CEO of Finnish machinery supplier Raute predicts challenging final quarter on low order book; company reports operating profit of €1.01M, down from €4.93M a year ago

NASTOLA, Finland , November 10, 2011 (press release) –

  • The Group’s net sales amounted to EUR 59.4 million (MEUR 49.5), up 20% on the comparison period. Order intake was EUR 46 million, at the level of the comparison period (MEUR 46).
  • Operating result amounted to EUR +0.4 million (MEUR +3.6, including the MEUR 4.4 profit from a real-estate sale). Result before taxes was EUR +0.1 million (MEUR +3.5).
  • Earnings per share (undiluted) were EUR -0.02 (EUR +0.76).
  • Third-quarter net sales amounted to EUR 21.6 million and the operating result was EUR 1.0 million. Order intake was EUR 7 million and the order book stood at EUR 21 million at the end of the reporting period (MEUR 20).
  • Raute issued a profit warning on October 25, 2011, due to the weakened profit outlook. Net sales will increase from the year 2010 and the operating result is estimated to be at the break-even level or somewhat in the negative.

Our third-quarter net sales were almost back to their pre-recession level, and our operating profit reached a reasonable level. We also posted a profit for the first three quarters of the year. The third quarter proves that, when the market allows reasonable net sales to be achieved, our operations are profitable.

Uncertainty in the global economic and financial markets, particularly in Europe and North America, has increased markedly in the past few months. For the time being, however, our customers have not given any direct indication that the situation has affected their plans or decisions. According to my estimate, it is nevertheless clear that the growing uncertainty in the financial markets will have some effect on our customers’ confidence in pursuing investments and acquiring financing for them. The postponement of a few projects that we were expecting to proceed with during the third quarter was no doubt the result of financing difficulties.

Several new orders forecast for the third quarter have further been postponed for various reasons. The projects have not, however, been discontinued and we continue to work with our customers on their realization. Some orders that we had originally forecast for the last quarter have proceeded favorably. As far as our customers are concerned, I estimate that the realization of those projects is now on more solid ground, and I believe they will be started up. Despite the low volume of new orders in the previous two quarters, I believe we will see an upward trend in our order intake towards the end of the year.

Due to our low order book, the final quarter of 2011 will be a challenging one for us, and we had to weaken our profit outlook for this year. We are now working hard to acquire new orders and to achieve a positive operating result.


Order intake and order book

Order intake during the third quarter totaled EUR 7 million (MEUR 12). New orders consisted entirely of our technology services.

The volume of new orders remained at a low level as customers delayed their decisions on projects that were expected to be realized in the third quarter. The delays in projects are estimated to be due to typical scheduling changes in investment projects, the general economic uncertainty and the increasing difficulties in arranging financing.

The order book weakened during the third quarter by EUR 14 million, amounting to EUR 21 million at the end of the period (MEUR 20). A significant proportion of the order book is scheduled for 2012.

Net sales

Third-quarter net sales amounted to EUR 21.6 million (MEUR 19.5). The improved market prospects of the company’s customer industries increased demand, particularly in the first quarter, and resulted in a stronger order book, which contributed to net sales growth.

Technology services accounted for 32 percent of total net sales (24%).

Result and profitability

The operating result for the third quarter was EUR 1.0 million positive (MEUR 4.9 positive, including the profit of MEUR 4.4 from a real-estate sale), representing 5 percent (25%) of net sales. The third-quarter result was EUR 0.7 million positive (MEUR 4.1 positive, including the profit from a real-estate sale), and earnings per share were EUR 0.17 (EUR +1.02).



Market situation in customer industries

Raute’s customers in the veneer, plywood and LVL (Laminated Veneer Lumber) industries are engaged in the manufacture of wood products used in investment commodities and are thus highly affected by fluctuations in construction, housing-related consumption, international trade, and transportation.

According to our estimate, the slow improvement in the market situation of our customer industries in 2010 and the first part of the current year has leveled out. With the exception of North America, most of the plywood and LVL manufacturers are still, however, operating at normal utilization rates. Demand for wood products in North America continues to be very sluggish as a result of the weak situation in the housing market and construction.

Demand for wood products technology and technology services

During the reporting period, demand for wood products technology and technology services remained at a normal level, in light of the market situation in the customer industries. Demand focused on smaller projects, modernizations, and other technology services, which reflects the good utilization rates in our customers’ mills.

Several larger projects – both individual production lines and complete mills – have been under prolonged planning and negotiation in many market areas. Customers will decide on and realize these projects only once they are confident that the demand has recovered permanently and once financing for the projects can be arranged.


Raute’s business consists of providing project deliveries and technology services to the wood products industry. Project deliveries encompass complete mills, production lines, and individual machines and equipment. Technology services include maintenance, spare parts services, modernizations, consulting, training, and reconditioned machinery.

