Raute Corporation - Financial statements release January 1 - December 31, 2019

RAUTE CORPORATION FINANCIAL STATEMENTS RELEASE FEBRUARY 13, 2020 AT 9:00 A.M.

RAUTE CORPORATION – FINANCIAL STATEMENTS JANUARY 1 – DECEMBER 31, 2019

This is a summary of Raute’s Financial statements release January 1 – December 31, 2019. 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.

- The Group’s net sales EUR 151.3 million (MEUR 181.0) fell by 16% on the comparison year. Order intake, at EUR 148 million (MEUR 167), was at a good level, although it fell 11%. The order book at the end of the year, EUR 88 million (MEUR 95), was also strong despite a decline year-on-year.
- Operating profit amounted to EUR 8.5 million (MEUR 14.9), down 43%. The result before taxes was EUR 9.3 million (MEUR 14.9). Profit for the financial year was EUR 7.7 million (MEUR 11.8).
- Undiluted earnings per share were EUR 1.80 (EUR 2.78) and diluted earnings per share were EUR 1.79 (EUR 2.76).
- Fourth-quarter net sales amounted to EUR 39.3 million and the operating result was EUR 1.8 million. Order intake was EUR 17 million.
- The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 1.45 (EUR 1.40) per share be paid for the financial year 2019.
- Raute’s net sales for 2020 are expected to remain at the same level as in 2019 and operating profit is expected to weaken compared to 2019.

TAPANI KIISKI, PRESIDENT AND CEO: A YEAR OF CHANGE

In 2019, uncertainty in the global economy and in our customers’ markets increased. Many of our traditional customers were still digesting major investments made in the past few years. As a result, our demand focused on major new capacity projects, minor improvements, as well as services. Mid-sized projects accounted for a low share of demand, which made it more difficult to forecast order intake and caused larger variations in our order intake volumes. 

We started the year with a strong order book and high hopes to continue the strong development we had enjoyed for the past several years. The market change and unforeseen challenges with some deliveries surfacing during 2019, caused by the previous year’s record-high workload, made us fall short of our expectations and targets in terms of revenue and profits. This was a disappointment. Based on these experiences, we are developing models and risk management for the projects’ implementation. We can be satisfied with the strong development of our spare parts and technology services business and new orders from the emerging markets in Asia and South America.

Our markets are changing. In the future, plywood and LVL industries are expected to have modest growth in the developed markets. At the same time, the emerging economies are forecasted to continue strong demand growth. The results of this were seen already in 2019, when we were able to secure orders from several new customers, especially in the emerging markets. These companies have a different way of operating. Their priorities in terms of investments’ size, technology, quality and scope of services differ from the more traditional players. In order to meet the requirements of these new customers, we have to constantly develop our product and service offering and the way we do business. We will make significant investments in this new market situation, through product development and marketing measures during 2020. We will also strongly focus on the digital transformation of our own operations. Digitalization creates new opportunities in developing our technology services and measurement system business (Metrix). Due to the costs of these investments, our profitability will, unfortunately, weaken temporarily.

The global economic situation remains uncertain, despite the weak signals in recent months indicating a decrease in the risk of recession. In addition, uncertainty in terms of profitability development will result from China’s coronavirus epidemic and Finland’s difficult labor market situation. The megatrends that are the foundation for Raute’s technology and services demand, including the mitigation of climate change through wood construction, are strengthening. 

2019 was a year of change for Raute. And the change will continue. Our challenge will be to reposition ourselves in the new market situation. In 2020, we want to finalize the implementation of the new management structure, maintain and strengthen our leading position in our traditionally strong markets as a leading supplier of technology as well as strengthen our standing in the emerging markets through a suitable offering and grow our technology services business. I believe we are in a good position to do all this. 

I would like to express my sincerest thanks for the past year to Raute’s customers for their invaluable cooperation and trust, to our personnel for their good work and strong commitment in an environment of varying workloads, to our shareholders for their continued confidence in us, and to all our other partners for their contribution to furthering Raute’s development and progress.

