Interim report January - March 2013

IMPROVED MARGINS DESPITE MARKET SLOWDOWN

FIRST QUARTER 2013

  • Sales revenue amounted to EUR 55.0m (57.6m)*
  • Revenue decrease of 4.5% Y-o-Y (2.7% in local currency)
  • Operating loss amounted to EUR -0.5m (-0.9m)
  • The Operating margin was -1.0% (-1.5%)
  • EBITDA amounted to EUR 2.6m (1.5m)
  • The after-tax result amounted to EUR -3.5m (-0.5m)
  • Cash flow from operating activities amounted to EUR 22.4m (9.5m)

* Comparative figures for last year are in brackets.

SIGNIFICANT EVENTS DURING THE FIRST QUARTER

  • Market for construction equipment in Russia down 10% compared to Q1 2012
  • Regions Siberia and Far East, recently established, growing share of revenues
  • Improvement in overall gross profit margin
  • Unstable oil price, albeit still on a high level
  • Downgrading of Russia’s GDP forecast for 2013, although still at relatively high level
2013 2012 2012 Apr –
 EUR M Jan-Mar Jan-Mar 2013 Mar
Revenue 55.0 57.6 273.2
EBITDA 2.6 1.5 14.5
Operating Profit (0.5) (0.9) 3.4
Net Debt 44.6 56.1 44.6
Net debt / EBITDA* 2.7x 3.0x 2.7x

*Calculation based on Bond Terms and Conditions.

Lars Corneliusson, the CEO of Ferronordic Machines comments:

Improved margins despite market slowdown

The market for new construction equipment in Russia decreased by around to 10% in the first quarter compared to the same period in 2012. This should however be put in light of the fact that the market in Q1 2012 was up 60% compared to Q1 2011. The subsequent quarters in 2012 saw more stable development trends compared to 2011. The first quarter is traditionally the weakest in terms of overall market and shows the biggest swings in numbers year-on-year.

Ferronordic Machines generated revenue of EUR 55.0m in the first quarter of 2013, a 4.5% decrease compared to the same period of 2012 when revenue amounted to EUR 57.6m (it should be noted that in RUR revenue decreased by only 2.7%). Revenue from new machines decreased by 6.0% from EUR 40.2m in 2012 to EUR 37.8m in 2013. Number of new units sold decreased from 275 units in the first quarter of 2012 to 261 units, or 5.5%. The product mix was almost unchanged: backhoe loader represented 43% of unit sales in both periods, while sale of excavators increased from 24% in 2012 to 31% in 2013 reaching 81 units. Revenue from parts and services remained unchanged at EUR 14.3m. Revenue from services isolated rose by EUR 0.5m or over 40% while revenue from parts sales decreased by the same amount. Parts revenue decreased slightly as a result of high first quarter 2012 revenue due to sales to sub dealers and one-off revenues.

In the first quarter of 2013 we managed to increase our gross profit margin to 18.9% as compared to 14.1% in the same period of 2012. In money terms gross profit increased from EUR 8.1m to EUR 10.4m. This is a result of better price realization on machines due to customer and regional mix and increased gross margin on spare parts sales as a result of a restructuring of the parts price list. EBITDA in the first quarter of 2013 was EUR 2.6m, a 81% increase compared to the same period of 2012 when EBITDA amounted to EUR 1.5m. Cash flow from operating activities of EUR 22.4m was supported by a reduction in trade receivables and increased payables and by the end of the first quarter of 2013 our short term debt amounted to EUR 5.0m (EUR 27.3m as at the end of 2012). Our net debt position by the end of the first quarter of 2013 amounted to EUR 44.6m and our net debt/EBITDA was 2.7x based on the calculation method in the bond terms and conditions.

Unrealized FX losses significantly affected net results for the period. In the first quarter of 2013 unrealized FX losses amounted to EUR 1.2m while in the same period of 2012 the Company incurred an unrealized FX gain of EUR 2.0m. Primarily as a result of this our net loss for the period amounted to EUR 3.5m as compared to a net loss of EUR 0.5m in previous year.

Ferronordic Machines, alongside its cooperation with VCE, has during the quarter further increased its commitment to Volvo Trucks aftermarket operations. During the first quarter three authorized service centers were put into operation servicing both Volvo CE machines and Volvo Trucks. These centers are located in the Moscow Region, Noviy Urengoy (Yamalo-Nenetskiy Autonomous Destrict) and Khabarovsk (Far East region). We expect significant synergies by combining the Volvo branded services and expect greater customer satisfaction, cost efficiency and profitability of these centers. Ferronordic Machines is already operating a joint VCE and Volvo Trucks facility in Arkhangelsk since more than a year.

At the end of the first quarter of 2013 we operated 69 sales- and/or service locations as compared to 56 locations at the end of the same period of 2012. We continued to establish a firm foothold in Siberia and Far East, two regions which were traditionally weak for the Volvo CE business. During the quarter, Siberia & Far East accounted for 21% of our total revenues, compared to only 8% in Q1 2012. We expect to see further growth in these two regions in 2013.

At the end of the first quarter of 2013 we had 690 employees as compared to 563 employees in the end of the same period in 2012 – sales and service personnel comprise 95% of the increase.

Despite recent downgrades of the forecast for Russia’s GDP growth for 2013, the oil price remains at a high level and the government continues infrastructural spending like Sochi Olympics, preparations for the World Football Championship, development of roads and natural resources projects. We remain cautiously optimistic as we look forward into 2013, but continue to follow the key risks created by the international economic instability and the potential effects on business conditions in Russia.

For further information, please contact:
Anders Blomqvist, Chief Financial Officer, Ferronordic Machines AB, Tel: +46 70 7766 485
Ferronordic Machines AB, Hovslagargatan 5B, 111 48 Stockholm, Sweden

Ferronordic Machines is the Authorized Dealer of Volvo Construction Equipment in Russia. The Company began its operations in June 2010 and has since then shown strong growth:

2012 revenue of EUR 276m vs. EUR 74m in 2010

 69 own outlets vs. 6 in June 2010

690 employees vs. 162 in June 2010

Ferronordic Machines has expanded all across Russia through its 69 outlets and is today well established in all seven federal districts. In addition to distributing and providing aftermarket support to Volvo CE machines, the Company has also been appointed Aftermarket Dealer for Volvo Trucks as well as Dealer for Volvo Penta in certain parts of Russia. The company has also signed up some other high quality brands such as LogSet and several attachment manufacturers. The company intends to become a leading service- and sales company in the CIS markets.

Tags:

About Us

See release

Contacts

  • Ferronordic Machines AB
    Hovslagargatan 5B, SE-111 48 Stockholm, Sweden
    +46 8 50907280
    http://ferronordic.ru/
  • Ferronordic Machines LLC
    Business Center Country Park Ferronordic Machines LLC Panfilova str., 19, bld.4 Khimki Moscow region Russia 141407
    +7 495 663 9237

Subscribe