Correction to Raute Corporation's Financial statements release 2022

RAUTE CORPORATION FINANCIAL STATEMENTS RELEASE FEBRUARY 14, 2023 AT 11:20  A.M.

CORRECTION TO RAUTE CORPORATION’S FINANCIAL STATEMENTS RELEASE 2022

Correction to the Financial Statements Release 2022 published on February 14, 2023 at 9:10 a.m. The table Consolidated statement of income on page 11 in the attachment contains incorrect figure related to Change in inventories of finished goods and work in progress for January 1–December 31, 2022. The correct figure is EUR 4,501 thousand (the incorrect figure was EUR 9,320 thousand). The figure has been corrected to attachment of this release.

RAUTE CORPORATION FINANCIAL STATEMENTS RELEASE JANUARY 1-DECEMBER 31, 2022

This is a summary of Raute’s Financial statements release January 1 – December 31, 2022. The full report is a PDF file attachment to this stock exchange release and is also available on the company's website at www.raute.com.

October-December 2022

•                     Net sales were EUR 45.7 million (44.1), a growth of 4%. EUR 10.8 million of the net sales came from revenue recognized from the Russian order book.

•                     Comparable EBITDA* was EUR 2.7 million (2.1)

•                     Operating profit was EUR 0.5 million (0.5)

•                     Earnings per share were EUR 0.32 (0.18), and diluted earnings per share EUR 0.32 (0.18).

•                     Order intake was EUR 28 million.

January-December 2022

•                     Net sales were EUR 158.3 million (142.2), a growth of 11 %. EUR 32.6 million of the net sales came from revenue recognized from the Russian order book.

•                     Comparable EBITDA* was EUR -2.3 million (3.5)

•                     Operating loss was EUR -14.6 million (-2.2)

•                     Result before taxes was EUR -13.8 million (-1.8).

•                     Earnings per share were EUR -2.70 (-0.42), and diluted earnings per share EUR -2.70 (-0.42).

•                     Order intake was EUR 138 million.

•                     Order book at the end of the reporting period was EUR 84 million (158). The order book includes EUR 4 million in orders from Russia after reservations which constitutes the remaining part of the Russian order book after the controlled wind-down of Russian agreements and related reserves.

•                     Gearing was 29.4 % (-35.9).

*The Company publishes alternative performance measures (APMs).  These performance measures are not defined in accordance with IFRS but provide complementary information to investors and company management about the company’s financial position and development. In this report two new APMs are presented: Comparable EBITDA and EBITDA. The new APMs definitions can be found in the tables section of this report.

The company has decided to change its reporting segments in accordance with the new operative organization structure that has been effective since January 1, 2023. The new reporting segments are Wood Processing, Analyzers and Services. The segment figures with the new segment split are presented in this release (as additional information) for the reporting period as well as for the comparison period on a quarterly basis and are comparable.

Guidance statement for 2023:

Raute’s 2023 net sales are expected to be above EUR 130 million and Comparable EBITDA margin to be above 4%.

The Board’s dividend proposal:

The Board of Directors proposes to the Annual General Meeting that no dividend be paid for financial year 2022.

Mika Saariaho, President and CEO: Showing the way and driving change

Year 2022 will be remembered as the year when Russia attacked Ukraine, causing severe negative consequences to the world economy. When the war began in February, over half of our order book for 2022 consisted of projects in Russia. Since the end of February, we have not made any new agreements with Russian operators and our Russian business is being gradually scaled down.

The impact of withdrawing from the Russian market, combined with the increased prices and limited availability of components and logistics, had a significant negative impact on our financials in 2022. To mitigate this impact, we strengthened our development program to improve competitiveness and profitability. Overall, the program is expected to reduce our annual cost base by some EUR 4‒5 million and improve margins. We were able to show positive comparable EBITDA in all the new business units both in the third and fourth quarter in 2022, which demonstrates that we are taking steps in the right direction and our actions to improve our profitability are bearing fruit.

Strong market demand especially in North America, Latin America and Europe

While we were winding down our Russian operations, our businesses in North America, Latin America and EMEA were performing very well, helping to mitigate the impact of lost Russian business. This is an important proof of our agility and capability to adjust our business to cope even with such a dramatic change in our business environment.

While the activity in Asian markets and in China continued to recover from COVID-19-related downturn, business activity in these markets did not yet reach the pre-pandemic levels. Additionally, the restrictions imposed in China due to the pandemic continued to burden our profitability in 2022.

