Raute's 3Q earnings continue to decline

31-10-2019
Raute,earnings,profits,sales,interim report,3Q

RAUTE CORPORATION - INTERIM REPORT JANUARY 1-SEPTEMBER 30, 2019

- The Group’s net sales, EUR 112.0 million (MEUR 126.8), decreased 12% from the comparison period. Order intake was EUR 130 million (MEUR 138).
- Operating profit was EUR 6.6 million (MEUR 11.5), down 42% from the comparison period. The result before taxes was EUR 6.7 million (MEUR 11.5).
- Earnings per share were EUR 1.27 (EUR 2.10), and diluted earnings per share were EUR 1.26 (EUR 2.08).
- Third-quarter net sales amounted to EUR 33.7 million and the operating profit was EUR 1.7 million. Order intake was EUR 73 million. The order book at the end of the reporting period came to EUR 109 million (MEUR 121), EUR 78 million of which is scheduled for 2020 or 2021.
- On June 25, 2019, Raute changed its guidance for 2019. Raute’s net sales for 2019 are expected to decrease and operating profit is expected to weaken from the previous year. 

 

KEY FIGURES

1.7.-30.9.

2019

1.7.-30.9.

2018

1.1.-30.9.

2019

1.1.-30.9.

2018

1.1.-31.12.

2018

Net sales, MEUR

33,7

47,9

112,0

126,8

181,0

Change in net sales, %

-29,5

29,3

-11,7

16,7

22,2

Exported portion of net sales, %

90,5

81,2

86,9

86,0

84,6

Operating profit, MEUR

1,7

5,6

6,6

11,5

14,9

Operating profit, % of net sales

5,1

11,7

5,9

9,1

8,2

Profit before taxes, MEUR

1,7

5,5

6,7

11,5

14,9

Profit before taxes, % of net sales

4,9

11,5

6,0

9,1

8,2

Profit for the period, MEUR

1,4

4,3

5,4

8,9

11,8

Profit for the period, % of net sales

4,2

9,0

4,8

7,0

6,5

 

 

 

 

 

 

Gross capital expenditure, MEUR

0,8

0,9

2,1

3,1

4,4

% of net sales

2,4

1,9

1,9

2,5

2,4

 

 

 

 

 

 

Research and development costs, MEUR

1,3

0,7

3,1

2,4

3,7

% of net sales

3,9

1,5

2,8

1,9

2,1

 

 

 

 

 

 

Order book, MEUR

 

 

109

121

95

Order intake, MEUR

73

42

130

138

167

 

 

 

 

 

 

Personnel, at the end of the period

 

 

783

755

772

Personnel, effective, on average

 

 

763

718

725

Personnel, on average

 

 

785

742

748

 

TAPANI KIISKI, PRESIDENT AND CEO: UNCERTAINTY IN THE MARKETS STILL ON THE RISE

The impact of the postponement of our customers’ project decisions on our order intake during the early year is now reflected in our net sales falling short of last year’s level and our targets.

Uncertainty in our customers’ markets has further increased, and the start-up of a few projects that have progressed well has been delayed. Some of them have been postponed until the market situation settles. Our demand continues to focus on a customer base that is new to us and less established. We are addressing this in part through the announced organisation changes. Demand for strategic, major, long-term projects and minor immediate improvements and maintenance services is at a good level, while demand for repair and improvement investments is weak. This makes it more difficult to forecast order intake and causes larger variations in order intake volumes. Demand for spare parts and maintenance services has remained stable. It indicates that, in spite of the market uncertainty, the utilisation rates of customer mills have mostly kept to a good level.

The third-quarter order intake, EUR 73 million, was at an excellent level, taking into consideration the market situation. The dominant role of a single exceptionally large order also reflects the market situation well. The record order received at the end of the third period brought our order book back to a strong level of EUR 109 million. However, this major order will not start generating any major net sales until next year. The project will also be implemented over a rather long period of time. Thus we will be able to serve our other customers with quick and flexible delivery times, despite the large order book.

In terms of operating profit, we are nearly five million euros behind the record result of the corresponding period last year. In terms of the third quarter, the result stayed at the realised level in part due to the above-mentioned delays in new orders and the resulting low net sales. As for the last quarter of the year, our order book enables the realisation of the best period of the year. I believe that we will be able to close in on last year’s performance to some extent, but unfortunately we will not be able to bridge the gap entirely. Therefore, our estimate that Raute’s net sales will decrease and operating profit will weaken in 2019 compared to 2018 remains unchanged.

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 the first nine months of 2019, the situation in the global economy and the financial markets deteriorated steadily. The economic outlook continued to deteriorate.

Many of Raute’s established and traditional customers have invested heavily during the past few years. As demand among this traditional customer base remains at a lower level than in the past few years, the demand for our technology continues to shift towards new and different types of customer accounts.

Demand for wood products technology and technology services

Although investment activity among Raute’s customers has decreased from what it was in recent years, it remains at a reasonable level. Enquiry activity for new capacity projects and larger projects involving replacement and efficiency-boosting investments has remained at a good level, and contracts are being actively negotiated.

There is active demand especially in Russia, although forecasting the realisation and timing of projects is difficult. In the emerging markets of Asia, China included, demand has continued to pick up. There is growing interest in Raute’s offering in these markets, which presents opportunities to obtain new customers.

Demand for maintenance and spare parts services remained at a good level, which is an indication of the generally good capacity utilisation rates of Raute’s customers’ production plants.

OUTLOOK FOR 2019

On June 25, 2019, Raute changed its guidance for 2019 concerning net sales and operating profit, estimating that the company’s net sales will decrease and operating profit will weaken in 2019 compared to the record figures of the previous year. The revised guidance was based on scheduling delays concerning a few projects that were in the implementation phase, as well as the related costs, and to the postponement from previous estimates of a few major new orders that are in the negotiation phase.

The company’s current situation and outlook for the rest of the year give no cause to change the guidance issued on June 25, 2019. Raute’s net sales will decrease and operating profit will weaken in 2019 compared to 2018.

 


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