Ponsse´s Interim Report for 1 January - 30 September 2020
– Net sales amounted to EUR 431.4 (Q1-Q3/2019 464.1) million.
– Q3 net sales amounted to EUR 155.0 (Q3/2019 148.3) million.
– Operating result totalled EUR 43.4 (Q1-Q3/2019 46.6) million, equalling 10.1 (10.0) per cent of net sales.
– Q3 operating result totalled EUR 21.6 (Q3/2019 16.2) million, equalling 13.9 (10.9) per cent of net sales.
– Profit before taxes was EUR 22.7 (Q1-Q3/2019 45.1) million.
– Cash flow from business operations was EUR 15.5 (14.1) million.
– Earnings per share were EUR 0.52 (1.23).
– Equity ratio was 47.5 (52.6) per cent.
– Order books stood at EUR 178.5 (326.4) million.
– New profit guidance: Group´s euro-denominated operating profit is expected to be slightly lower in 2020 than in 2019.
PRESIDENT AND CEO JUHO NUMMELA:
Despite the difficult situation, Ponsse performed well during the third quarter. The problems with the availability of components that characterised the second quarter were solved, and demand picked up in nearly all markets. The slight recovery of the markets and the excellent performance of Ponsse’s network increased the value of orders to EUR 161.2 (116.9) million during the third quarter. Our order book remained at the second quarter’s level, being EUR 178.5 (326.4) million. This is an excellent performance considering the situation. After all, our factory operated at full capacity throughout the quarter, apart from the summer holiday period.
We have adapted effectively to the pandemic. Ponsse has handled all the major changes in working life, including remote working, excellently, and we have been able to keep projects running effectively in all operations. The successful investments in our factory in recent years and our excellent employees are key in enabling productive operations at our factory. Our factory is fully on schedule, and our operations are developing strongly, driven by continuous improvement. Disruptions in the supplier network have decreased, apart from a few individual companies.
Our existing order book allowed us to run our factory at full capacity after holidays, which led our company to a record-high third quarter in our history. Our net sales for the third quarter were excellent at EUR 155.0 (148.3) million. Our customers were fully employed throughout the quarter, which was reflected in the positive development of the net sales of our service businesses. At the same time, used machine sales increased clearly from the low level of the second quarter.
As operations picked up, the company had no temporary layoffs, and effective cost cuts enabled an excellent profitability. Ponsse’s operating profit for the quarter was EUR 21.6 (16.2) million, giving an operating margin of 13.9 (10.9) per cent. Although our net sales are slightly behind the previous year, our profitability reached the previous year’s level after the first nine months of the year. This is largely attributable to the successful third quarter. The cumulative cash flow was EUR 15.5 (14.1) million at the end of the third quarter. While our trade-in machine stocks continue to be a little high compared to a normal situation, the recovery of the market situation has also started to reduce their level.
Despite our successes during the third quarter, there are still significant uncertainties in the markets. According to our estimate total market has decreased approximately 20 per cent this year. The changed operating environment has a significant impact and the smaller order book no longer offers the same level of security to business cyclicality it has given us in the past. We will continue to invest normally in sales, after sales and the availability of spare parts and will serve our customers to the best of our abilities.
The factory will continue to run at full capacity in two shifts until the end of October. After this, our order book does not enable two shifts, and our factory will operate in one shift during November and December. Our network is working hard to keep our Vieremä factory busy.
We will continue to closely observe safety instructions in everything we do to prevent the coronavirus pandemic from spreading. The most important thing is to ensure the health of our personnel, customers and other stakeholders under all circumstances.
Consolidated net sales for the period under review amounted to EUR 431.4 (464.1) million, which is 7.0 per cent less than in the comparison period. International business operations accounted for 77.7 (77.9) per cent of net sales.
Net sales were regionally distributed as follows: Northern Europe 42.2 (38.6) per cent, Central and Southern Europe 24.1 (20.0) per cent, Russia and Asia 12.4 (16.3) per cent, North and South America 20.8 (24.7) per cent and other countries 0.5 (0.4) per cent.
The operating result amounted to EUR 43.4 (46.6) million. The operating result equalled 10.1 (10.0) per cent of net sales for the period under review. Consolidated return on capital employed (ROCE) stood at 9.3 (21.7) per cent.
Staff costs for the period totalled EUR 61.0 (67.1) million. Other operating expenses stood at EUR 33.5 (41.5) million. The net total of financial income and expenses amounted to EUR -20.7 (-1.5) million. Exchange rate gains and losses with a net effect of EUR -18.7 (-0.1) million were recognised under financial items for the period. The parent company's net receivables from other Group companies stood at EUR 109.2 (108.4) 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 14.6 (34.5) million. Diluted and undiluted earnings per share (EPS) came to EUR 0.52 (1.23).
