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2021-10-26

Ponsse Oyj: Ponsse's Interim Report for 1 January - 30 September 2021

- Net sales amounted to EUR 523.4 (Q1-Q3/2020 431.4) million.
- Q3 net sales amounted to EUR 172.6 (Q3/2020 155.0) million.
- Operating result totalled EUR 56.3 (Q1-Q3/2020 43.4) million, equalling 10.8 (10.1) per cent of net sales.
- Q3 operating result totalled EUR 20.0 (Q3/2020 21.6) million, equalling 11.6 (13.9) per cent of net sales.
- Profit before taxes was EUR 54.7 (Q1-Q3/2020 22.7) million.
- Cash flow from business operations was EUR 50.1 (15.6) million.
- Earnings per share were EUR 1.40 (0.52).
- Equity ratio was 61.8 (47.5) per cent.
- Order books stood at EUR 402.3 (178.5) million.
- Profit guidance, updated on 13 October 2021: Group's euro-denominated operating result in 2021 is estimated to be significantly higher than in 2020. Earlier result guidance estimated that Group's euro-denominated operating result in 2021 would be slightly higher than in 2020.
PRESIDENT AND CEO JUHO NUMMELA:
Demand for PONSSE forest machines remained excellent during the third quarter. The good work situation of our customers was reflected positively in all our business areas, and strong growth continued. Ponsse's order flow during the third quarter totalled EUR 219.5 million, increasing our order books to a record-high level of EUR 402.3 million. While the availability of components remained very challenging, we were ultimately able to manufacture all PONSSE forest machines in our production programme. The quarter was an excellent success in terms of growth, profitability and cash flows.
Currently, Russia, Northern Europe and the Americas are showing the highest demand. In practice, all our market areas are growing well. Our maintenance services continued their very strong growth, and demand for trade-in machines has been high. Our cash flow was very strong during the third quarter.
The availability of parts and components continues to be a challenge due to high demand for machine and equipment manufacturing. The availability of components decreased during the quarter, with the largest challenges being associated with products in the semiconductor industry and the availability of hydraulic components. The imbalance between demand and supply has an impact not only through lower availability, but also through rising costs. What makes this challenging for Ponsse is that these increased costs cannot be wholly transferred directly to our customers. This is affected by the far-reaching order books in our production, the pricing of already agreed machine deals and our customers' challenges in their business operations amidst increasing harvesting costs. We are constantly seeking sustainable solutions with our suppliers to curb price increases. Ponsse has performed well considering the situation, thanks to our competent personnel and excellent supplier relationships.
The availability of parts and components will also be a challenge during this quarter. We are doing everything we can to improve the situation with our supplier network. Where profitability is concerned, the situation is challenging. The development of productivity supports our profitability, while the increase in material costs reduces the gross profit margin. At the same time, business costs are increasing. Our result will increase significantly from the comparison period, but we still have work to do in terms of our relative profitability.
Ponsse's personnel have worked remotely since the outbreak of the coronavirus pandemic, with the exception of our production, sales and maintenance service personnel. Office employees at our Vieremä factory will continue to work remotely to protect the continuity of our production. We will also observe special caution in our other locations to prevent coronavirus infections. It is vital to keep our personnel healthy and serve our customers at full efficiency.
NET SALES
Consolidated net sales for the period under review amounted to EUR 523.4 (431.4) million, which is 21.3 per cent more than in the comparison period. International business operations accounted for 80.1 (77.7) per cent of net sales.
Net sales were regionally distributed as follows: Northern Europe 33.6 (42.2) per cent, Central and Southern Europe 19.2 (24.1) per cent, Russia and Asia 20.3 (12.4) per cent, North and South America 26.4 (20.8) per cent and other countries 0.5 (0.5) per cent.
PROFIT PERFORMANCE
The operating result amounted to EUR 56.3 (43.4) million. The operating result equalled 10.8 (10.1) per cent of net sales for the period under review. Consolidated return on capital employed (ROCE) stood at 21.1 (9.3) per cent.