Order intake during the reporting period totaled EUR 46 million (MEUR 46). 57 percent of the new orders came from Russia (8%), 26 percent from Europe (26%), 7 percent from South America (3%), 8 percent from North America (14%) and 2 percent from Asia-Pacific (49%).

The most significant new order was received in January for the delivery of plywood mill machinery to Russia valued at more than EUR 12 million. The low order intake during the reporting period from Asia and South America can be explained by customers’ scheduling of their projects.

Technology services accounted for EUR 19 million (MEUR 12) of the order intake.

The order book weakened during the reporting period by EUR 12 million, amounting to EUR 21 million at the end of the period (MEUR 20). A significant proportion of the order book is scheduled for 2012.


Raute’s competitive position is good. Raute’s solutions help customers in securing their delivery and service capabilities throughout the life cycle of the product. In such investments, the supplier’s overall expertise and extensive and diverse technology offering play a key role. The competitive edge provided by Raute is also a major draw when customers select their cooperation partners. Furthermore, Raute’s strong financial position enhances its credibility and improves its competitive position as a company that realizes long-term investment projects.


Net sales for the reporting period, EUR 59.4 million (MEUR 49.5), were up 20 percent on the comparison period. The brighter market prospects of Raute’s customer industries boosted demand, which contributed to net sales growth, particularly at the end of 2010 and in the first quarter of 2011.

Of the total net sales for the reporting period, Russia accounted for 35 percent (34%), Asia-Pacific for 27 percent (30%), Europe for 25 percent (16%), North America for 8 percent (16%), and South America for 5 percent (4%).

Technology services’ net sales grew 39 percent and accounted for 33 percent (28%) of total net sales.


The operating result for the reporting period was EUR 0.4 million positive (MEUR 3.6 positive), representing one percent of net sales (+7%). The operating result benefited from EUR 4.4 million in gains from a real estate sale.

The result for the reporting period was weakened largely due to additional costs incurred during the first quarter from the drawn-out implementation of some projects that were in the installation phase.

The result before taxes for the reporting period was EUR 0.1 million positive (MEUR 3.5 positive, including the MEUR 4.4 profit from the real estate sale) and the result for the reporting period was EUR 0.1 million negative (MEUR 3.0 positive, including the profit from the real estate sale). Earnings per share (undiluted) were EUR -0.02 (EUR +0.76, including the profit from the real estate sale).


The Group’s financial position is good. At the end of the reporting period, gearing was -17 percent (-19%) and the equity ratio 53 percent (50%). Other fluctuations in balance sheet working capital items and the key figures based on them are due to differences in the timing of customer payments and the cost accumulation from project deliveries, which is typical of project business.

The Group’s cash and cash equivalents, including financial assets recognized at fair value through profit or loss, amounted to EUR 14.9 million (MEUR 21.3) at the end of the reporting period. Operating cash flow was EUR -4.5 million due to the increase in working capital (MEUR -3.1). Cash flow from investment activities was EUR -1.1 million (MEUR -0.7). Cash flow from financing activities was EUR -3.3 million (MEUR -2.6), including dividend payments of EUR 1.2 million (MEUR 0.0).

Interest-bearing liabilities amounted to EUR 11.0 million (MEUR 16.5) at the end of the reporting period, with current interest-bearing liabilities accounting for EUR 3.3 million (MEUR 4.2).

The parent company Raute Corporation has a EUR 10 million commercial paper program, which allows the company to issue commercial papers maturing in less than one year. The company also has unused bilateral credit facilities totaling EUR 9.8 million with two different Nordic banks.


Raute Corporation published stock exchange releases on the following events:

January 20, 2011 Raute received new orders valued at over EUR 12 million from Russia.
April 13, 2011 Raute Corporation’s 2011 Annual General Meeting was held in April.
September 26, 2011 Petri Lakka appointed member of Raute Group’s Executive Board.


Raute aims to be the leading technology supplier in its field, investing strongly in continuous R&D, particularly in plywood and LVL manufacturing technology and the automation and instrumentation, especially machine vision, applications that support these technologies.

Research and development costs totaled EUR 1.4 million (MEUR 1.2) during the reporting period, representing 2.3 percent of net sales (2.3%). Progress has been made, in particular, in the product development of a new type of peeling station intended for the Chinese market. The first machinery installed is about to start production.

Investments totaled EUR 1.2 million (MEUR 1.8) during the reporting period. The biggest investments centered on the development and maintenance of IT systems.


At the end of the reporting period, the Group’s personnel numbered 467 (511). Group companies outside Finland accounted for 25 percent (25%) of employees.

Converted to full-time employees (“effective headcount”), the average number of employees was 459 (439) during the reporting period.


