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2020-08-11

Ponsse Oyj: Ponsse's Interim Report for 1 January - 30 June 2020

- Net sales amounted to EUR 276.4 (H1/2019 315.8) million.
- Q2 net sales amounted to EUR 131.9 (Q2/2019 172.7) million.
- Operating result totalled EUR 21.8 (H1/2019 30.4) million, equalling 7.9 (9.6) per cent of net sales.
- Q2 operating result totalled EUR 8.4 (Q2/2019 17.5) million, equalling 6.4 (10.2) per cent of net sales.
- Profit before taxes was EUR 7.0 (H1/2019 30.1) million.
- Cash flow from business operations was EUR -14.6 (2.7) million.
- Earnings per share were EUR 0.11 (0.83).
- Equity ratio was 47.9 (51.3) per cent.
- Order books stood at EUR 179.3 (361.1) million.
PRESIDENT AND CEO JUHO NUMMELA:
The second quarter was highly challenging for Ponsse due to the coronavirus pandemic. Challenges that started from problems in the availability of components escalated rapidly into a demand crisis as a result of increased uncertainties in the markets. After the market situation deteriorated, the value of orders received during the second quarter was EUR 110.6 (168.8) million, and our order book decreased to EUR 179 million.
As a result of our fast responses, we were, however, able to adapt effectively to the unexpected situation. At the beginning of the coronavirus pandemic, problems in the availability of components were associated with our European suppliers when their factories especially in Northern Italy and Germany were forced to close their doors. Our preparations enabled us to run our production uninterrupted in one shift. Later in June, we raised the factory capacity back to its normal level. Apart from our production and maintenance personnel, our employees started to work remotely from the middle of March onwards. Despite these changes, Ponsse employees maintained their excellent level of performance, and we continued to develop our company strongly in all our functions.
The uninterrupted factory operations allowed us to maintain our net sales at a satisfactory level in the difficult situation. Ponsse's net sales during the second quarter were EUR 131.9 (172.7) million. The coronavirus pandemic had a broad impact on the operations of our customers, and the net sales of service businesses and used machine operations decreased alongside the sale of new machines. Our sales of used machines were low, especially at the beginning of the second quarter, and our stocks of used machines increased considerably during the period under review. Towards the end of the quarter, all our business areas started to clearly recover.
When business activities decreased, all our employees were subject to fixed-term layoffs and effective cost cuts during the quarter. These measures had a significant impact on our financial performance. Ponsse's operating profit for the quarter was EUR 8.4 (17.5) million, with the operating profit rate being 6.4 (10.2) per cent. We cut our operating costs by roughly 20 per cent during the second quarter. Cumulative cash flow at the end of the second quarter was EUR -14.6 (2.7) million. There was no need to recognize through profit and loss any significant one-time items effecting operating result for the period under review and company has strong consolidated statement of financial position.
In this challenging operating environment, we will continue to normally invest in sales, maintenance and the availability of spare parts, and we will serve our customers to the best of our ability. We will focus on matters that are within our scope of influence. In particular, our investments in the development of our products continue to produce good results. Our factory in Vieremä is right on schedule and in excellent shape. Our satisfactory order book allows our factory to run in two shifts at a full capacity.
The uncertainties arising from the coronavirus pandemic have rapidly changed our operating environment and reduced demand for forest machines. Next autumn will be a challenge for us. It is important to increase our order book during the autumn to ensure normal operations, also next year.
Our priority is to protect the health of our employees, customers and other stakeholders in all conditions.
NET SALES
Consolidated net sales for the period under review amounted to EUR 276.4 (315.8) million, which is 12.5 per cent less than in the comparison period. International business operations accounted for 76.0 (79.7) per cent of net sales.
Net sales were regionally distributed as follows: Northern Europe 42.9 (37.7) per cent, Central and Southern Europe 22.8 (21.1) per cent, Russia and Asia 11.5 (16.3) per cent, North and South America 22.1 (24.5) per cent and other countries 0.7 (0.4) per cent.
PROFIT PERFORMANCE
The operating result amounted to EUR 21.8 (30.4) million. The operating result equalled 7.9 (9.6) per cent of net sales for the period under review. Consolidated return on capital employed (ROCE) stood at 4.8 (22.6) per cent.
Staff costs for the period totalled EUR 42.9 (48.0) million. Other operating expenses stood at EUR 24.0 (29.1) million. The net total of financial income and expenses amounted to EUR -14.8 (-0.3) million. Exchange rate gains and losses with a net effect of EUR -13.5 (0.6) million were recognised under financial items for the period. The parent company's net receivables from other Group companies stood at EUR 111.1 (106.4) million. Receivables from subsidiaries mainly consisted of trade receivables, with unregistered tax receivables from unrealised exchange rate losses from unhedged items related to the valuation of trade receivables having an impact on the Group's effective tax rate. Result for the period under review totalled EUR 2.9 (23.2) million. Diluted and undiluted earnings per share (EPS) came to EUR 0.11 (0.83).
STATEMENT OF FINANCIAL POSITION AND FINANCING ACTIVITIES
