Interim Report January – September 2013
CONTINUED MARGIN IMPROVEMENT
THIRD QUARTER 2013*
- Sales revenue amounted to EUR 70.5m (80.3m)
- Revenue decrease of 12.2% Y-o-Y (4.7% in local currency)
- Operating profit amounted to EUR 2.2m (1.3m)
- The Operating margin was 3.2% (1.7%)
- EBITDA amounted to EUR 5.4m (3.9m)
- Unrealized FX losses amounted to EUR -2.1m (-0.2m)
- The after-tax result amounted to EUR -2.0m (-1.3m)
- Cash flow from operating activities amounted to EUR -16.0m (4.1m)
JANUARY - SEPTEMBER 2013*
- Sales revenue amounted to EUR 207.6m (207.9m)
- Revenue at same level as previous year (increase of 4.6% in local currency)
- Operating profit amounted to EUR 3.5m (1.6m)
- The Operating margin was 1.7% (0.8%)
- EBITDA amounted to EUR 12.9m (8.8m)
- Unrealized FX losses amounted to EUR -3.8m (-0.8m)
- The after-tax result amounted to EUR -6.3m (-5.3m)
- Cash flow from operating activities amounted to EUR 9.0m (3.5m)
* Comparative figures for previous year are in brackets.
SIGNIFICANT EVENTS DURING THE THIRD QUARTER
- Improved gross margin and EBITDA despite flat market for construction equipment in Russia
- All seven regions significantly contributing to the business performance
- Decrease of financial indebtedness compared to the same period in 2012
|2013||2012||2013||2012||2012 Oct –|
|EUR M||Q3||Q3||9M||9M||2013 Sept|
|Net debt / EBITDA*||2.6x||4.2x||2.6x||4.2x||2.6x|
*Calculation based on Bond Terms and Conditions
Continued margin improvement
Ferronordic Machine’s CEO Lars Corneliusson comments:
The market for new construction equipment in Russia was close to flat in Q3 2013 compared to the same period in 2012. The Company, however, managed to increase EBITDA from EUR 3.9m to EUR 5.4m and gross margin from 14.2% to 16.9% compared to the same period in 2012.
In Q3 2013 revenue amounted to EUR 70.5m, a 12.2% decrease compared to the same period in 2012 (4.7% in ruble terms). We are pleased by the strong performance in service revenue which was up by 40% compared to the same period in 2012. Parts sales, however, only increased by 2% compared to Q3 2012 (10% in local currency) partly due to high sales of spare parts under warranty campaigns in 2012.
In the Q3 2013, despite lower revenue, gross profit increased from EUR 11.4m to EUR 11.9m. EBITDA in Q3 2013 was EUR 5.4m, a 38% increase compared to the same period of 2012 when EBITDA amounted to EUR 3.9m. Our net debt position by the end of the third quarter of 2013 amounted to EUR 56.5m and our net debt/EBITDA ratio was 3.2x.
Unrealized FX losses again negatively affected net results for the period. In the third quarter of 2013 unrealized FX losses amounted to EUR 2.1m. Excluding the effect of unrealized FX losses, the Company’s net results increased by EUR 1.3m in Q3 2013 compared to the same period 2012.
In the first nine month of the year, Ferronordic Machines generated revenue of EUR 207.6m, which was at a similar level as the same period of 2012 when revenue amounted to EUR 207.9m. However, in local currency revenue increased by 4.6%. Revenue from parts and services increased from EUR 44.1m to EUR 46.8m. Revenue from service isolated increased by 43% while revenue from parts sales increased by 2%.
Due to more efficient pricing structure of machines and parts we managed to increase our gross profit margin to 16.8% as compared to 14.4% in the same period of 2012. In money terms gross profit increased significantly from EUR 29.9m to EUR 34.9m. EBITDA in the first nine months of 2013 was EUR 12.9m, a 46% increase compared to the same period of 2012 when EBITDA amounted to EUR 8.8m. Unrealized FX losses negatively affected the net result by EUR 3.8m.
At the end of September 2013 we operated 75 sales and/or service locations as compared to 63 locations at the end of September 2012. We continued to establish a firm foothold in Siberia and Far East, two regions which have traditionally been weak for the Volvo CE business. We expect to see further growth in these two regions in 2013 and 2014. At the end of the third quarter of 2013 we had 710 employees as compared to 621 employees at the end of the same period in 2012 –service personnel comprise the majority of the increase.
In October we successfully raised SEK 500m through a preference share issuance. We are very pleased with the strong demand in our preference share, both from new investors as well as from existing bondholders. This signals a substantial interest and confidence in our business and a comfort in the way Ferronordic Machines has performed in Russia since the start of operations in 2010. With the capital from the preference share issue and with new investors on board, we will continue to execute our growth strategy.
We are encouraged by our profitability in the third quarter of 2013 and are cautiously optimistic about the prospect for 2014.
About Ferronordic Machines
Ferronordic Machines is the authorized dealer of Volvo Construction Equipment in Russia. The Company began its operations in June 2010 and has expanded rapidly across Russia and today is well established in all eight federal districts with 75 outlets and over 700 employees. In addition to distributing and providing aftermarket support to Volvo Construction Equipment 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 vision of the Company is to be regarded as the leading service- and sales company in the CIS markets.
Ferronordic Machines AB
Chief Financial Officer
Phone: +46 70 7766 485