Towards technology services company

I’m very proud of the strong development of our technology services sales. Good example was a significant modernization deal regarding Stiga RM’s birch plywood mill in Latvia. Thanks to Raute’s wide service offering combined with the latest generation of production equipment, the customer can improve the capacity, recovery and quality of their birch plywood production, as well as increase the automation level of their mill.

Another important customer win in 2022 was the sale of the first Raute Green Veneer Composing Line R7 in North America to Tolko Industries Ltd. in Canada.  In this case automation plays a big part in improving yield and profitability. In addition, Tolko Industries’ new R7 lay-up line will replace existing labor-intensive lines and improve the efficiency of their operations.

Overall, our focus in 2022 has been on customer efficiency improvements and releasing production bottlenecks. We are seeing customers investing more and more in data platforms and automation. MillSIGHTS, our industry leading platform, provides the necessary information to enable concrete optimization work.

In order to further strengthen our local performance services closer to customers, we are also continuously developing our service network. For example, we have now also permanent service operations out of Italy, and we are in progress of opening an additional Service Center in Southeast Asia.

Three top priorities

At the moment, the top priorities for Raute can be summarized in three points: profitability, operational model clarification and growth initiatives. It is clear that our highest priority in the short-term is to improve our profitability. We made good progress in the second half of 2022 and the work continues in 2023.

In November, we announced a change to our organization structure. As of January 1, 2023, Raute has had three business units: Wood Processing, Analyzers, and Services. The change is also reflected in the Executive Board composition and responsibility areas. The new structure will streamline our internal operations, put the customer in the center of everything we do and strengthen our ability to service customers more directly. In order to improve visibility to our business, we will also start reporting externally the financial key figures for the new business units.

At the moment, we are carrying out a strategic development project to crystallize the growth strategy and development path for Raute going forward. At the same time, we are developing our ESG (Environmental, Social, Governance) agenda. We believe that for a company like Raute, sustainability is an inseparable part of our core strategy and should be integrated into everything we do. We also know that sustainability and sustainable manufacturing is becoming more important for our customers. We are in a good position to help our customers in executing their sustainability agendas and reaching their sustainability goals.

Taking a bigger role in the industry

I started as President and CEO of Raute on October 1, 2022. It has been a pleasure to see with my own eyes the high level of expertise that Raute is globally renowned for. Our thorough understanding of the whole plywood and LVL processing value chain puts us in a unique position. Thanks to our strong, world-class technology and service expertise, we have, together with our customers, a unique opportunity to take a bigger role by showing the way and driving change in the whole industry.

Achieving together

In many ways, year 2022 has been an eventful year for Raute. To ensure viable business also in the future, we have also had to make some hard decisions and let people go. This is never easy, and those decisions are not made lightly. But these challenging times have also highlighted the best characteristics of our personnel: teamwork, creativity, and can-do attitude! I want to express by appreciation for the dedication and hard work of all Rauteans during these most exceptional of times.

I also want to thank our customers and shareholders for the great collaboration during this challenging year. I’m confident that together we can make the year 2023 a good year for us all.

BUSINESS ENVIRONMENT

Market situation in customer industries

Raute’s customers are the producers of veneer, plywood and LVL (Laminated Veneer Lumber). Their products are typically used in construction, housing-related consumption, international trade and transportation. Global megatrends have a marked impact on the future demand of these products, such as the increasing use of sustainable wood-based construction materials also in the high-rise buildings, the demand for veneer-based packaging materials and the targets to reduce the use of plastic materials. All these megatrends are indicating an increasing demand for wood-based materials in the future. This is also supported by the developing regulation.

Market situation and outlook in the global economy as well as the financial markets have become uncertain during last year. The military action by Russia and the resulting sanctions are affecting the situation. High inflation caused by the rise in raw material, energy and transport costs, and poor availability of certain materials and components increase uncertainty and weaken the outlook. These impacts have become also visible in demand for Raute’s customers’ products. Restrictions imposed due to the Covid-19 pandemic have been mostly lifted around the world, but the impact of Covid-19 can still be seen, especially in the Asian market. The raw material availability has started to limit our customers’ production volumes, especially due to the lack of the Russian birch logs. The slowdown of the construction business and housing starts have slowed down the demand of the softwood plywood.

Demand for wood products technology and technology services

Demand for Raute’s technology and services has been strong in the developed markets of Europe and North America. However, likelihood for economic downturn seems high on both of these markets.  The disappearance of the Russian birch plywood and birch logs from the European market has caused some turbulence on the market, but at the same time it has also created increasing demand for Raute’s solutions for production capacity increase within the European birch plywood producers. In Latin America demand is on a fairly good level, also as the availability of raw material in the market area is good. In Asia, demand was lower than in the developed markets, and the market continues to feel uncertain, still slowly recovering from the Covid-19 and reduced industry financing.