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 511.7 (416.3) million. Inventories stood at EUR 172.5 (162.4) million. Trade receivables totalled EUR 47.3 (46.3) million, while liquid assets stood at EUR 123.3 (35.6) million. Group shareholders’ equity stood at EUR 239.9 (214.9) million and parent company shareholders’ equity (FAS) at EUR 228.1 (202.0) million. The amount of interest-bearing liabilities was EUR 161.8 (89.0) million. The company has ensured its liquidity by withdrawal of current loan from credit facility limit and commercial paper programme. The company has used 39 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 38.5 (53.3) million, and the debt-equity ratio (net gearing) was 16.0 (24.8) per cent. The equity ratio stood at 47.5 (52.6) per cent at the end of the period under review.
Cash flow from operating activities amounted to EUR 15.5 (14.1) million. Cash flow from investment activities came to EUR -12.2 (-21.2) million.
ORDER INTAKE AND ORDER BOOKS
Order intake for the period totalled EUR 378.6 (508.5) million, while period-end order books were valued at EUR 178.5 (326.4) million.
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 15.2 (13.7) million, of which EUR 6.0 (4.6) million was capitalised.
Capital expenditure totalled EUR 12.3 (21.5) million. It consisted in addition to capitalised R&D expenses of investments in buildings and ordinary maintenance and replacement investments for machinery and equipment.
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:
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).
The Group had an average staff of 1,768 (1,758) during the period and employed 1,759 (1,747) people at period-end.
The company’s registered share capital consists of 28,000,000 shares. The trading volume of Ponsse Plc shares for 1 January – 30 September 2020 totalled 2,465,654, accounting for 8.8 per cent of the total number of shares. Share turnover amounted to EUR 61.3 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 23.70, and market capitalisation totalled EUR 663.6 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.
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 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 risks which may influence the achievement of the company’s strategic and financial goals or the continuity of its business. Decisions on the necessary measures to anticipate risks and react to observed risks are made on the basis of this information.
Risk management is a part of regular daily business, and it is also included in the management system. Risk management is controlled by the risk management policy approved by the Board.
A risk is any event that may prevent the company from reaching its objectives or that threatens the continuity of business. On the other hand, a risk may also be a positive event, in which case the risk is treated as an opportunity. Each risk is assessed on the basis of its impact and probability. Methods of risk management include avoiding, mitigating and transferring risks. Risks can also be managed by controlling and minimising their impact.
SHORT-TERM RISK MANAGEMENT
The insecurity in the world economy may result in a decline in the demand for forest machines. The uncertainty may be increased by the volatility of developing countries’ foreign exchange markets. The geopolitical situation, in particular, will increase the uncertainty through financial market operations and sanctions. Changes taking place in the fiscal and customs legislation in countries to which Ponsse exports may hamper the company’s export trade or its profitability.
The coronavirus pandemic has caused rapid changes in the company’s operating environment. The company’s management has actively monitored and forecasted the development of the pandemic and taken preventive and corrective action to minimise its impact. Prolonging of coronavirus pandemic may have a significant impact on demand for forestry machines, and also availability of components and financing.
The parent company monitors the changes in the Group’s internal and external trade receivables and the associated risk of impairment.
The key objective of the company’s financial risk management policy is to manage liquidity, interest and currency risks. The company ensures its liquidity through credit limit facilities agreed with a number of financial institutions. The effect of adverse changes in interest rates is minimised by utilising credit linked to different reference rates and by concluding interest rate swaps. The effects of currency rate fluctuations are partly mitigated through derivative contracts.
OUTLOOK FOR THE FUTURE
Due to the rapidly changed market environment, Ponsse issued a profit warning on 17 March 2020 to cancel its previous guidance, according to which Ponsse Group’s euro-denominated operating profit in 2020 was expected to be at the same level as in 2019.
Ponsse Group’s outlook for the rest of the year is clarified and this allows providing the result guidance for the current year.
Group’s euro-denominated operating profit in 2020 is expected to be slightly lower than in 2019.
It is still unclear how long, and how strong the corona pandemic will last. Its impact on Ponsse’s business operations, financial position, operating results and liquidity are continuously evaluated.
