RAUTE CORPORATION INTERIM REPORT APRIL 29, 2020 AT 9:00 a.m.
RAUTE CORPORATION - INTERIM REPORT JANUARY 1–MARCH 31, 2020
This is a summary of Raute’s Interim financial report January 1 – March 31, 2020. 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.
- The Group’s first-quarter net sales, EUR 23.8 million (MEUR 41.3), declined 42.4% on the comparison period.
- Operating result, EUR-3.0 million (MEUR 2.6), declined 215%. The result before taxes was EUR -2.9 million (MEUR 2.7).
- Earnings per share were EUR -0.52 (EUR 0.50), and diluted earnings per share were EUR -0.52 (EUR 0.50).
- Order intake, at EUR 25 million (MEUR 32), was satisfactory. The order book at the end of the reporting period stood at EUR 92 million (MEUR 84).
- On April 24, 2020, Raute changed its guidance for 2020. Raute’s net sales for 2020 are expected to decrease compared to 2019 and operating profit is expected to weaken clearly year-on-year.
| KEY FIGURES | 1.1.-31.3.2020 | 1.1.-31.3.2019 | 1.1.-31.12.2019 |
| Net sales, MEUR | 23,8 | 41,3 | 151,3 |
| Change in net sales, % | -42,4 | 17,1 | -16,4 |
| Exported portion of net sales, % | 95,2 | 88,1 | 88,3 |
| Operating profit, MEUR | -3,0 | 2,6 | 8,5 |
| Operating profit, % of net sales | -12,6 | 6,3 | 5,6 |
| Profit before taxes, MEUR | -2,9 | 2,7 | 9,3 |
| Profit before taxes, % of net sales | -12,1 | 6,6 | 6,1 |
| Profit for the period, MEUR | -2,2 | 2,1 | 7,7 |
| Profit for the period, % of net sales | -9,4 | 5,2 | 5,1 |
| Gross capital expenditure, MEUR | 0,9 | 0,6 | 3,0 |
| % of net sales | 3,9 | 1,4 | 2,0 |
| Research and development costs, MEUR | 1,4 | 1,0 | 4,4 |
| % of net sales | 5,9 | 2,4 | 2,9 |
| Order book, MEUR | 92 | 84 | 88 |
| Order intake, MEUR | 25 | 32 | 148 |
| Personnel, at the end of the period | 767 | 776 | 778 |
| Personnel, effective, on average | 754 | 754 | 761 |
| Personnel, on average | 776 | 774 | 784 |
TAPANI KIISKI, PRESIDENT AND CEO: OUR FUTURE PLANS WILL GET US THROUGH THE PANDEMIC
2020 began with low net sales and a negative result. Our net sales declined on the comparison period as expected and significantly due to the timing of our order book.
Net sales fell and the operating profit declined also due to the postpone of schedules for a few projects, for reasons attributable to the customers, and due to the coronavirus pandemic, which caused the several weeks long shutdown of our Chinese plant and the travel restrictions affecting our field operations. Also the industrial action in Finland early on in the year caused difficulties for the carrying out of maintenance services. The impacts of the pandemic on our operations in the first quarter were limited, but not insignificant.
Regardless of the increase in the uncertainty resulting from the coronavirus, we succeeded in achieving a relatively good order intake and our order book remained strong. The majority of the orders we received came from projects that had been negotiated long before the coronavirus pandemic escalated into a global crisis and from there into a rapid deceleration of the economy. The starting up of our customers’ investment projects indicates that they consider the impacts of the pandemic on their business to be limited and temporary, for now at least.
The escalation of the coronavirus epidemic, which had started in January, into a global pandemic has impacted and will continue to impact the global economy and our market situation to an extent and for a period of time that are currently difficult, if not impossible, to predict. Visibility, even into the near future of our business, is poor. Predicting the order intake is exceptionally difficult and our customers’ investment decisions involve considerable uncertainty in terms of both implementation and timing. Risks related to the availability of components and assuring the flow of production have risen. Guaranteeing successful field operations is also especially difficult both when it comes to the installation and commissioning of project deliveries and maintenance operations. It is clear that we will not reach our targeted and previously predicted net sales and operating profit this year. We would like to repeat our estimate given on April 24th: our net sales will decline and operating profit will weaken clearly year-on-year.
