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's activity report 2022

Introduction

Flexa Eesti AS was established on April 26, 1994. The 100% owner of Flexa Eesti AS shares is Flexa4Dreams Holding A/S.

Flexa Eesti AS has two factories in Estonia, both located in Lääne-Virumaa. The Viru-Nigula factory has warehouses and production buildings for furniture components and glued laminated timber, as well as for furniture production and packaging. The Viru-Nigula factory mainly produces beds. The factory located in Kadrina produces wardrobes, chests of drawers, shelves and other furniture items.

Overview of economic activity The year 2022 was challenging for the company, resulting in a significant decline in production orders and sales in the first half of the year. We were forced to review and increase our sales prices due to high raw material prices. In the third and fourth quarters, we were able to stabilize production, but still at a lower level compared to previous years. We also had to reduce the number of employees. While the peak production season in previous years has been the autumn period, in 2022, due to the aforementioned reasons, the results were modest.

Turnover in 2022 was 17,655 thousand euros, which is lower compared to the previous year (2021: 21,755 thousand euros).

For the company, product quality and efficient production are the two main success factors. In 2022, special attention was paid to improving product quality and production efficiency. LEAN principles were successfully used in production management.

The company's profit for the financial year was 280 thousand euros (2021: 643.1 thousand euros).

Main areas of activity, product and service groups

Flexa Eesti produces children's furniture from pine wood and fiberboard, and other wooden furniture on a subcontracting basis. There have been no significant changes in the product range. The demand for fiberboard (MDF board) furniture continues to increase, and its share of turnover shows a growing trend.

Significant environmental and social impacts

Flexa Eesti AS has been awarded ISO 9001 and ISO 14001 certificates. Among other things, our management principles are as follows: (cid:127) we employ competent personnel in performing tasks and raise employees' awareness of the company's key indicators, quality, environmental and occupational safety, and emergency response; (cid:127) in making investment decisions, we assess the impact on occupational safety, quality, environment, efficiency and improving financial results; (cid:127) we ensure a safe working environment and working conditions for employees and partners; (cid:127) we involve employees in identifying workplace risks and implementing mitigation measures; (cid:127) we assess the environmental aspects associated with activities, prevent, avoid or reduce adverse environmental impacts; (cid:127) we use resources responsibly and efficiently; (cid:127) in planning, commissioning, using and disposing of production assets, we consider it important that the potential of production assets is effectively, efficiently, safely, environmentally friendly used throughout the life cycle of production assets, meeting the expectations of stakeholders in a sustainable manner.

Risk of changes in exchange rates and interest rates

Transactions with suppliers and customers are mainly in euros, so the exchange rate risk is low. Purchases are also made to a lesser extent in Danish kroner and British pounds, but due to the stable rate and small transaction volume, the exchange rate risk is low.

Investments In the 2022 financial year, 417 thousand euros were invested in fixed assets (2021: 732 thousand euros). The main investments were related to the expansion of the existing Kadrina production building, where MDF boards were cut to the required size. Employee facilities were also renovated, and several improvements were made to ensure occupational safety.

Investments planned for the 2023 financial year are mainly aimed at implementing more modern business software and, as in previous years, improving occupational safety.

Goals for the next year The military conflict between Russia and Ukraine that began on February 24, 2022, has had an indirect impact on the company's operations. Flexa Eesti AS does not have direct suppliers in these countries, but as a result of the conflict, raw material prices in several commodity groups (e.g., wood, fuel, metal) generally increased. Also, buyer confidence decreased, so they reviewed their consumption habits and did not make purchases, including furniture.

However, the company's management believes that the company can cope by keeping costs under control, increasing the profitability of products and increasing production efficiency.

The group's main markets are in Europe and Asia, and therefore developments in the operating environment there affect the company's financial results. Although sales volumes in Europe decreased in 2022 due to the increase in raw material prices and uncertainty among buyers, we see a normalization of prices in our important raw material groups (pine wood) and also forecast a growth in production order volumes from the second quarter of 2023. We also expect a recovery in sales to China this year (2023), as in 2022, due to the spread of the coronavirus, the country was closed for several months, and therefore sales volumes were significantly smaller than in previous years.

In Asian markets, the main focus has so far been on China, but last year (2022) we also successfully entered other countries. Since 2019, we have entered e-commerce and the production sold through online channels has significantly increased in the following years. We expect this trend to continue in 2023.