Raute Corporation – Interim Report January 1-September 30, 2020

RAUTE CORPORATION INTERIM REPORT OCTOBER 29, 2020 AT 9:00 a.m. 

RAUTE CORPORATION - INTERIM REPORT JANUARY 1–SEPTEMBER 30, 2020

This is a summary of Raute’s Interim financial report January 1–September 30, 2020. 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.

- The Group’s net sales, EUR 76.1 million (MEUR 112.0), decreased 32.1% from the comparison period. Order intake was EUR 49 million (MEUR 130).
- Operating result amounted to EUR -2.7 million (MEUR 6.6), down 141% on the comparison period. The result before taxes was EUR -2.3 million (MEUR 6.7).
- Earnings per share were EUR -0.54 (EUR 1.27), and diluted earnings per share were EUR -0.54 (EUR 1.26).
- Net sales for the third quarter were EUR 27.9 million and operating result was EUR 1.3 million. Order intake was EUR 11 million in the third quarter. The order book at the end of the reporting period amounted to EUR 62 million (MEUR 109).
- Raute’s net sales for 2020 are expected to decrease compared to 2019 and operating profit is expected to weaken clearly year-on-year.

TAPANI KIISKI, PRESIDENT AND CEO: OUR NEGOTIATION EFFORTS IN SUMMER WERE REWARDED WITH A MAJOR ORDER IN OCTOBER

Our third-quarter net sales were low, but our result was nevertheless positive. The low net sales can be attributed to a large extent to the more difficult delivery of installation supervision, commissioning and maintenance services caused by the travel restrictions. In our North American locations, we were forced to continue our adaptation measures for several weeks. In this respect, the situation in our locations in Finland and China was better.

Uncertainty caused by the coronavirus pandemic continued to have a strong effect on our customers’ investment decisions and thus on our order intake. Our order book remains, however, on a good level. Q1’s relatively good order intake included orders that had, for the most part, been negotiated almost fully before the start of the corona crisis. In Q2 and Q3, many of our customers put off their plans and orders, based on the uncertainty of their market situations. The number of actual cancellations was low, however, so when the situation settles, I anticipate that the postponed projects may restart, perhaps even at short notice.

In early October, we successfully concluded long and, due to the circumstances, exceptional negotiations and confirmed an order worth almost EUR 55 million to Russia. As a result, our outlook for 2021 clearly strengthened, but the transaction will not have an impact on this year’s outlook. There is generally active demand and project planning in Russia. China was the only market area in which activity has returned to a somewhat normal level. Our mill in China was operating normally and our customers’ projects continued to move forward. Nevertheless, this did not result in major orders in Q3. Project preparation is also active in Europe and North America, but decision-making is exceptionally uncertain.

As we have consolidated in our main locations the kind of expertise that is often required for special maintenance, project installation supervision and commissioning, the travel restrictions inconvenienced us and our customers globally. In spite of this, we successfully carried out a variety of these services with the help of remote work arrangements. In my estimate, the restrictions will unfortunately persist, and this is why we will increase our local resources where possible and invest in performing these services remotely. The overall impact of the coronavirus pandemic on our net sales and especially our operating profit can be characterized as substantial.

The impact of the coronavirus pandemic on the market development highlights the importance of our strategic goals – growing the emerging market share, developing the technology service business and investing in digitalization. We will thus continue to focus on product development, marketing and digitalization. Our strong balance sheet, market position and long-standing customer accounts are important competitive advantages and enablers of this type of long-term work. We will succeed when our personnel, customers and other partners work together and we will come out of this crisis as a stronger and more agile Raute.

It is clear that our targeted net sales and operating profit for this year will not be met in these conditions. We would like to repeat our estimate given on April 24th: our net sales will fall and operating profit will weaken clearly year-on-year.

BUSINESS ENVIRONMENT

Market situation in customer industries
Raute’s customers in the veneer, 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 third quarter, the situation and outlook in the global economy and the financial markets deteriorated as a whole. Before the start of the pandemic, we had estimated that the market situation had improved slightly. Soon after the pandemic broke out, the situation took a clear turn for the worse and, so far, has not taken a new turn for the better. We do not expect the situation to improve significantly before the pandemic is under control.

Demand for wood products technology and technology services
Many of Raute’s established and traditional customers have invested heavily in recent years. During the past year, this traditional customer base has mostly returned to lower investment volumes. The measures to contain the corona crisis have further slowed down the implementation and decision-making involved in the investments of this traditional customer base in particular. As a result, the demand for our technology shifted towards new customer accounts.

Overall, investment activity among Raute’s customers weakened from what it has been in recent years, and the weakening was intensified by the spread of the coronavirus pandemic and its countermeasures. In the reporting period, the number of new transactions was adequate at best, even in view of the situation.

In Russia, demand remained active. However, forecasting the realization and timing of projects is more difficult than before. In the emerging markets of Asia and South America, the coronavirus pandemic had an exceptionally strong effect, and the markets came practically to a halt. China was the only exception. Following the break caused by the coronavirus countermeasures, demand in China has recovered rapidly and projects already being planned have been picked up again. Interest in Raute’s offering grew in these markets, but it did not lead to major orders during the summer. Project planning was active in Europe and North America, but decision-making was slow and uncertain.

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. In Finland, the lengthy industrial actions at our customers’ plants caused a temporary lull in the demand for spare parts and maintenance services at the start of the year. After this, the travel restrictions resulting from the coronavirus pandemic have prevented us from carrying out the majority of our maintenance services as planned.

OUTLOOK FOR 2020

Regardless of the strong order book, we forecast that Raute’s net sales will fall in 2020 from the previous year’s level as a result of uncertainty in demand and the order intake for the remainder of the year. We expect the operating profit to clearly weaken from last year, as disclosed earlier, due to a shift in the markets and the costs for adapting to this, and due to investments in marketing, product development and digitalization and falling net sales.

On October 16, 2020 Raute announced a major order worth EUR 55 million to Russia. The received order will not have an effect on Raute’s profit outlook for 2020, but it will improve and strengthen the 2021 outlook.

RAUTE CORPORATION
Board of Directors

PRESENTATION OF THE INTERIM REPORT ONLINE ON OCTOBER 29, 2020, AT 2:00 PM:
Analysts, investors and the media can watch the presentation of the Interim Report online on October 29, 2020 starting at 2 p.m. with MS Teams. The Teams link will be sent to registered participants by email. Registrations to ir@raute.com.

The interim report will be presented by Mr. Tapani Kiiski, President and CEO, and Ms. Tarja Järvinen, CFO. Analysists, investors and the media can send in advance questions related to the Interim Report to the email address ir@raute.com on October 29, 2020 until 2.30 p.m., after which President and CEO Tapani Kiiski and Group Vice President, CFO Tarja Järvinen will answer the sent questions in a live Interim Report presentation up until around 3 p.m. There will also be an opportunity to present questions through Teams and the Teams chat channel.

President and CEO Tapani Kiiski has also reserved time for answering questions over the phone after the Interim Report presentation, starting at 3 p.m. The phone number is +358 400 814 148.

FINANCIAL RELEASES IN 2021:
Raute Corporation will publish a release on its financial statements for 2020 on Friday, February 12, 2021.

Raute’s half-year report and two interim reports will be published as follows:
– Interim report January–March on Thursday, April 29, 2021
– Half-year report January–June on Friday, July 23, 2021
– Interim report January–September on Friday, October 22, 2021.

Raute Corporation’s Annual General Meeting is scheduled to be held in Lahti on Wednesday March 31, 2021.

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.