Poor results for Moelven in the third quarter
The combination of challenging international market conditions for Moelven's sawmills and losses linked to individual projects means that the Group returned a loss in the third quarter.
The operating income for the third quarter was NOK 1 936 million (NOK 1 886 million), and the operating result was negative at NOK 15.4 million (positive NOK 114.4 million). In total, operating income after the first three quarters of the year amounted to NOK 6 059 million (NOK 5 299 million), with an operating result of NOK 14 million (NOK 278 million).
Hans Rindal, President and CEO of Moelven, is not happy with this result:
"This is an unsatisfactory result for Moelven. The loss is a result of a combination of factors. The market conditions internationally combined with losses on individual projects have led to a negative result this quarter. However, there are good results from some of the activities in all three divisions, but unfortunately they are not good enough to compensate for the losses in the third quarter," says Rindal.
Satisfactory demand in Scandinavia
There have been good levels of activity in the Wood division, and the demand for timber-based building products has been satisfactory. In this division, demand depends primarily on activity in the new build and renovation markets in Norway and Sweden.
"The order backlog in the Building Systems division is also normal for the season. We are seeing a high level of activity within both building modules and system interiors in Sweden, but otherwise, the Scandinavian market has few contracts to compete for," says Rindal.
Feeling the pinch from low international activity
The export markets, which primarily impact the Timber division, have been plagued by low activity levels. This has had a negative impact on prices, resulting in an unsatisfactory gross margin.
"There is nothing we can do about fluctuations in the markets around us, but they occur from time to time, and we are used to dealing with them. Naturally, it will take some time for us to adapt," says Rindal, and continues:
"Raw materials make up a large percentage of our costs, and any measures we implement internally can only partially compensate for falling prices for finished goods at times like these. Nevertheless, such measures are important for our ability to maintain a competitive position and for our earnings over time. If we manage to stay ahead of the game in terms of costs, then we also will not need to make so many capacity adjustments. At the moment, we see that both the raw material costs and overall production in the sector are on the decline, which will help," explains Rindal.
Loss in Electro
It became clear in August that Moelven Electro had four major projects in the Oslo area that were running at a considerable loss. The losses on completed projects and the anticipated losses in one ongoing project have all been recorded in this quarter.
"This is unfortunate, and we are now implementing both organisational and system changes to reduce the risk of this happening again."
Acquiring a new business
At the beginning of the fourth quarter, an agreement was signed for the acquisition of the business of H-Profil. H-Profil produces wooden components for the window industry, a customer group that Moelven is already a major supplier to. Laminated window elements will be a good supplement to the products we currently supply. In addition, the business is located in a region where Moelven has several sawmills that supply suitable raw materials for this type of production.
Hans Rindal says the outlook going forwards is complex:
"The outlook is poor for the Eurozone and the U.S., whereas we expect only a normal seasonal reduction in activity in the construction industry in Sweden and Norway towards the end of the year. This means that we have a challenging time ahead, but there are also some causes for optimism. We have a satisfactory order backlog in the Building Systems division, and prices and volumes in both the raw materials and the finished product markets are beginning to adapt to a new situation with lower levels of activity in the timber industry. For the fourth quarter, we expect a positive result for the Group as a whole. However, we do not expect this to compensate for the losses we have incurred so far this year, and, unfortunately, we now expect a negative result for the year as a whole," says Rindal.
For further information, please contact:
President & CEO Hans Rindal, +47 90 69 69 10
Chief Financial Officer Morten Sveiverud, +47 90 98 06 67
Director of Communications and HR Kristin V. Bjørnstad, +47 90 71 37 01