The Group will continue to keep costs under strict control and make investments after thorough consideration.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR 1,000)
|Increase (+)/decrease (-) in inventories of finished goods and work in progress||22,555||29,226||15,718|
|Other operating income||1,326||2,107||3,046|
|Raw materials and services||-298,650||-324,605||-447,390|
|Expenditure on employment-related benefits||-60,960||-67,063||-92,693|
|Depreciation and amortisation||-18,736||-15,623||-21,219|
|Other operating expenses||-33,521||-41,537||-57,563|
|Share of results of associated companies||-81||28||305|
|Financial income and expenses||-20,636||-1,500||-1,032|
|RESULT BEFORE TAXES||22,721||45,100||66,574|
|NET RESULT FOR THE PERIOD||14,648||34,503||52,010|
|OTHER ITEMS INCLUDED IN TOTAL COMPREHENSIVE RESULT:|
|Translation differences related to foreign units||1,576||2,469||2,373|
|TOTAL COMPREHENSIVE RESULT FOR THE PERIOD||16,224||36,972||54,383|
|Diluted and undiluted earnings per share*||0.52||1.23||1.86|
|Increase (+)/decrease (-) in inventories of finished goods and work in progress||4,978||483|
|Other operating income||398||867|
|Raw materials and services||-104,462||-96,661|
|Expenditure on employment-related benefits||-18,110||-19,101|
|Depreciation and amortisation||-6,738||-5,223|
|Other operating expenses||-9,481||-12,448|
|Share of results of associated companies||-21||81|
|Financial income and expenses||-5,872||-1,215|
|RESULT BEFORE TAXES||15,710||15,046|
|NET RESULT FOR THE PERIOD||11,700||11,318|
|OTHER ITEMS INCLUDED IN TOTAL COMPREHENSIVE RESULT:|
|Translation differences related to foreign units||-1,217||1,443|
|TOTAL COMPREHENSIVE RESULT FOR THE PERIOD||10,484||12,761|
|Diluted and undiluted earnings per share*||0.42||0.40|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR 1,000)
|ASSETS||30 Sep 20||30 Sep 19||31 Dec 19|
|Property, plant and equipment||109,211||118,187||118,507|
|Investments in associated companies||665||572||849|
|Deferred tax assets||3,780||4,766||3,844|
|TOTAL NON-CURRENT ASSETS||153,335||159,275||160,773|
|Income tax receivables||184||237||351|
|Other current receivables||15,283||12,543||16,646|
|Cash and cash equivalents||123,286||35,604||48,704|
|TOTAL CURRENT ASSETS||358,318||257,005||266,030|
|SHAREHOLDERS’ EQUITY AND LIABILITIES|
|EQUITY OWNED BY PARENT COMPANY SHAREHOLDERS||239,946||214,933||232,121|
|Deferred tax liabilities||1,138||1,174||1,407|
|Other non-current liabilities||39||25||23|
|TOTAL NON-CURRENT LIABILITIES||49,534||49,979||49,460|
|Tax liabilities for the period||3,754||3,423||3,021|
|Trade creditors and other current liabilities||100,350||103,843||105,099|
|TOTAL CURRENT LIABILITIES||222,173||151,367||145,221|
|TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES||511,653||416,279||426,803|
CONSOLIDATED STATEMENT OF CASH FLOWS (EUR 1,000)
|CASH FLOWS FROM OPERATING ACTIVITIES:|
|Net result for the period||14,648||34,503||52,010|
|Financial income and expenses||20,636||1,500||1,032|
|Share of the result of associated companies||81||-28||-305|
|Depreciation and amortisation||18,736||15,623||21,219|
|Cash flow before changes in working capital||62,770||61,574||87,730|
|Change in working capital:|
|Change in trade receivables and other receivables||-6,096||-3,220||-7,828|
|Change in inventories||-29,648||-33,300||-24,187|
|Change in trade creditors and other liabilities||-2,572||-69||2,398|
|Change in provisions for liabilities and charges||1,173||-1,496||-1,968|
|Other financial items||-1,957||-829||-882|
|Income taxes paid||-7,527||-8,340||-11,944|
|NET CASH FLOWS FROM OPERATING ACTIVITIES (A)||15,496||14,116||42,854|
|CASH FLOWS USED IN INVESTING ACTIVITIES|
|Investments in tangible and intangible assets||-12,349||-21,488||-28,567|
|Proceeds from sale of tangible and intangible assets||114||244||322|
|NET CASH FLOWS USED IN INVESTMENT ACTIVITIES (B)||-12,235||-21,244||-28,245|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Acquisition of treasury shares||0||-2||0|
|Withdrawal/Repayment of current loans||80,219||15,556||7,166|
|Repayment of non-current loans||0||0||0|
|Withdrawal/Repayment of finance lease liabilities||-1,943||-1,467||-2,402|
|Change in non-current receivables||100||154||832|
|NET CASH FLOWS FROM FINANCING ACTIVITIES (C)||69,977||-8,159||-16,803|
|Change in cash and cash equivalents (A+B+C)||73,238||-15,287||-2,194|
|Cash and cash equivalents on 1 Jan||48,704||51,105||51,105|
