Raute Corporation - Interim Report January 1-September 30, 2019

RAUTE CORPORATION INTERIM REPORT OCTOBER 30, 2019 AT 9:00 a.m.

This is a summary of Raute’s Interim financial report January 1 - September 30, 2019. 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-SEPTEMBER 30, 2019

- The Group’s net sales, EUR 112.0 million (MEUR 126.8), decreased 12% from the comparison period. Order intake was EUR 130 million (MEUR 138).
- Operating profit was EUR 6.6 million (MEUR 11.5), down 42% from the comparison period. The result before taxes was EUR 6.7 million (MEUR 11.5).
- Earnings per share were EUR 1.27 (EUR 2.10), and diluted earnings per share were EUR 1.26 (EUR 2.08).
- Third-quarter net sales amounted to EUR 33.7 million and the operating profit was EUR 1.7 million. Order intake was EUR 73 million. The order book at the end of the reporting period came to EUR 109 million (MEUR 121), EUR 78 million of which is scheduled for 2020 or 2021.
- On June 25, 2019, Raute changed its guidance for 2019. Raute’s net sales for 2019 are expected to decrease and operating profit is expected to weaken from the previous year. 

TAPANI KIISKI, PRESIDENT AND CEO: UNCERTAINTY IN THE MARKETS STILL ON THE RISE

The impact of the postponement of our customers’ project decisions on our order intake during the early year is now reflected in our net sales falling short of last year’s level and our targets.

Uncertainty in our customers’ markets has further increased, and the start-up of a few projects that have progressed well has been delayed. Some of them have been postponed until the market situation settles. Our demand continues to focus on a customer base that is new to us and less established. We are addressing this in part through the announced organization changes. Demand for strategic, major, long-term projects and minor immediate improvements and maintenance services is at a good level, while demand for repair and improvement investments is weak. This makes it more difficult to forecast order intake and causes larger variations in order intake volumes. Demand for spare parts and maintenance services has remained stable. It indicates that, in spite of the market uncertainty, the utilization rates of customer mills have mostly kept to a good level.

The third-quarter order intake, EUR 73 million, was at an excellent level, taking into consideration the market situation. The dominant role of a single exceptionally large order also reflects the market situation well. The record order received at the end of the third period brought our order book back to a strong level of EUR 109 million. However, this major order will not start generating any major net sales until next year. The project will also be implemented over a rather long period of time. Thus we will be able to serve our other customers with quick and flexible delivery times, despite the large order book.

In terms of operating profit, we are nearly five million euros behind the record result of the corresponding period last year. In terms of the third quarter, the result stayed at the realized level in part due to the above-mentioned delays in new orders and the resulting low net sales. As for the last quarter of the year, our order book enables the realization of the best period of the year. I believe that we will be able to close in on last year’s performance to some extent, but unfortunately we will not be able to bridge the gap entirely. Therefore, our estimate that Raute’s net sales will decrease and operating profit will weaken in 2019 compared to 2018 remains unchanged.

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.

In the first nine months of 2019, the situation in the global economy and the financial markets deteriorated steadily. The economic outlook continued to deteriorate.

Many of Raute’s established and traditional customers have invested heavily during the past few years. As demand among this traditional customer base remains at a lower level than in the past few years, the demand for our technology continues to shift towards new and different types of customer accounts.

Demand for wood products technology and technology services

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

There is active demand especially in Russia, although forecasting the realization and timing of projects is difficult. In the emerging markets of Asia, China included, demand has continued to pick up. There is growing interest in Raute’s offering in these markets, which presents opportunities to obtain new customers.

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

OUTLOOK FOR 2019

On June 25, 2019, Raute changed its guidance for 2019 concerning net sales and operating profit, estimating that the company’s net sales will decrease and operating profit will weaken in 2019 compared to the record figures of the previous year. The revised guidance was based on scheduling delays concerning a few projects that were in the implementation phase, as well as the related costs, and to the postponement from previous estimates of a few major new orders that are in the negotiation phase.

The company’s current situation and outlook for the rest of the year give no cause to change the guidance issued on June 25, 2019. Raute’s net sales will decrease and operating profit will weaken in 2019 compared to 2018.
 
RAUTE CORPORATION
Board of Directors

BRIEFING ON OCTOBER 30, 2019 AT 2 P.M.:
A briefing will be organized for analysts, investors and the media on October 30, 2019 at 2 p.m. at Scandic Simonkenttä Hotel, Tapiola cabinet, Simonkatu 9, Helsinki. The interim report will be presented by Mr. Tapani Kiiski, President and CEO, and Ms. Tarja Järvinen, CFO.

FINANCIAL RELEASES IN 2020:
Raute Corporation will publish a release on its financial statements for 2019 on Thursday, February 13, 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 Annual General Meeting is scheduled to be held in Lahti on Tuesday, March 31, 2020.

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 2018 were EUR 181.0 million. The Group’s headcount at the end of 2018 was 772. More information about the company can be found at www.raute.com.