The number of Raute Corporation’s shares at the end of the reporting period totaled 4,004,758, of which 991,161 were series K shares (ordinary share, 20 votes/share) and 3,013,597 series A shares (1 vote/share). The shares have a nominal value of 2 euros. Series K and A shares confer equal rights to dividends and company assets.

Series K shares can be converted to series A shares under the terms set out in section 3 of the Articles of Association. If an ordinary share is transferred to a new owner who has not previously held series K shares, the new owner must notify the Board of Directors of this in writing and without delay. Other holders of series K shares have the right to redeem the share under the terms specified in Article 4 of the Articles of Association.

Raute Corporation’s series A shares are listed on NASDAQ OMX Helsinki Ltd. The trading code is RUTAV. Raute Corporation has signed a market making agreement with Nordea Bank Finland Plc in compliance with the Liquidity Providing (LP) requirements issued by NASDAQ OMX Helsinki Ltd.

The company’s market capitalization at the end of the reporting period was EUR 28.8 million (MEUR 32.8), with series K shares valued at the closing price of the series A shares on September 30, 2011, which was EUR 7.18 (EUR 8.20).

The Annual General Meeting held on April 13, 2011 authorized the company’s Board of Directors to decide on the repurchase of Raute Corporation series A shares with the company’s distributable assets and on a directed share issue. The maximum number of shares to be repurchased and issued is 400,000. The Board of Directors did not exercise the authorization during the reporting period.

The company did not possess any treasury shares during the reporting period.


The Annual General Meeting held on March 31, 2010 resolved to issue a maximum of 240,000 stock options.

In accordance with the authorization granted by the Annual General Meeting, the Board of Directors issued a total of 80,000 stock options marked with the symbol 2010 B to the Group’s key personnel on May 31, 2011 and September 26, 2011. The share subscription period for stock options 2010 B will be from March 1, 2014 to March 31, 2017 and the subscription price will be EUR 9.83.

Earlier, on May 5, 2010, 80,000 stock options 2010 A were granted to key employees of the Group under this stock option scheme.

The terms and conditions of the stock option scheme are available on the company’s website.


The number of shareholders totaled 1,787 at the beginning of the year and 1,676 at the end of the reporting period. Series K shares are held by 50 private individuals (46). Management held 7.2 percent (7.0%) of the company’s shares and 13.7 percent (12.5%) of the votes. Nominee-registered shares accounted for 2.1 percent (2.1%) of shares.

No flagging notifications were given to the company during the report period.


Raute Corporation complies with the Finnish Corporate Governance Code for listed companies issued by the Securities Market Association on June 15, 2010. Raute deviates from the Code’s recommendation 22 on appointing members to the Appointments Committee in that one member to the Committee is elected from outside the Board of Directors, as per the company’s Administrative Instructions, from among the representatives of major shareholders who have significant voting rights. The Board views this exception as justified, taking into consideration the company’s ownership structure and the possibility to consider the expectations of major shareholders as early as in the preparation phase of selecting members of the Board of Directors. The main points of Raute Corporation’s corporate governance principles are presented on the company’s website at

Raute Corporation’s Corporate Governance Statement 2010 has been drawn up separately from the Board of Directors’ report and is published on the company’s website.


Petri Lakka, Licentiate in Technology, was appointed member of Raute Group’s Executive Board as of September 26, 2011. Lakka joined Raute Group on September 12, 2011, as Group Vice President, Business Development.

As of September 26, 2011, the Group’s Executive Board consists of Mr. Tapani Kiiski, President and CEO (Chair); Ms. Arja Hakala, CFO; Mr. Timo Kangas, Group Vice President, Technology Services; Mr. Petri Lakka, Group Vice President, Business Development; Mr. Petri Strengell, Group Vice President, Technology and Operations; and Mr. Bruce Alexander, Group Vice President, North American Operations.


Raute Corporation’s Annual General Meeting was held on April 13, 2011. A stock exchange release on the decisions of the Annual General Meeting was published on April 13, 2011.


The Annual General Meeting held on April 13, 2011 decided to pay a dividend of EUR 0.30 per share for the financial year 2010. The dividends amounted to a total of EUR 1.2 million, of which series A shares accounted for EUR 904,079.10 (EUR 0) and series K shares for EUR 297,348.30 (EUR 0). The dividend payment date was April 27, 2011.


At Raute Corporation’s Annual General Meeting on April 13, 2011, Mr. Erkki Pehu-Lehtonen, M.Sc. (Eng.), was elected as Chairman of the Board of Directors, Ms. Sinikka Mustakallio, Researcher, as Vice Chair, and Mr. Risto Hautamäki, M.Sc. (Eng.), Mr. Ilpo Helander, M.Sc. (Eng.), Mr. