Componenta Corporation Interim Report 1 January - 30 September 2016: Componenta’s restructuring proceeds, net sales and operating profit declined from previous year
Componenta Corporation Stock Exchange Release 26.10.2016 at 16.40
January-September 2016 in brief
- On 1 September 2016 Componenta filed for its parent company Componenta Corporation and its subsidiaries in Finland and Sweden for a corporate restructuring, and filed for bankruptcy for its Dutch subsidiary. The Turkish subsidiary is continuing its operations without official proceedings.
- The company believes that the corporate restructuring process in Finland and Sweden will enable the company’s operations to be brought back to profitability and developed in the longer term. However, there is still a significant degree of uncertainty regarding the going concern of the Group’s operations.
- The turnover of the continued operations dropped during the review period, 13% lower than the previous year, and was EUR 284.5 million (EUR 326.7 million). Because of the bankruptcy proceedings the company considers that it has lost control of the Dutch sub-group and for this reason its consolidation in the Group’s financial statement has been discontinued in the third quarter of 2016 and its operations have been classified as Discontinued Operations. Recorded impairment losses and write-downs relating to the Group’s Dutch operations have also been presented under Discontinued Operations. The figures for comparison have been adjusted accordingly.
- Adjusted EBITDA of continued operations declined from the previous year, standing at MEUR 13.0 (MEUR 32.0). EBITDA including items affecting comparability was MEUR 3.7 (MEUR 29.7).
- Profitability of continued operations in the review period was weakened by lower production volumes than in the previous year, by wage inflation in Turkey and especially by stoppages in production caused by filings for corporate restructuring and tight liquidity situation. Exchange rate differences had an impact of MEUR -1.6 (MEUR 3.1).
- Adjusted operating profit of continued operations was down on the previous year, standing at MEUR -0.1 (MEUR 19.7). Operating profit of continued operations for the period in accordance with IFRS, including items affecting comparability, was MEUR -21.2 (MEUR 17.5).
- The adjusted result of continued operations after financial items was -15.8 (MEUR 2.5) and the IFRS result of continued operations after financial items, including items affecting comparability, was MEUR 6.2 (MEUR 0.2).
- Items affecting comparability of continued operations that had an impact on the result after financial items for the review period totalled MEUR 22.0 (MEUR -2.3).
- The net result for the review period was MEUR -20.6 (MEUR -9.1) and basic earnings per share were EUR -0.18 (EUR -0.10).
- Order book of continued operations at the beginning of October was 9% down on the previous year, at MEUR 67 (MEUR 74).
- The sale of the operations of Suomivalimo foundry located in Iisalmi and the related estate property was sold on 30 June 2016 and the Group recorded a sales loss of EUR 6.1 million on the transaction, which has been presented in items affecting comparability.
- Componenta’s pistons business located in Pietarsaari was sold on 17 August and the Group recorded a sales profit of MEUR 1.0 from the transaction, which has been presented in items affecting comparability. In addition the company is examining the possibility of selling other non-core business operations and property.
- The company has announced on 7 October 2016 and 13 October 2016 its plans to sell its shareholding in the Turkish subsidiary and forge operations in Sweden.
July-September 2016 in brief, continued operations
- Net sales declined 21% from the previous year to MEUR 75.1 (MEUR 95.4).
- Adjusted EBITDA declined from the previous year to MEUR 3.2 (MEUR 8.5). EBITDA including items affecting comparability was MEUR 1.4 (MEUR 7.7).
- Profitability was weakened by lower production volumes than in the previous year, by wage inflation in Turkey and especially by stoppages in production caused by filings for corporate restructuring and tight liquidity situation. Exchange rate differences had an impact of MEUR 1.6 (MEUR 1.1).
- Adjusted operating profit was MEUR -1.5 (MEUR 4.6) and the operating profit of continued operations in accordance with IFRS, including items affecting comparability, was MEUR -15.0 (MEUR 3.8).
- Adjusted result after financial items was MEUR -6.7 (MEUR -1.7) and the IFRS result after financial items, including items affecting comparability, was MEUR -20.6 (MEUR -2.5).
- Items affecting comparability that had an impact on the result after financial items for the July-September period totaled MEUR -13.9 (MEUR -0.8).
- The net result for the July-September period, including discontinued operations, was MEUR -40.4 (MEUR -7.5) and basic earnings per share were EUR -0.30 (EUR -0.08).
Componenta’s guidance for 2016
Due to the financial situation, the ongoing restructuring proceedings of the company and the structural changes currently taking place, giving earnings guidance is exceptionally challenging. Because of this, Componenta is not for the time being making forecasts about its financial performance when commenting on its prospects.
President and CEO Harri Suutari comments on factors leading to the need for corporate restructuring and the review period:
”The Componenta Group’s liquidity remained tight throughout the review period and the Group failed to source from the market the financing required to maintain operations. The company was not able to start its production units after the holiday season as planned in Holland, Finland and Sweden due to a lack of raw materials and other materials for reason of tight liquidity.
On 1 September 2016 Componenta filed its parent company Componenta Corporation and its subsidiaries in Finland and Sweden for corporate restructuring, and filed for bankruptcy for its Dutch subsidiary. The Turkish subsidiary is continuing its operations without official proceedings. The restructuring proceedings have begun in Finland and Sweden – in Sweden at the beginning of September and in Finland at the end of September. The Dutch subsidiary was declared bankrupt on 2 September 2016.
In Finland and Sweden the restructuring proceedings will enable the company’s operations to return to profitability and be developed in the longer term, but significant uncertainty still relates to going concern of operations. Since the review period, the companies in Finland and in Sweden have agreed a prepayment arrangement with their main customers which will help these companies with short-term working capital financing. Actions to reduce fixed costs have continued and will actively continue further. Measures to increase productivity and streamlining operations at the company’s production units will continue according to plan.
Significant business acquisitions made in 2004 and 2006 and the impact of the 2008 and 2009 financial crisis on the market contributed to the Componenta Group’s current debt situation. Furthermore, demand in Componenta’s key customer segments, such as mining, construction and agricultural machinery, has been significantly lower than before the financial crisis. The company’s ability to manage its financial obligations has continued to weaken since the financial crisis, significantly increasing financial costs. During 2016 investors’ trust in the company’s ability to manage its obligations began to weaken, and the company failed to re-negotiate short-term loans as it had in the past.
To increase profitability the Group has tried to improve the productivity of its factories and to decrease fixed costs. It has put parts of the Group up for sale as part of its efforts to improve the company’s financial position.
The proceeds from divestments carried out in 2016 were very small in comparison to the lack of funding. The sale of the Pistons unit in Pietarsaari was completed in mid-August and the Suomivalimo iron foundry in Iisalmi was sold at the end of June.
Componenta is planning to sell its foundry and machine shop operations in Turkey as well as its forging operations in Sweden. The remaining Högfors and Pori foundries in Finland and the Främmestad machine shop in Sweden together form a competitive business. Despite the company’s financial difficulties these operations have been able to show growth in both profitability and productivity. I believe this is due to effective use of opportunities made possible by the new organisational model.
During the review period development in profitability and volumes have been unsatisfactory. Sales of Componenta’s iron products in continued operations in the first half of the year declined some 23% from the previous year. The decline was caused by a number of factors. The mining and construction equipment and the agricultural machinery markets, both key markets for Componenta’s iron business, weakened from the previous year. Production problems caused by the company’s weakened liquidity and falling sales prices also contributed to a significant decrease in turnover. Unusually, around six million euros’ worth of products had not been delivered at the end of the review period. There was no similar delay in the reference period. Customers are also very aware of Componenta’s liquidity issues, and have therefore placed very few orders for new products to replace discontinued products.
Adjusted EBITDA on sales of iron products in continued operations fell from EUR 18.2 million to EUR 2.0 million as a result of lower volumes, wage inflation in Turkey and stoppages in production caused by the tight liquidity situation and other special arrangements. In addition, the exchange rate differences weakened EBITDA significantly. Capital expenditure in the iron business totalled EUR 3.9 million.
Adjusted EBITDA on sales of aluminium products fell slightly from EUR 11.0 million to EUR 10.5 million. The installation of machinery and equipment and the start-up processes of production at the new production plant in Manisa, Turkey have progressed as planned. Capital expenditure in the aluminium business totalled EUR 13.4 million.”
| Q1-Q3 |
| Q1-Q3 |
|Order book, continued operations, MEUR||67.3||73.5||-8.5%||68.0|
|Net sales, continued operations, MEUR||284.5||326.7||-12.9%||429.0|
|Adjusted EBITDA, continued operations, MEUR||13.0||32.0||-59.5%||30.9|
|Adjusted operating profit, continued operations, MEUR||-0.1||19.7||n/a||14.7|
|Adjusted operating profit, continued operations, %||0.0||6.0||n/a||3.4|
|Adjusted result after financial items, continued operations, MEUR||-15.8||2.5||n/a||-9.3|
|Items affecting comparability that had an impact on the result after financial items, continued operations, MEUR||22.0||-2.3||n/a||-22.0|
|Taxes, continued operations, MEUR||-2.8||-2.0||40.4%||-26.4|
|Net result, MEUR||-20.6||-9.1||126.7%||-82.7|
|Earnings per share, EUR||-0.18||-0.10||77.2%||-0.86|
|Net gearing, %||580||226||156.0%||1,273|
|Adjusted return on investment, %||-1.5||5.3||n/a||2.3|
|Adjusted return on equity, %||-83.6||-10.2||721.4%||-20.4|
|Number of personnel at end of quarter, incl. leased personnel||3,456||4,286||-19.4%|| 4,269 |
Componenta’s Q3 2016 Interim Report in pdf format is in the appendix to this release. It is also available on the company’s websites at www.componenta.com
Helsinki, 26 October 2016
President and CEO
ENCL. Interim Report 1 January – 30 September 2016
For further information, please contact:
tel. +358 10 403 2200
tel. +358 10 403 2101
Componenta is a metal sector company with international operations and production plants located in Finland, Turkey and Sweden. The net sales of Componenta were EUR 495 million in 2015 and its share is listed on Nasdaq Helsinki. The Group employs approx. 3 700 people. Componenta specializes in supplying cast and machined components and total solutions made of them to its global customers, who are manufacturers of vehicles, machines and equipment.