|Impact of exchange rate changes||1,344||-215||-208|
|Cash and cash equivalents on 30 Sep/31 Dec||123,286||35,604||48,704|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR 1,000)
|A = Share capital|
|B = Share premium and other reserves|
|C = Translation differences|
|D = Treasury shares|
|E = Retained earnings|
|F = Total shareholders’ equity|
|EQUITY OWNED BY PARENT COMPANY SHAREHOLDERS|
|SHAREHOLDERS’ EQUITY 1 JAN 2020||7,000||3,460||5,400||-2||216,264||232,121|
|Result for the period||14,648||14,648|
|Total comprehensive income for the period||1,576||14,648||16,224|
|SHAREHOLDERS' EQUITY 30 SEP 2020||7,000||3,460||6,976||-2||222,513||239,946|
|SHAREHOLDERS’ EQUITY 1 JAN 2019||7,000||3,462||3,027||0||186,667||200,155|
|Result for the period||34,503||34,503|
|Total comprehensive income for the period||2,469||34,503||36,972|
|Matching Share Plan||-2||-2|
|Acquisition of treasury shares||-2|
|Direct entries to retained earnings||210||210|
|SHAREHOLDERS' EQUITY 30 SEP 2019||7,000||3,460||5,496||-2||198,979||214,933|
|30 Sep 20||30 Sep 19||31 Dec 19|
|1. LEASING COMMITMENTS (EUR 1,000)||635||1,081||858|
2. CONTINGENT LIABILITIES (EUR 1,000)
|30 Sep 20||30 Sep 19||31 Dec 19|
|Guarantees given on behalf of others||0||186||20|
|Responsibility of checking the VAT deductions made on real property investments||8,018||8,329||8,700|
3. PROVISIONS (EUR 1,000)
|1 January 2020||3,450|
|30 September 2020||4,623|
KEY FIGURES AND RATIOS
|30 Sep 20||30 Sep 19||31 Dec 19|
|R&D expenditure, MEUR||15.2||13.7||19.3|
|Capital expenditure, MEUR||12.3||21.5||28.6|
|as % of net sales||2.9||4.6||4.3|
|Average number of employees||1,768||1,758||1,761|
|Order books, MEUR||178.5||326.4||256.8|
|Equity ratio, %||47.5||52.6||54.8|
|Diluted and undiluted earnings per share (EUR)||0.52||1.23||1.86|
|Equity per share (EUR)||8.57||7.68||8.29|
FORMULAE FOR FINANCIAL INDICATORS
Return on capital employed, %:
Result before taxes + financial expenses
Shareholder´s equity + interest-bearing financial liabilities (average during the year) * 100
Average number of employees:
Average of the number of personnel at the end of each month. The calculation has been adjusted for part-time employees.
Net gearing, %:
Interest-bearing financial liabilities – cash and cash equivalents
Shareholders’ equity * 100
Equity ratio, %:
Shareholders’ equity + Non-controlling interests
Balance sheet total - advance payments received * 100
Earnings per share:
Net result for the period - Non-controlling interests
Average number of shares during the accounting period, adjusted for share issues
Equity per share:
Number of shares on the balance sheet date, adjusted for share issues
ORDER INTAKE (EUR million)
The stock exchange release for the interim report has been prepared observing the recognition and valuation principles of IFRS, and the requirements of IAS 34 have not been complied with. The same accounting principles were observed for the closing of the books as for the annual financial statements dated 31 December 2019.
The above figures have not been audited.
The above figures have been rounded and may therefore differ from those given in the official financial statements.
This communication includes future-oriented statements that are based on the assumptions currently made by the company’s management and its current decisions and plans. Although the management believes that the future expectations are well founded, there is no certainty that these expectations will prove to be correct. This is why the results may significantly deviate from the assumptions included in the future-oriented statements as a result of, among other things, changes in the economy, markets, competitive conditions, legislation or currency exchange rates.
Vieremä, 20 October 2020
President and CEO
Juho Nummela, President and CEO, tel. +358 400 495 690
Petri Härkönen, CFO, tel. +358 50 409 8362
NASDAQ OMX Helsinki Ltd
Ponsse Plc is a company specialising in the sales, manufacture, servicing and technology of cut-to-length method forest machines and is driven by genuine interest in its customers and their business. Ponsse develops and manufactures sustainable and innovative harvesting solutions based on customers’ needs.
The company was established by forest machine entrepreneur Einari Vidgrén in 1970, and it has been a leader in timber harvesting solutions based on the cut-to-length method ever since. Ponsse is headquartered in Vieremä, Finland. The company’s shares are quoted on the NASDAQ OMX Nordic List.