From the CEO
October 29, 2020
OUR NEGOTIATION EFFORTS IN SUMMER WERE REWARDED WITH A MAJOR ORDER IN OCTOBER
Our third-quarter net sales were low, but our result was nevertheless positive. The low net sales can be attributed to a large extent to the more difficult delivery of installation supervision, commissioning and maintenance services caused by the travel restrictions. In our North American locations, we were forced to continue our adaptation measures for several weeks. In this respect, the situation in our locations in Finland and China was better.
Uncertainty caused by the coronavirus pandemic continued to have a strong effect on our customers' investment decisions and thus on our order intake. Our order book remains, however, on a good level. Q1's relatively good order intake included orders that had, for the most part, been negotiated almost fully before the start of the corona crisis. In Q2 and Q3, many of our customers put off their plans and orders, based on the uncertainty of their market situations. The number of actual cancellations was low, however, so when the situation settles, I anticipate that the postponed projects may restart, perhaps even at short notice.
In early October, we successfully concluded long and, due to the circumstances, exceptional negotiations and confirmed an order worth almost EUR 55 million to Russia. As a result, our outlook for 2021 clearly strengthened, but the transaction will not have an impact on this year's outlook. There is generally active demand and project planning in Russia. China was the only market area in which activity has returned to a somewhat normal level. Our mill in China was operating normally and our customers' projects continued to move forward. Nevertheless, this did not result in major orders in Q3. Project preparation is also active in Europe and North America, but decision-making is exceptionally uncertain.
As we have consolidated in our main locations the kind of expertise that is often required for special maintenance, project installation supervision and commissioning, the travel restrictions inconvenienced us and our customers globally. In spite of this, we successfully carried out a variety of these services with the help of remote work arrangements. In my estimate, the restrictions will unfortunately persist, and this is why we will increase our local resources where possible and invest in performing these services remotely. The overall impact of the coronavirus pandemic on our net sales and especially our operating profit can be characterized as substantial.
The impact of the coronavirus pandemic on the market development highlights the importance of our strategic goals – growing the emerging market share, developing the technology service business and investing in digitalization. We will thus continue to focus on product development, marketing and digitalization. Our strong balance sheet, market position and long-standing customer accounts are important competitive advantages and enablers of this type of long-term work. We will succeed when our personnel, customers and other partners work together and we will come out of this crisis as a stronger and more agile Raute.
It is clear that our targeted net sales and operating profit for this year will not be met in these conditions. We would like to repeat our estimate given on April 24th: our net sales will fall and operating profit will weaken clearly year-on-year.
President and CEO