Raute Corporation - Interim report January 1-March 31, 2023

Raute Corporation, Interim report, April 28, 2023 at 8:00 EEST

This is a summary of Raute’s Interim financial report January 1-March 31, 2023. The complete report is attached to this release as a pdf file and is also available on the company’s’ website at www.raute.com.

RAUTE CORPORATION - INTERIM REPORT JANUARY 1–MARCH 31, 2023

-          The Group’s Q1 net sales amounted to EUR 36.8 million (41.3), 10.8 % below the comparison period. EUR 5.5 million of the net sales came from revenue recognized from the remaining Russian order book following the controlled wind-down of operations.

-          Comparable EBITDA was EUR 2.8 million (-0.1), 7.7% of net sales.

-          Operating profit was EUR 0.9 million (-1.5), 2.3% of net sales.

-          Earnings per share were EUR 0.10 (-0.29).

-          Order intake was EUR 67 million (30) and the order book at the end of the reporting period EUR 121 million (152). The order book includes EUR 3 million in orders from Russia after reservations.

Guidance statement for 2023:

Raute’s 2023 net sales are expected to be above EUR 150 million and Comparable EBITDA margin to be above 4%.

Previous guidance (as stated in the financial statements release 2022 on February 14, 2023) was:

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

Mika Saariaho, President and CEO:  Making wood matter - good start of the year under challenging market conditions, EUR 49.6 million mill order as the highlight of the quarter

Raute’s order intake of EUR 67 million during the first quarter was strong due to Lumin plywood mill order in Uruguay received in March, demonstrating our strong ability as a one-stop-supplier. We had active dialogue as well with other customers on prospects for new mill orders and larger modernizations, but some customer investment decisions were postponed in Q1. Demand for modernization offerings related to new automation solutions also remained at a good level, whereas increased market uncertainty impacted the customer demand for single production lines, and demand for new services orders. The order book was EUR 121 million at the end of Q1.

First quarter net sales were EUR 36.8 million, 11% reduction against comparison period resulting mainly from lower activity level in Wood Processing. We continued to scale-down the Russian order book and have recognized EUR 5.5 million of sales from Russia in Q1 related to orders received before the war in Ukraine. We have now completed all the remaining line deliveries from Finland to Russian customers. We are pleased with the comparable EBITDA of EUR 2.8 million (-0.1) and EBITDA margin of 7.7% and that all our business units continue to perform profitably.

Wood Processing sales were at a reasonable level.  We were also pleased to see another quarter of positive comparable EBITDA. Following the controlled wind-down of operations from Russia, part of the revenue and margin were still recognized from the remaining Russian order book.   Analyzers sales were growing strong against comparison period, and the comparable EBITDA margin for Analyzers improved to EUR 0.7 million or 17% of the Sales, demonstrating our good market position in this business.  Growth in Services sales were at 4%, which is good considering that the comparison period still included Russian sales, and profitability remained at good level.

We have continued to follow through the profitability improvement program as announced last year and are making good progress with those initiatives. Cost inflation is currently tamed, but we continue to face some component availability issues. Related to profitability initiatives, we have in Q1 restructured our market area operations in China, and the related restructuring costs of EUR 0.6 million are visible in the Q1 financials. We have concluded in Q1 the negotiations for temporary layoffs concerning the hourly workers at the production plants in Finland, in order to actively manage operational competitiveness.

During Q1, we have also updated our strategy and introduced new financial targets for the five-year strategy period. According to the new strategy, Raute is the partner to future-proof the wood industry. With our unique solutions, we drive change and promote resource-efficient society. Moving ahead, our aim is to accelerate growth by expanding Raute’s portfolio into new wood products segments, especially through digital and analytical solutions and new service concepts. Our new financial targets are net sales of 250 MEUR, including both organic and inorganic growth, Services and Analyzers relative share of net sales of 40% of the Group, comparable EBITDA margin of 12% on average over cycle, and equity ratio of over 40%.

To support the strategy execution, we have taken decisive steps to strengthen our balance sheet and build our ability to serve customers. Following the decisions of the AGM, the company is now operating under one share series and the directed share issue was completed in early April. Further actions are ongoing to prepare for the rights issue planned for May. These important events give us the needed boost to invest in activities that support our growth agenda.

Looking ahead in 2023, we expect the market situation to continue to be uncertain, although principal interest to Raute’s solutions has so-far remained quite good. During the Q2, our main unit in Nastola is also getting ready for the go-live of our renewed ERP- system. While we expect to gain major process and efficiency improvements from the new system over time, we need to be prepared that for the first months we may experience inefficiencies and minor disturbance on business operations until the learning curve settles. Thanks to the new mill-size orders, we expect the year 2023 to deliver higher net sales than we originally estimated at the beginning of the year, but we remain somewhat cautious about the profitability development during the following months before the new mill orders start to generate profit.

Our new promise is making wood matter, and I would like to invite the current and new shareholders to join Raute journey by participating in the forthcoming rights issue.

BUSINESS ENVIRONMENT

Market situation and outlook in the global economy as well as the financial markets became uncertain and weakened during the past year, partially caused by the military action by Russia. High inflation, as experienced last year, has now smoothened out, however poor availability of certain materials and components continues to impact the outlook. These impacts are visible in demand for Raute’s customers’ products. Also, remnants of Covid-19 may still impact especially 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 which used to be an important raw material source before 2022. The slowdown of the construction business and reduction in housing starts have reduced the demand for the softwood plywood.

Demand for Raute’s technology has slowed down due to market slowdown in EMEA and in Asia where investment activity among Raute’s customers has clearly been reduced, but the customer activity in North America has continued to be at a good level. In Latin America demand is also good.

We are encouraged by the development of our high-end technology offerings, and Lumin order is an excellent example of a solution where technology of the production lines is of the modern automated R7/R5-Series technology equipped with analyzers for grading and MillSIGHTS software for data capturing and dynamic reporting. At the same time, some of our other customers are also active in the larger investment arena, and we have signed a mill-size order with Latvijas Finieris in April, already the second mill-size order for this year and we continue negotiations in final stages of contracting of a further large-scale project.

There is an increasing interest in EMEA also for Services, as well as possibilities to increase the birch plywood production capacity to compensate supply of lost Russian volumes.

Raute continues its controlled wind-down of activities in Russia, and the remaining order book for Russian customers after reservations was EUR 3 million at the end of the reporting period.

GUIDANCE STATEMENT FOR 2023

Raute’s 2023 net sales are expected to be above EUR 150 million and Comparable EBITDA margin to be above 4%.

Previous guidance (as stated in the financial statements release 2022 on February 14, 2023) was:

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 APRIL 28, 2023 AT 10 A.M.:
A briefing will be organized for analysts, investors and the media on April 28, 2023 at 10 a.m. at Scandic Simonkenttä Hotel, Simonkatu 9, Helsinki. The interim report 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 May 2, 2023.

NEXT INTERIM REPORT:
Raute Corporation’s half-year financial report January 1-June 30, 2023 will be published on Thursday July 27, 2023.

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 - Making Wood Matter
Raute is the partner to future-proof the wood industry. Our technologies cover different production processes with supporting digital and analytics solutions for engineered wood products.  Additionally, we offer full-scale service concept ranging from spare parts to regular maintenance and modernizations. Our innovative hardware and software solutions are designed to support our customers’ efficient consumption of natural resources. In mill-scale projects, Raute is a global market leader both in the plywood and LVL industries. Raute’s head office and main production is located in Lahti, Finland. The company’s other production plants are located in Kajaani, Finland, the Vancouver area of Canada, Changzhou, China, and in Pullman, WA, 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.