Raute Corporation - Interim Report January 1-September 30, 2022

RAUTE CORPORATION INTERIM REPORT OCTOBER 21, 2022 at 9:00 a.m.

This is a summary of Raute’s Interim financial report January 1-September 30, 2022. The complete report is attached to this release as a pdf file and is also available on the company’s’ website at www.raute.com.

 

RAUTE CORPORATION - INTERIM REPORT JANUARY 1–SEPTEMBER 30, 2022

 

July-September 2022

  • Net sales were EUR 41.8 million (37.9), a growth of 10.2%. EUR 5.7 million of the net sales came from revenue recognized from the Russian order book.
  • Operating profit was EUR 1.4 million (1.7), a decline of 18.0%.
  • Earnings per share were EUR 0.29 (0.28), and diluted earnings per share EUR 0.29 (0.28).
  • Order intake was EUR 35 million. 

January-September 2022

  • Net sales were EUR 112.6 million (98.1), a growth of 14.8 %. EUR 21.8 million of the net sales came from revenue recognized from the Russian order book.
  • Operating loss was EUR -15.2 million (-2.8). The loss was impacted by approximately EUR - 9 million from write-downs related to winding down the Russian business as well as one-time items of approximately EUR -2.5 million.
  • Result before taxes was EUR -15.1 million (-2.4).
  • Earnings per share were EUR -3.02 (-0.59), and diluted earnings per share EUR -3.02 (-0.59).
  • Order intake was EUR 110 million.
  • Order book at the end of the reporting period was EUR 94 million (150). The order book includes EUR 6 million in orders from Russia which constitutes the remaining part of the Russian order book after the controlled wind-down of Russian agreements.
  • Gearing was 22.5 % (-26.0). 

Guidance statement for 2022

On June 22, 2022, Raute Corporation’s Board of Directors issued a revised earnings guidance for 2022. The Board of Directors expects Raute’s 2022 operating profit to stay significantly negative and below last year’s level. Raute’s operating profit for 2021 was -2.2 million euros.

 

KEY FIGURES

1.7.-

30.9.2022

1.7.-

30.9.2021

1.1-30.9.2022

1.1-30.9.2021

1.1.-

31.12.2021

Net sales, MEUR

41,8

37,9

112,6

98,1

142,2

Change in net sales, %

10,2

35,8

14,8

28,9

23,7

Exported portion of net sales, %

85,9

89,8

90,5

90,2

91,8

Operating profit, MEUR

1,4

1,7

-15,2

-2,8

-2,2

Operating profit, % of net sales

3,4

4,6

-13,5

-2,8

-1,6

Profit before taxes, MEUR

1,4

1,7

-15,1

-2,4

-1,8

Profit before taxes, % of net sales

3,3

4,6

-13,4

-2,4

-1,2

Profit for the period, MEUR

1,3

1,2

-12,9

-2,5

-1,8

Profit for the period, % of net sales

3,0

3,2

-11,4

-2,6

-1,2

 

 

 

 

 

 

Gross capital expenditure, MEUR

2,0

3,7

5,7

6,3

6,3

% of net sales

4,8

9,8

5,0

6,4

4,4

 

 

 

 

 

 

Research and development costs, MEUR

1,3

1,1

4,5

3,6

4,9

% of net sales

3,1

3,0

4,0

3,7

3,5

 

 

 

 

 

 

Order book, MEUR

94

150

94

150

158

Order intake, MEUR

35

58

110

154

203

 

 

 

 

 

 

Personnel, at the end of the period

 

 

812

783

802

Personnel, effective, on average

 

 

787

778

780

Personnel, on average

 

 

841

786

788

 

Mika Saariaho, President and CEO: Good demand in most market areas and recovered profitability in Q3 brightening the unprecedented year

 

Following the very difficult first half of the year, Raute is operating in a new business environment leveraging the ongoing good market demand. At the same time determined steps for a controlled wind-down of the remaining operations in Russia continue.