Staff costs for the period totalled EUR 72.3 (61.0) million. Other operating expenses stood at EUR 42.3 (33.5) million. The net total of financial income and expenses amounted to EUR -1.6 (-20.7) million. Exchange rate gains and losses with a net effect of EUR -1.0 (-18.7) million were recognised under financial items for the period. The parent company's receivables from subsidiaries stood at EUR 59.5 (109.2) million net. Their reduction and the moderate change in exchange rates have resulted in a significantly reduced impact on financial items for the period under review. The unrealised exchange rate losses for the comparison period mainly consist of the assessment of inter-company accounts payable for Ponsse Latin America Ltda and OOO Ponsse.
The effective tax rate for the period under review is affected by a tax expense posted in full of Ponsse Latin America related to the valuation of a parent company net investment posted by the group in the financial statements 2020 and completed by the subsidiary in the period under review. The finality of the tax expense will be decided by the authorities. The parent company's receivables from subsidiaries mainly consist of trade receivables. The unposted tax assets of unrealised exchange rate losses for unhedged items related to the trade receivables' valuation impacted the group's effective tax rate for the comparison period.
Result for the period under review totalled EUR 39.2 (14.6) million. Diluted and undiluted earnings per share (EPS) came to EUR 1.40 (0.52).
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 479.4 (511.7) million. Inventories stood at EUR 172.3 (172.5) million. Trade receivables totalled EUR 49.3 (47.3) million, while cash and cash equivalents stood at EUR 75.5 (123.3) million. Group shareholders' equity stood at EUR 280.9 (239.9) million and parent company shareholders' equity (FAS) at EUR 226.1 (228.1) million. The amount of interest-bearing liabilities was EUR 54.2 (161.8) million. The company has ensured its liquidity by credit facility limits and commercial paper programs, which are not used at the end of the period under review. Group's loans from financial institutions are non-collaretal bank loans without financial covenants. Consolidated net liabilities totalled EUR -21.3 (38.5) million, and the debt-equity ratio (net gearing) was -7.6 (16.0) per cent. The equity ratio stood at 61.8 (47.5) per cent at the end of the period under review.
Cash flow from operating activities amounted to EUR 50.1 (15.6) million. Cash flow from investment activities came to EUR -18.0 (-12.2) million.
IMPACT OF THE COVID-19 PANDEMIC
The company has recovered from the impacts of covid-19 pandemic on the demand for products faster than expected. However, the covid-19 pandemic has caused changes in the company's operating environment. The company's management is actively monitoring the development of the pandemic. The covid-19 pandemic has had a major impact on the availability of components. The company will continue its enhanced cost control and careful execution of investments going forward.
Covid-19 pandemic restrictions have been felt by company operations across the world. Decisions have been made to ensure the health and safety of the company's customers and all Ponsse employees. The company's white-collar employees have mainly been teleworking, while manufacturing units and the sales and service business network are operating as normal.
In terms of financing, the company has carried out all measures necessary to ensure business continuity. The company has analysed credit risks related to trade receivables and credit loss provisions and concluded that there are sufficient provisions at the end of the period under review. The company has not had any signs of decreases in goodwill or the value of activated development costs.
ORDER INTAKE AND ORDER BOOKS
Order intake for the period totalled EUR 755.2 (378.6) million, while period-end order books were valued at EUR 402.3 (178.5) 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 16.7 (15.2) million, of which EUR 5.7 (6.0) million was capitalised.
Capital expenditure totalled EUR 18.3 (12.3) 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
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; Marko Mattila, Sales and Marketing Director; Tapio Mertanen, Service Director; Paula Oksman, HR Director; Miika Soininen, Director of IT and Digital Services and Tommi Väänänen, Director of Delivery Chain Process. 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),
Gary Glendinning (United Kingdom and Ireland),
Antti Räsänen (Hungary, Italy, Romania, Slovenia, Croatia, Serbia and Bulgaria) 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 1,924 (1,768) during the period and employed 1,966 (1,759) 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 September 2021 totalled 990,...

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