Raute Corporation – Half-Year Report January 1 – June 30, 2020
RAUTE CORPORATION HALF-YEAR REPORT JULY 23, 2020 AT 9:10 a.m.This is a summary of Raute’s Half-year financial report January 1 – June 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. RAUTE CORPORATION – HALF-YEAR REPORT JANUARY 1–JUNE 30, 2020TAPANI KIISKI, PRESIDENT AND CEO: FOCUS UNCHANGED DESPITE THE PANDEMICNet sales for the first half of the year remained low and the result was negative. The decline in our net sales and the consequent weakened result were expected due to the timing of the order book. The impacts of the corona pandemic showed most dramatically in the second quarter in the order intake. Our Canadian, US and China locations were forced to shut down for several weeks. Our field operations were largely prevented due to the travel restrictions.Our order book is still strong. 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, many of our customers put off their plans and orders, based on the uncertainty of their market situations. Very few actual cancellations took place, however, so when the situation settles, I anticipate that the postponed projects may restart, perhaps even at short notice.The restrictions put in place due to the coronavirus pandemic countermeasures and the resulting increased uncertainty impacted our business in full force in the second quarter. China was the only market area in which development took a turn for the normal again. There, our plant’s operations returned to normal and our customers’ projects resumed. We received an order from China that gained us a foothold in the Chinese markets. In our North American locations, we were forced to restrict our operations due to the official guidelines. 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. The impact of the coronavirus pandemic on our net sales and operating profit can be described as significant.The impact of the corona pandemic on the outlook 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. Buying the majority of Hiottu Oy was one of these measures. We also initiated a significant system investment during Q2, which will improve our operations and our technical capabilities to serve our customers. 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 original targets and predictions for net sales and operating profit for this year will not be met. 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 ENVIRONMENTIn H1, the situation and outlook in the global economy and the financial markets deteriorated significantly. As we see it, the economic situation was improving slightly, in fact, before the escalation of the uncertainty caused by the coronavirus pandemic and the impact of the measures taken to control it.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 reduced its investments. 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 and different types of 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 tolerable in view of the circumstances.In Russia, demand remained active. However, forecasting the realization and timing of projects is more difficult than before. In the emerging markets of Asia, China included, demand continued to pick up. 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. This development led to a new order from China that opened doors into a new market (stock exchange release May 14, 2020).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 2020Regardless 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. AttachmentRaute Corporation_Half-year report 1.1.-30.6.2020
Many of Raute’s established and traditional customers have invested heavily in recent years. During the past year, this traditional customer base has reduced its investments. 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 and different types of 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 tolerable in view of the circumstances.In Russia, demand remained active. However, forecasting the realization and timing of projects is more difficult than before. In the emerging markets of Asia, China included, demand continued to pick up. 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. This development led to a new order from China that opened doors into a new market (stock exchange release May 14, 2020).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 2020Regardless 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. AttachmentRaute Corporation_Half-year report 1.1.-30.6.2020
