). Nearly 3.6 million mink pelts were sold in the June auction, and their price level rose significantly. Approximately 95 per cent of the auctioned 590,000 certified Saga® fox and Finnraccoon pelts offered were sold.

The value of brokerage sales in the September auction was EUR 59 million (9/2020: MEUR 72). The company's sales policy for mink pelts was based on defending the price level and aiming to stabilise the market after a strong price increase during the period. As a result, the sales percentages of the lower quality mink pelts on auction were higher than the sales percentages of the higher quality mink pelts. 70 per cent of the 2.5 million auctioned mink pelts were sold, and their price doubled compared to the auction of the previous year. More than half of the 580,000 auctioned fox and Finnraccoon pelts were sold. One-third of the higher quality Blue fox and Shadow fox pelts were sold almost at the price level of the June auction, but nearly 80 per cent of the lower quality level pelts were sold. Blue Frost fox pelts were all sold at rising prices.

Brokerage sales in the half-year period 1 May-31 October 2021

Between May and October 2021, the company sold a total of 6.2 million pelts (5/2020-10/2020: 6.4 million pelts). Of the pelts sold, 5.3 million were mink pelts (6.0 million), 0.8 million fox pelts (270,000), 49,000 Finnraccoon pelts (37,000) and 25,000 Karakul lamb pelts (12,000). During the review period, the value of sales grew by 121 per cent, totalling EUR 248 million (MEUR 112).

Value of brokerage sales by auction

Auction	Sales	Value	Sales	Value	Sales	Value
	1,000 pelts	EUR 1,000	1,000 pelts	EUR 1,000	1,000 pelts	EUR 1,000
	2020/2021	2020/2021	2019/2020	2019/2020	2018/2019	2018/2019
December	831	28 315	197	11 629	320	19 602
March	2 755	103 536	1 360	31 865	2 919	106 226
June	4 115	188 430	1 173	24 583	3 347	99 498
September	2 050	58 889	4 442	71 528	2 211	69 697
Private Treaty	211	12 760	830	17 341	34	1 335
Total	9 962	391 931	8 002	156 944	8 830	296 357

Financial position, result and key performance indicators

During the financial year 2020-2021, the number of pelts sold increased by one quarter from the previous financial year, totaling 10 million pelts (8 million pelts in the previous financial year) due to the improvement in the demand for pelts. The exchange rate of the US dollar against the euro, weighed with auction sales, increased by 4,0 per cent from the previous financial year. The euro-denominated prices of fox pelts increased by 14 per cent and those of mink pelts by 105 per cent from the previous financial year. Thanks to the higher price level and increased number of pelts sold, brokerage sales increased by 150 per cent from the previous financial year, totaling EUR 392 million (MEUR 157).

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Financial Statements Bulletin 26 January 2022

2020-2021

During the financial year, the Group's consolidated net turnover increased by 81 per cent to EUR 51 million (MEUR 28). The bulk of the net turnover, 91 per cent (87%), consisted of commission fees collected for pelt brokerage. The commission fees from producers accounted for 27 per cent (38%) and the commission fees from buyers for 64 per cent (50%) of the consolidated net turnover. The remainder was generated, among others from sales of pelting services to produc- ers. The share of commission fees collected from Finnish customers, both producers and buyers, was 13 per cent (8%) and the share of commission fees collected from international customers was 79 per cent (80%). Other operating income increased due to restored customer credit losses, totaling EUR 2.7 million (MEUR 1.9).

The Group's operating expenses remained at the level of the comparison period despite the increase in the number of pelts sold. Personnel expenses increased by 5 per cent year-on-year, totaling EUR 16 million (MEUR 15). Comparable depreciation in light of the IFRS 16 standard decreased from EUR 6.0 million to EUR 5.7 million. Other operating expenses were EUR 19 million (MEUR 20). This includes credit losses of EUR 0.3 million (1.6 MEUR) recorded for receivables from buyers.

Consolidated operating profit in the financial year was EUR 11 million (a loss of MEUR -13).

Credit losses for advances paid to producers decreased and totaled EUR 1.2 million (MEUR 3.6), which increased the Group's consolidated net financial income by 154 per cent to EUR 5.6 million (MEUR 2.2). Net financial income was also improved by lower interest expenses.

Consolidated profit before tax stood at EUR 17 million (a loss of MEUR -10). Consolidated profit stood at EUR 13 million (a loss of MEUR −8.4).

Return on equity was 15.3 per cent (−10.2%), with earnings per share amounting to EUR 3.63 (EUR −2.37).

The Group's equity ratio at the end of the financial year was 75.2 per cent (31 October 2020: 42.9%). At the end of the financial year, the company had no net debt, as its cash and cash equivalents were EUR 3.7 million higher than its lia- bilities. At the end of the financial year, the receivables from fur producers were EUR 23 million (MEUR 103), as producers took significantly fewer advances due to a smooth sales season. Receivables from buyers were EUR 14 million (MEUR 31) due to the rapid pace of redeeming the pelts throughout the financial year.

The consolidated balance sheet total was EUR 130 million (31 October 2020: MEUR 186). Equity per share was

EUR 25,48 (31 October 2020: EUR 22,01 and 31 October 2019: EUR 24.38).

Financial performance for the half-year period 1 May to 31 October 2021

Consolidated net turnover increased by 62 per cent compared to the comparison period, amounting to EUR 30 million (MEUR 18 million). The growth of net turnover continued thanks to lively brokerage sales.

Operating expenses increased to EUR 25 million (MEUR 20). Consolidated operating profit in the second half of the financial year improved, amounting to EUR 7.2 million (a loss of EUR −50,000). Net interest income decreased to EUR

1. million (MEUR 3.7). Credit losses recorded for receivables from producers decreased to EUR 1.5 million (MEUR
   2.9). Other financial income was EUR 1.7 million (EUR 34,000), of which the share of producer credit losses was EUR

1. million (EUR 34,000). Net financial income increased to EUR 1.8 million (MEUR 0.5).

Consolidated profit before tax stood at EUR 9.0 million (MEUR 0.5) in the second half of the financial year.

Personnel

The number of permanent Group staff in the financial year averaged 147 persons (171 in the comparable period) and that of fixed-term employees 106 (161). The majority of the Group's fixed-term employees work on a seasonal basis in various duties in grading and processing of pelts.

At the end of the financial year, the Group employed 220 individuals (156). Of them, 147 (149) were permanent employ- ees, of whom 37 (33) worked abroad.

Of the permanent staff members, 56 per cent (55%) were male and 44 per cent (45%) female. The average age was 47 years (47) and the median age was 49 years. 51 per cent of the Group's personnel were male and 49 per cent female. During the financial year, the company employed citizens of 18 countries.

The time of service of permanent staff averaged 12.9 (12.3) years. On average, seasonal employees were employed on a fixed-term basis for 3 (5) months in the parent company, and for 4 (4) months in Furfix Oy, the pelting centre located in Kaustinen, Finland.

Saga Furs has an incentive bonus scheme for all employees of the Group, valid after six months of employment. The annual bonus scheme is based on four Group-level objectives. The remuneration of the company's Board of Directors and executives is explained in the Remuneration Report, available on the company's website. Wages and salaries for the financial year totaled EUR 12 million in the Group and EUR 10 million in the parent company (2019-2020: MEUR 15 and MEUR 12).

Due to the COVID-19 pandemic, Saga Furs continued to take exceptional measures to improve personnel safety, including instructing personnel to work remotely, where possible, to reduce the risk of infection. During the financial year,

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