BUSINESS ENVIRONMENT

Market situation in customer industries
Raute’s customers in the plywood and LVL (Laminated Veneer Lumber) industries are engaged in the manufacture of wood products used in investment projects and are thus highly affected by fluctuations in construction, housing-related consumption, international trade and transportation. We expect that the trend-like growth in wood construction will create demand for our customers and indirectly for Raute, strengthening our long-term growth opportunities.

Throughout 2019, the situation in the global economy and the financial markets deteriorated steadily. 

Demand for wood products technology and technology services
Many of Raute’s established and traditional customers have invested heavily during the past few years. As demand among this traditional customer base remained at a lower level than in previous years, the demand for our technology shifted towards new and different types of customer accounts.

Overall, although investment activity among Raute’s customers has weakened from what it was in recent years, it remained at a reasonable level. Enquiry activity for new capacity projects and larger projects involving replacement and efficiency-boosting investments remained at a good level, and contracts were actively negotiated.

There was active demand especially in Russia, although forecasting the realization and timing of projects was difficult. In the emerging markets of Asia, China included, demand continued to pick up. Interest in Raute’s offering grew in these markets. This development did not, however, result in a significant order intake, but in the future we see strong opportunities for us.

Demand for maintenance and spare parts services remained good, which is an indication of the generally good capacity utilization rates of Raute’s customers’ production plants.

BOARD OF DIRECTORS’ PROPOSAL CONCERNING PROFIT DISTRIBUTION, DIVIDEND EUR 1.45 PER SHARE

On December 31, 2019, the parent company Raute Corporation’s distributable assets totaled EUR 42,525 thousand, of which EUR 4,539 thousand represents the profit for the financial year 2019.

The Board of Directors will propose to Raute Corporation’s Annual General Meeting, to be held on March 31, 2020, that a dividend of EUR 1.45 per share be paid to holders of series A and K shares for the financial year 2019, and that the remainder of distributable assets be transferred to equity.

On the date of the profit distribution proposal, the number of shares entitling to a dividend is 4,263,194 shares, which would amount to total dividends of EUR 6,182 thousand. Shareholders who are registered in the shareholders’ register maintained by Euroclear Finland Ltd on the record date for dividend distribution, April 2, 2020, are entitled to dividends. The dividend payment date would be April 9, 2020.

No essential changes have taken place in the company’s financial position since the end of the financial year. The company has good liquidity, and in the Board of Directors’ view, the proposed dividend does not pose a risk to solvency.

OUTLOOK FOR 2020

Due to the high order book and relatively good demand, we estimate that Raute’s net sales in 2020 will remain at the level of the preceding year. We expect the operating profit to weaken from last year due to shifting markets and the costs related to adapting to these and due to investments in marketing, product development and digitalization.

RAUTE CORPORATION
Board of Directors


BRIEFING ON FEBRUARY 13, 2020 AT 2 P.M.:
A briefing will be organized for analysts, investors and the media on February 13, 2020 at 2 p.m. at Scandic Simonkenttä Hotel, Tapiola cabinet, Simonkatu 9, Helsinki. The financial statements will be presented by Mr. Tapani Kiiski, President and CEO, and Ms. Tarja Järvinen, CFO.

FINANCIAL RELEASES IN 2020:
Raute’s half-year report and two interim reports will be published as follows:
– Interim report January–March on Wednesday, April 29, 2020
– Half-year report January–June on Thursday, July 23, 2020
– Interim report January–September on Thursday, October 29, 2020

Raute Corporation’s consolidated financial statements will be published on February 13, 2020. Raute Corporation’s Annual Report 2019 will be published the week of February 24th.

Raute Corporation’s Annual General Meeting will be held at Lahti Fair Centre on Tuesday, March 31, 2020 at 6:00 p.m.

FURTHER INFORMATION:
Mr. Tapani Kiiski, President and CEO, Raute Corporation, mobile phone +358 400 814 148
Ms. Tarja Järvinen, Group Vice President, Finance, CFO, Raute Corporation, mobile phone +358 40 658 3562

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 the Nastola area of Lahti, Finland. The company’s other production plants are located in Kajaani, Finland, the Vancouver area of Canada, the Shanghai area of China and in Pullman, Washington, USA. Raute’s net sales in 2019 were EUR 151.3 million. The Group’s headcount at the end of 2019 was 778. More information about the company can be found at www.raute.com.