Raute Corporation's interim report January 1-September 30, 2023: Profitability improvement continued in the third quarter

Raute Corporation, Interim report, October 26, 2023 at 8:30 EEST

This is a summary of Raute’s Interim report January 1-September 30, 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–SEPTEMBER 30, 2023

 

Profitability improvement continued in the third quarter

 

July−September 2023

• Order intake was EUR 19 million (35)
• Order book was EUR 192 million (94) at the end of the reporting period
• Net sales decreased by 18.5% to EUR 34.0 million (41.8)
• Comparable EBITDA was EUR 3.0 million (6.0), representing 8.8% (14.5) of net sales
• Operating profit was EUR 1.4 million (1.4)
• Earnings per share were EUR 0.16 (0.28)
• Equity ratio was 55.4% (35.7)

 

January−September 2023

• Order intake was EUR 197 million (110)
• Net sales decreased by 11.0% to EUR 100.2 million (112.6)
• Comparable EBITDA was EUR 6.6 million (-4.9), representing 6.6 % (-4.4%) of net sales
• Operating profit was EUR 1.2 million (-15.2)
• Earnings per share were EUR 0.11 (-2.86)

 

	1.7.-30.9.	1.7.-30.9.	1.1. –30.09.	1.1. –30.09.	1.1. –31.12.
KEY FIGURES	2023	2022	2023	2022	2022
Net sales, MEUR	34.0	41.8	100.2	112.6	158.3
Change in net sales, %	-18.5	10.2	-11.0	14.8	11.3
Comparable EBITDA MEUR	3.0	6.0	6.6	-4.9	-2.3
Comparable EBITDA %	8.8	14.5	6.6	-4.4	-1.4
Operating profit, MEUR	1.4	1.4	1.2	-15.2	-14.6
Operating profit, % of net sales	4.1	3.4	1.2	-13.5	-9.2
Profit for the period, MEUR	1.0	1.3	0.7	-12.9	-11.5
Profit for the period, % of net sales	3.0	3.0	0.7	-11.4	-7.3
Gross capital expenditure, MEUR	1.1	2.0	3.4	5.7	6.6
% of net sales	3.2	4.8	3.4	5.0	4.2
Research and development costs, MEUR	0.8	1.3	3.8	4.5	6.3
% of net sales	2.4	3.1	3.8	4.0	4.0
Order book, MEUR	192	94	192	94	84
Order intake, MEUR	19	35	197	110	138
Personnel, at the end of the period			745	812	778
Personnel, effective, on average			695	787	774
Personnel, on average			748	841	829

 

CEO’s review: On track with profitability turnaround and building foundation for future growth

We had a good quarter in terms of profitability development as our comparable EBITDA was EUR 3.0 million, representing a margin of 8.8%. This was supported by the good progress of the profitability improvement program. I’m pleased that all our three business units – Wood Processing, Analyzers and Services – were able to show black figures on the comparable EBITDA level. The comparison figure of Q3/2022 was exceptionally high due to the release of some provisions related to the wind-down of the Russian operations.

Our order intake of EUR 19 million in the third quarter was rather low after a record high order intake in the previous quarter. The order intake mainly consisted of after-sales services and modernization projects, while some orders were postponed to the fourth quarter. The order book at the end of the reporting period was still at a near record-high level of EUR 192 million, thanks to the complete mill-sized orders received earlier in the year. 

The fundamental demand for Raute’s solutions was still at a reasonable level, even if the short-term market uncertainty has increased, impacting on the demand for single production lines and spare parts. We have a strong position in complete mill-sized projects and there is continued customer interest in these solutions over the business cycle, driven by sustainability needs. 

Net sales decreased by 18.5% to EUR 34 million in the third quarter and were somewhat below our expectations. As the structure of our order backlog is more weighted towards mill-sized projects, revenue recognition takes place later than in equipment deliveries and the service business. In addition, the implementation of the ERP system has also caused slowness, but the learning curve is constantly improving.

We are now in a good position to proceed with our growth strategy implementation at full speed, including driving our ESG agenda and expanding our portfolio into new wood product segments. Our profitability improvement program is moving ahead as planned, and we expect to achieve the previously announced annual cost savings of EUR 4−5 million by the end of 2023. These savings were already partly visible in our third-quarter result. Also, we do not have any remaining equipment deliveries to Russia, and our target remains to finalize the exit from Russia as soon as possible.

Earlier this month, we updated our full-year guidance for 2023. Our short-term priority remains on further profitability improvements and realizing the full benefits of the new ERP system. Thanks to the high order book, we are in a good position for further business development. 

Mika Saariaho
President & CEO 

Guidance statement for 2023 (updated on October 19, 2023)

Raute’s 2023 net sales are expected to be in the range of EUR 140−150 million and comparable EBITDA margin to be above 6%.

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

Business environment

The market situation continued to be uncertain in January−September 2023. High inflation, as experienced last year, has been smoothening out. However, increasing interest rates and overall uncertainty in the global economy are impacting the market outlook, which is visible in the demand for Raute’s customers’ products. The raw material availability has started to limit 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 market and elevated uncertainty in the global economy have reduced the demand for softwood plywood, especially in the European and North American markets, and from the third quarter onwards, also for hardwood plywood.

Customer activity and interest in Raute’s technology for mill-sized projects and modernizations have continued to be active. This trend is supported by customers’ long-term capacity planning horizon, regardless of the current market situation. However, the demand has slowed for individual product lines and the market slowdown is also visible in the demand for spare parts.

Raute is encouraged by the development of its high-end technology offering and its capability to offer mill-size solutions. During January−September 2023, Raute received three major orders. In March, the company signed a plywood mill machinery order with Lumin and in April with Latvijas Finieris. In May, Raute signed an LVLmill machinery order with the French company Thebault. All these orders are good examples of a complete mill-size solution, combining the modern automated R7/R5-Series technology with analyzers for grading and MillSIGHTS software for data capturing and dynamic reporting.

There is an increasing interest in Europe also for services, as well as possibilities to increase birch plywood production capacity to compensate for lost Russian volumes.

RAUTE CORPORATION
Board of Directors
 

Further information
Mr. Mika Saariaho, President and CEO, tel. +358 40 154 9393
Mr. Ville Halttunen, CFO, tel. +358 50 346 0868

Briefing
A briefing will be organized for analysts, investors and the media on October 26, 2023, at 2:00 p.m. at Scandic Simonkenttä Hotel, Simonkatu 9, Helsinki, Finland. The report will be presented by President and CEO Mika Saariaho and CFO Ville Halttunen. 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 [email protected]. The event will be recorded, and the recording can be viewed on Raute’s website at www.raute.com at the latest on October 27, 2023.

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.