At the end of the period under review, the total consolidated statements of financial position amounted to EUR 484.8 (403.0) million. Inventories stood at EUR 174.8 (157.1) million. Trade receivables totalled EUR 38.5 (53.0) million, while liquid assets stood at EUR 103.3 (24.2) million. Group shareholders' equity stood at EUR 229.5 (202.2) million and parent company shareholders' equity (FAS) at EUR 215.7 (187.8) million. The amount of interest-bearing liabilities was EUR 165.0 (77.6) million. The company has ensured its liquidity by withdrawal of current loan from credit facility limit and commercial paper programme. The company has used 41 per cent of its credit facility limit. Group's loans from financial institutions are non-collaretal bank loans without financial covenants. Consolidated net liabilities totalled EUR 61.7 (53.3) million, and the debt-equity ratio (net gearing) was 26.9 (26.3) per cent. The equity ratio stood at 47.9 (51.3) per cent at the end of the period under review.
Cash flow from operating activities amounted to EUR -14.6 (2.7) million. Cash flow from investment activities came to EUR -7.2 (-11.5) million.
ORDER INTAKE AND ORDER BOOKS
Order intake for the period totalled EUR 217.4 (391.6) million, while period-end order books were valued at EUR 179.3 (361.1) million.
DISTRIBUTION NETWORK
The subsidiaries included in the Ponsse Group are Ponsse AB, Sweden; Ponsse AS, Norway; Ponssé S.A.S., France; Ponsse UK Ltd, the United Kingdom; Ponsse Machines Ireland Ltd, Ireland, Ponsse North America, Inc., the United States; Ponsse Latin America Ltda, Brazil; Ponsse Uruguay S.A., Uruguay; OOO Ponsse, Russia; Ponsse Asia-Pacific Ltd, Hong Kong; Ponsse China Ltd, China and Epec Oy, Finland. The Group includes also the property company Ponsse Centre, Russia. Sunit Oy, Finland, is an associate in which Ponsse Plc has a holding of 34 per cent.
R&D AND CAPITAL EXPENDITURE
Group's R&D expenses during the period under review totalled EUR 10.9 (9.6) million, of which EUR 4.4 (3.1) million was capitalised.
Capital expenditure totalled EUR 7.2 (11.7) million. It consisted in addition to capitalised R&D expenses of investments in buildings and ordinary maintenance and replacement investments for machinery and equipment.
MANAGEMENT
A separate release was issued on 27 May 2020 regarding the changes in members of the Management Team.
The following persons were members of the Management Team: Juho Nummela, President and CEO, acting as the chairman; Petri Härkönen, Deputy CEO, CFO; Juha Inberg, Technology and R&D Director; Tapio Mertanen, Service Director; Paula Oksman, HR Director; Tommi Väänänen, Director of Delivery Chain Process and Marko Mattila, Sales and Marketing Director. The company management has regular management liability insurance.
The area director organisation of sales is led by Marko Mattila, the Group's sales and marketing director, and Tapio Mertanen, service director. Area directors report to Jussi Hentunen, Ponsse retail network manager. Managing directors of subsidiaries and Jussi Hentunen report to Marko Mattila, Ponsse Plc's sales and marketing director.
The geographical distribution and the responsible persons are presented below:
Northern Europe:
Jani Liukkonen (Finland),
Carl-Henrik Hammar (Sweden, Denmark and Norway) and
Tarmo Saks (the Baltic countries).
Central and Southern Europe:
Tuomo Moilanen (Germany and Austria),
Clément Puybaret (France),
Janne Tarvainen (Spain and Portugal),
Dean Robson (the United Kingdom),
Patrick Murphy (Ireland),
Gary Glendinning (Hungary, Romania, Slovenia, Croatia and Serbia) and
Tarmo Saks (Poland, Czech Republic and Slovakia).
Russia and Asia:
Jaakko Laurila (Russia and Belarus),
Janne Tarvainen (Australia and South Africa) and
Risto Kääriäinen (China and Japan).
North and South America:
Pekka Ruuskanen (the United States),
Eero Lukkarinen (Canada),
Fernando Campos (Brazil) and
Martin Toledo (Uruguay, Chile and Argentina).
PERSONNEL
The Group had an average staff of 1,771 (1,755) during the period and employed 1,777 (1,808) people at period-end.
SHARE PERFORMANCE
The company's registered share capital consists of 28,000,000 shares. The trading volume of Ponsse Plc shares for 1 January - 30 June 2020 totalled 2,206,888, accounting for 7.9 per cent of the total number of shares. Share turnover amounted to EUR 54.8 million, with the period's lowest and highest share prices amounting to EUR 19.36 and EUR 33.00, respectively.
At the end of the period, shares closed at EUR 25.40, and market capitalisation totalled EUR 711.2 million.
At the end of the period under review, the company held 227 treasury shares.
ANNUAL GENERAL MEETING
A separate release was issued on 27 May 2020 regarding the authorizations given to the Board of Directors and other resolutions at the AGM.
GOVERNANCE
In its decision-making and administration, the company observes the Finnish Limited Liability Companies Act, other regulations governing publicly listed companies and the company's Articles of Association. The company's Board of Directors has adopted the Code of Governance that complies with the Finnish Corporate Governance Code approved by the Board of the Securities Market Association. The purpose of the code is to ensure that the company is professionally managed and that its business principles and practices are of a high ethical and professional standard.
The Code of Governance is available on Ponsse's website in the Investors section.
RISK MANAGEMENT
Risk management is based on the company's values, as well as strategic and financial objectives. Risk management aims to support the achievement of the objectives specified in the company's strategy, as well as to ensure the financial development of the company and the continuity of its business.
Furthermore, risk management aims to identify, assess and monitor business-related ri...

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