RAUTE CORPORATION – HALF-YEAR REPORT

July 23, 2021

By: The Working Forest Staff

The Group’s net sales, EUR 60.2 million (MEUR 48.2), increased 25 percent on the comparison period. Order intake was EUR 95 million (MEUR 38).
– Operating profit amounted to EUR -3.5 million (MEUR -4.0), up 13% on the comparison period. The result before taxes was EUR -3.1 million (MEUR -3.6).
– Earnings per share were EUR -0.64 (EUR -0.73) and diluted earnings per share were EUR -0.64 (EUR -0.73).
– Net sales in the second quarter were EUR 35.5 million and operating profit was EUR -1.0 million. Order intake in the second quarter was EUR 65 million. The order book at the end of the reporting period stood at EUR 129 million (MEUR 80).
– Raute’s net sales are expected to grow in 2021 and operating profit to improve from 2020.

KEY FIGURES Q2

2021

Q2

2020

Q1-Q2

2021

Q1-Q2

2020

Q1-Q4

2020

Net sales, MEUR 35,5 24,4 60,2 48,2 115,0
Change in net sales, % 45,5 -34,1 24,9 -38,5 -24,0
Exported portion of net sales, % 89,2 93,5 90,5 94,4 94,2
Operating profit, MEUR -1,0 -1,0 -3,5 -4,0 -1,9
Operating profit, % of net sales -2,9 -4,2 -5,8 -8,4 -1,6
Profit before taxes, MEUR -0,7 -0,7 -3,1 -3,6 -1,5
Profit before taxes, % of net sales -1,8 -2,8 -5,2 -7,4 -1,3
Profit for the period, MEUR -0,3 -0,9 -2,8 -3,1 -0,9
Profit for the period, % of net sales -0,7 -3,5 -4,6 -6,4 -0,8
           
Gross capital expenditure, MEUR 1,5 1,2 2,6 2,1 5,2
% of net sales 4,2 5,0 4,3 4,3 4,5
           
Research and development costs, MEUR 1,3 0,8 2,5 2,2 4,6
% of net sales 3,7 3,2 4,2 4,5 4,0
           
Order book, MEUR 129 80 129 80 94
Order intake, MEUR 65 13 96 38 119
           
Personnel, at the end of the period     817 784 751
Personnel, effective, on average     774 750 743
Personnel, on average     783 768 760

TAPANI KIISKI, PRESIDENT AND CEO: HEADING INTO THE SECOND HALF OF 2021 WITH A STRONG ORDER BOOK

Demand for Raute’s technology and services remained brisk also in the second quarter. We managed to receive new orders totaling EUR 65 million. Even without the EUR 30 million order for an LVL mill’s production process, the order intake was at a good level. I am particularly pleased with this good level of the mid-sized production line and modernization orders. Our order book thus almost reached a record of EUR 129 million. Our outlook for the near future is good.

Despite the continuing pandemic, the market situation was good, especially in the traditional, industrialized and developed markets of Europe, North America and Russia. Travel restrictions continue to hamper work carried out at our customers’ sites, however. Furthermore, in the emerging markets, except for China, the pandemic is still considerably limiting the progress of our customers’ projects. The travel restrictions are hampering the progress of many of our development projects also in China.

Our net sales in the first half of this year were EUR 12 million higher than in the same period last year. Most of the growth in net sales took place in the second quarter. As predicted, however, the growth was not enough to turn our result into a profit due to the exceptionally low payroll costs and the planned marketing and digitalization efforts. Even major fluctuations in net sales, and the accompanying operating profit, are typical for the project business, which accounted for roughly two-thirds of our net sales in the second quarter.

The travel restrictions imposed due to the coronavirus pandemic continue to hinder the implementation of installation supervision and commissioning and maintenance services, and, of course, our sales efforts. However, the removal of these restrictions bit by bit as vaccinations progress is creating optimism that business activities will gradually begin to normalize this year. Very recently, the spread of new virus variants has led to increasing uncertainty about the easing of the pandemic, however. I am pleased with the abilities demonstrated by our customers and our personnel to continue working using remote connections. The lessons learned and experience gained will improve both our ability to serve our customers and our flexibility also in the future.

The order intake for technology services was also at a good level. This is yet another reason to conclude that the capacity utilization rate of our customers’ production is at a good level. If the travel restrictions were not hampering maintenance work, there would be even more demand for these services.

Because of the exceptional market changes caused by the pandemic and the stimulus measures aimed at recovering from it, many raw material, component, and freight costs have risen, even to a great extent, and delivery times have increased; there have even been challenges in availability. So far, Raute has managed to operate amid these changes without major problems. Our operational organization is actively addressing these challenges together with our partners. We estimate that in the second half of the year, we may encounter delays and possible cost issues.

Because of the pandemic, in the near future, the focus of our market will be more on developed markets than we estimated before the pandemic. In the longer term, however, we believe that the focus of growth will again shift to the emerging markets. Accordingly, we will continue to invest in our stated strategic priorities, the emerging markets, and the development of our technology services business and digitalization. Besides the opportunities offered by the current market situation, our strong financial position and market position, as well as our long-standing customer relationships are important competitive advantages and enablers of this type of long-term work.

Our outlook for 2021 remains unchanged, and we expect our net sales to grow and our operating results to improve from last 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 second quarter, the situation and outlook in the global economy and financial markets continued to pick up. Vaccinations and the easing of the Covid-19 pandemic in many market areas created positive expectations. Demand remained strong and the prices of our customers’ products were exceptionally high. Currently, new variants of the virus are causing increased uncertainty, but for now, it has not affected demand among Raute’s customers. We expect the market situation of our customer industries to remain favorable and for things to get better this year, including in areas that have not yet experienced an upturn.

Demand for wood products technology and technology services
As a result of the exceptional volatility in the market situation caused by the pandemic, many of our customers, particularly in traditional, developed markets, initially put the brakes on their investments, whereas this year they have accelerated them and cleared their investment backlog. In contrast, emerging markets have not yet begun to make a similar recovery from the pandemic. Demand for Raute’s products and services has thus remained at the same level in these markets, and in some it has even slowed. Demand overall has been at a good level in the first half of the year. Mill-scale projects also moved forward during the first six months of the year, alongside smaller projects and modernizations.

Investment activity among Raute’s customers strengthened in the first six months of the year compared to last year. We consider our order intake during the reporting period to be very good. Even without the reported single large mill project, the order intake was at a good level.

In Russia, demand remained active, although decisions were few and far between. Forecasting the realization and timing of projects remains difficult. At the start of this year’s Q3, we announced a rather large order destined for Russia. The pandemic continued to have a major impact on the emerging markets of Asia and South America, which were very quiet. We nevertheless managed to gain a few orders. The only exception to this was China, where the planning of projects remained active. In Q2, however, we did not receive significant orders to China. Demand resumed in Europe and North America, and the order intake was at a good level.

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 our estimation, without the travel restrictions related to the pandemic, sales of maintenance services would have been even stronger than they were.

OUTLOOK FOR 2021

Due to the strong order book, active demand, and presumed alleviated impacts of the coronavirus pandemic, we expect Raute’s net sales to increase in 2021 compared to the level of the previous year. We expect the operating result to improve on the previous year mostly due to growth in net sales.

 

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