Investment activity among Raute’s customers remained fairly good.  The reporting period’s order intake continued on a good level, but it did not include any large capacity orders. Demand for maintenance and spare parts services has been very good, indicating generally good capacity utilization rates of Raute’s customers’ production plants during the reporting period. MINNA / MIKA

Update of the impacts of the Russian military actions on Raute’s business operations in Russia
Raute condemns Russia’s attack on Ukraine. The attack and resulting sanctions have had a significant impact on Raute’s business operations in Russia as Raute had ongoing projects for several different Russian customers. On March 4, 2022, we announced that we stopped entering into new contracts with Russian parties. Set sanctions prohibit several deliveries to Russia. With customers or deliveries that are not under sanctions, Raute is carrying out a controlled wind-down of existing agreements through completing or changing the scope of deliveries or terminating the contract. As a result of the wind-down activities, Raute’s order book for Russian customers has significantly reduced during 2022 and was EUR 4 million at the end of the year, after risk reservations. The remaining order book includes risks in case the controlled wind-down of remaining contracts turns out not to be possible. Raute’s assets in rubles in Russia were below one million euros on December 31, 2022 and the assets were mainly related to the local maintenance business in Russia. Raute has no currency hedging related to Russian ruble.

BOARD OF DIRECTORS’ PROPOSAL CONCERNING PROFIT DISTRIBUTION

On December 31, 2022, the parent company Raute Corporation’s distributable assets totaled EUR 19,328 thousand, of which EUR 8,414 thousand represents the loss for the financial year January 1 – December 31, 2022.

The Board of Directors will propose to Raute Corporation’s An­nual General Meeting, to be held on March 30, 2023, that no dividend to be distributed.

GUIDANCE STATEMENT FOR 2023
Raute’s 2023 net sales are expected to be above EUR 130 million and Comparable EBITDA margin to be above 4%.

RAUTE CORPORATION
Board of Directors

BRIEFING ON FEBRUARY 14, 2023 AT 2 P.M.:
A briefing will be organized for analysts, investors and the media on February 14, 2023 at 2 p.m. at Scandic Simonkenttä Hotel, Simonkatu 9, Helsinki. The financial statements release will be presented by President and CEO Mika Saariaho and Interim CFO Minna Yrjönmäki. The presentation will be in Finnish. The event can also be followed online via Teams. We will send a Teams link to those who have registered by email; registrations at ir@raute.com. The event will be recorded, and the recording can be viewed on Raute’s website www.raute.com on February 15, 2023.

FINANCIAL RELEASES IN 2023:

Raute’s half-year report and two interim reports will be published as follows:
- Interim report January - March on Tuesday April 25, 2023
- Half-year financial report January - June on Thursday July 27, 2023
- Interim report January - September on Thursday October 26, 2023.

Raute Corporation’s consolidated financial statements will be published at the latest in the week beginning on March 6, 2023 (week 10).

The Annual Report 2022 will be published at the latest in the week beginning on March 6, 2023 (week 10).

Raute Corporation’s Annual General Meeting will be held in Lahti, at Sibelius Hall on Thursday, March 30, 2023 at 6:00 p.m.

FURTHER INFORMATION:
Mr. Mika Saariaho, President and CEO, tel. +358 40 154 9393
Ms. Minna Yrjönmäki, Interim CFO, tel. +358 40 570 2067

DISTRIBUTION:
Nasdaq Helsinki Ltd, main media, www.raute.com

RAUTE IN BRIEF:
Raute is a technology and service company that operates worldwide. Raute’s customers are companies operating in the wood products industry that manufacture veneer, plywood, LVL (Laminated Veneer Lumber) and sawn timber. Its technology offering covers the entire production process for veneer, plywood and LVL and special measurement equipment for sawn timber. As a supplier of mill-scale projects, Raute is a global market leader both in the plywood and LVL industries. Additionally, Raute’s full-service concept includes technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations. Raute’s head office is located in Lahti, Finland. The company’s other production plants are located in Kajaani, Finland, the Vancouver area of Canada, the Changzhou area of China and in Pullman, Washington, USA. Raute’s net sales in 2022 were EUR 158.3 million. The Group’s headcount at the end of 2022 was 778. More information about the company can be found at www.raute.com.