 

Demand during the third quarter has continued at a high level. EMEA demand is good, customers continue efforts to increase capacity to fulfill the gap left by missing imports into the region. This has also raised new interest towards Raute’s solutions among customers and countries where earlier activity has been small. We are actively pursuing opportunities in these markets. Market activity has also been especially strong in North America. Latin America, where raw material availability is good, continues to be positive as well. Activity in Asian markets and in China continue recovery following the extended Covid-19 related downturn.

 

Order intake in 2022 amounts to EUR 110 million, third quarter order intake being EUR 35 million. No new mill size projects have been received in 2022, and the overall amount includes EUR 2.4 million orders from Russia that were received in the beginning of the year. Received orders continue at a reasonable level giving confidence that the new market situation can provide good volume filling the production capacity. Mid-sized single production line orders and technology services have increased during the year, compensating the lack of mill size orders.

 

Order book at the end of September was EUR 94 million. The continuing order book excluding Russia amounts to EUR 88 million and has remained on the same level as in Q2.

 

The remaining order book for the Russian market, after risk reservations, is EUR 6 million, majority of which is planned to be delivered in 2022 or early part of 2023. The ongoing activities for a controlled wind-down of the remaining operations in Russia are strictly bound by the existing sanctions and local laws and regulations in both countries. Each project is considered individually including the contractual commitments, sanctions, changing impacts on logistics, financing and payment conditions, and we continue to adjust the order book and expected margin to reflect the outcome.

 

Third quarter net sales were EUR 41.8 million, 10% above comparison period. The increase is coming from all market areas, however most significant growth has been in EMEA and North America. The sales of technology services have also developed favorably.

 

Following the reorganization of Russian delivery projects, the third quarter operational situation has clearly stabilized, and overall loading has been on a good level. Following the improved operating environment, we are encouraged by the third quarter operating profit of EUR 1.4 million. Our Russian projects had net neutral impact on the Q3 profit.

 

Strong cost inflation as experienced during the first half of the year has started to recede slightly, but margin pressure still prevails. Poor availability of components also continues to burden the supply chain and increases working capital needs. In addition, the ongoing business transformation puts pressure for working capital financing resulting in negative cash flow for the quarter and increasing the net debt.

 

During the third quarter the earlier announced development program to improve competitiveness and profitability has progressed well and execution has started. Related to this, headcount in Finland is expected to reduce by over 40 people by the end of the year as a result of change negotiations, transfer of business, retirements and other measures. Overall, the program is expected to reduce costs by some EUR 4-5 million and improve margins.

 

During the last quarter of the year, we will focus on stabilizing the operational situation further and ensure actions to improve our profitability are followed through. We will also work with our customers to secure good and timely service and delivery of our products.

 

After my first weeks with Raute, I am pleased to say that our people and teams I have met are talented and diligent, and we have an outstanding knowledge to support our customers in utilizing forest assets in the most profitable and sustainable way.  We are well equipped to respond to the key challenges of the future by combining leading wood expertise with digital production solutions and local know-how.

 

BUSINESS ENVIRONMENT

 

Market situation in customer industries

Raute’s customers in the veneer, plywood and LVL (Laminated Veneer Lumber) industries are engaged in the manufacture of wood products used in investment projects and are thus affected by fluctuations in construction, housing-related consumption, international trade, and transportation. We believe that one of the future trends focuses on wood-based construction and its growth will create demand for our customers and indirectly for Raute, strengthening our long-term growth opportunities.

 

Market situation and outlook in the global economy and the financial markets, that became uncertain earlier this year due to the military action begun by Russia and the resulting sanctions, have slightly stabilized but remain uncertain. Higher inflation caused by the rise in raw material and transport costs, and poor availability of certain materials and components increase uncertainty and weaken the outlook, but these impacts have not yet become visible in demand for Raute’s customers’ products. Restrictions imposed due to the Covid-19 pandemic and its other direct impacts have mainly disappeared in Raute’s market area, with some still remaining in China.