In this situation, our strong balance sheet, market position and long-standing customer accounts are important competitive advantages and enablers of long-term work. We are doing our utmost to minimize the impacts of the unprecedented situation and continue our planned investments in product development, marketing and digitalization to ensure our success in the post-coronavirus world. We will succeed when our personnel, customers and other partners work together.
BUSINESS ENVIRONMENT
Market situation in customer industries
Raute’s customers in the plywood and LVL (Laminated Veneer Lumber) industries are engaged in the manufacture of wood products used in investment projects and are thus highly affected by fluctuations in construction, housing-related consumption, international trade and transportation. We expect that the trend-like growth in wood construction will create demand for our customers and indirectly for Raute, strengthening our long-term growth opportunities.
In Q1, the situation and outlook in the global economy and the financial markets deteriorated significantly due to increased uncertainty. The weakening of the outlook was accelerated by the escalating uncertainty caused by the coronavirus pandemic at the end of the first quarter.
Demand for wood products technology and technology services
Many of Raute’s established and traditional customers have invested heavily in recent years. As demand among this traditional customer base remained at a lower level than in previous years, the demand for our technology shifted towards new and different types of customer accounts.
Overall, investment activity among Raute’s customers weakened from what it has been in recent years, and the weakening was increased by the spread of the coronavirus epidemic. In the reporting period, the number of new transactions was moderate in view of the circumstances. Several of the larger orders received resulted from negotiations started well before the coronavirus crisis.
Especially in Russia, demand remained active. However, forecasting the realization and timing of projects is more difficult than before. In the emerging markets of Asia, China included, demand continued to pick up. Following the break caused by the coronavirus countermeasures, demand in China especially has recovered rapidly and projects already being planned have been picked up again. Interest in Raute’s offering grew in these markets. This development did not, however, result in a significant order intake in the reporting period, but in the future we see strong opportunities for us.
Demand for maintenance and spare parts services remained good, which is an indication of the generally good capacity utilization rates of Raute’s customers’ production plants. In Finland, the lengthy industrial action measures at our customers’ plants caused a temporary lull in the demand for spare parts and maintenance services at the start of the year. After this, the travel restrictions resulting from the coronavirus epidemic have prevented us from carrying out the majority of the planned maintenance services.
OUTLOOK FOR 2020
On April 24, 2020, Raute changed its guidance for 2020 net sales and operating profit. Regardless of the high order book and moderately good volume of order intake in Q1, we forecast that Raute’s net sales will decline in 2020 from the previous year’s level as a result of uncertainty in demand and the order intake for the rest of the year. We expect the operating profit to clearly weaken from last year, as disclosed earlier, due to a shift in the markets and the costs for adapting to this, and due to investments in marketing, product development and digitalization and falling net sales.
RAUTE CORPORATION
Board of Directors
PRESENTATION OF THE INTERIM REPORT ONLINE:
Analysts, investors and the media can watch the presentation of the Interim Report online on April 29, 2020 starting at 2 p.m. using this link. The Interim Report will be presented by Mr. Tapani Kiiski, President and CEO, and Ms. Tarja Järvinen, CFO. The presentation will be held in Finnish.
Analysts, investors and the media can send in advance questions related to the Interim Report to the email address ir@raute.com on April 29, 2020 until 2.30 p.m., after which President and CEO Tapani Kiiski and Group Vice President, CFO Tarja Järvinen will answer the sent questions in a live Interim Report presentation up until around 3 p.m.
President and CEO Tapani Kiiski has also reserved time for answering questions over the phone after the Interim Report presentation, starting at 3 p.m. The phone number is 03 829 11.
NEXT INTERIM REPORT:
Raute Corporation’s half-year report January 1–June 30, 2020 will be released on Thursday, July 23, 2020.
FURTHER INFORMATION:
Mr. Tapani Kiiski, President and CEO, Raute Corporation, mobile phone +358 400 814 148
Ms. Tarja Järvinen, Group Vice President, Finance, CFO, Raute Corporation, mobile phone +358 40 658 3562
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 the Nastola area of Lahti, Finland. The company’s other production plants are located in Kajaani, Finland, the Vancouver area of Canada, the Shanghai area of China and in Pullman, Washington, USA. Raute’s net sales in 2019 were EUR 151.3 million. The Group’s headcount at the end of 2019 was 778. More information about the company can be found at www.raute.com.
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