 

Demand for wood products technology and technology services

Demand for Raute’s technology and services has been strong in the developed markets of Europe and North America. However, likelihood for economic downturn seems higher in Europe whereas North American demand continues stronger. In Latin America demand is on fairly good level, also as the availability of raw material in the market area is good. In Asia, demand was lower than in the developed markets, and market continues to feel uncertain, still slowly recovering from the Covid-19 measures, that have been mainly lifted, and reduced industry financing.

 

Investment activity among Raute’s customers remained good. The reporting period’s order intake continued on good level, but it did not include any large capacity orders. Demand for maintenance and spare parts services has been very good, indicating generally good capacity utilization rates of Raute’s customers’ production plants.

 

Update of the impacts of the Russian military actions on Raute’s business operations in Russia

Raute condemns Russia’s attack on Ukraine. The attack and resulting sanctions have had a significant impact on Raute’s business operations in Russia as Raute had ongoing projects for several different Russian customers. On March 4, 2022, we announced that we stopped entering into new contracts with Russian parties. Set sanctions prohibit several deliveries to Russia. With customers or deliveries that are not under sanctions, Raute is carrying out a controlled wind-down of existing agreements through completing or changing the scope of deliveries or terminating the contract. As a result of the wind-down activities, Raute’s order book for Russian customers has significantly reduced during 2022 and was EUR 6 million on September 30, 2022, after risk reservations. The remaining order book includes risks in case the controlled wind-down of remaining contracts turns out not to be possible. Raute’s assets in rubles in Russia were equal to approximately one million euros on September 30, 2022 and the assets were mainly related to the local maintenance business in Russia. Raute has no currency hedging related to Russian ruble.

 

OUTLOOK FOR 2022

 

On June 22, 2022, Raute Corporation’s Board of Directors issued a revised earnings guidance for 2022. The Board of Directors expects Raute’s 2022 operating profit to stay significantly negative and below last year’s level. Raute’s operating profit for 2021 was -2.2 million euros.

 

RAUTE CORPORATION
Board of Directors

 

BRIEFING ON OCTOBER 21, 2022 AT 2 P.M.:
A briefing will be organized for analysts, investors and the media on October 21, 2022 at 2 p.m. at Scandic Simonkenttä Hotel, Tapiola cabinet, Simonkatu 9, Helsinki. The interim report will be presented by Mr. Mika Saariaho, President and CEO, and Ms. Minna Yrjönmäki, Interim CFO. The event can also be watched online via Teams. We will send a Teams link to those who have registered by email; registrations at [email protected]. The event will be recorded, and the recording can be viewed on Raute’s website www.raute.com on Monday, October 24, 2022.

FURTHER INFORMATION:
Mr. Mika Saariaho, President and CEO, tel. +358 40 154 9393
Ms. Minna Yrjönmäki, Interim CFO, tel. +358 40 570 2067

DISTRIBUTION:
Nasdaq Helsinki Ltd, main media, www.raute.com

RAUTE IN BRIEF:
Raute is a technology and service company that operates worldwide. Raute’s customers are companies operating in the wood products industry that manufacture veneer, plywood, LVL (Laminated Veneer Lumber) and sawn timber. Its technology offering covers the entire production process for veneer, plywood and LVL and special measurement equipment for sawn timber. As a supplier of mill-scale projects, Raute is a global market leader both in the plywood and LVL industries. Additionally, Raute’s full-service concept includes technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations. Raute’s head office is located in Lahti, Finland. The company’s other production plants are located in Kajaani, Finland, the Vancouver area of Canada, the Changzhou area of China and in Pullman, Washington, USA. Raute’s net sales in 2021 were EUR 142.2 million. The Group’s headcount at the end of 2021 was 802. More information about the company can be found at www.raute.com.

 

 

Raute Corporation_Interim report January 1-September 30, 2022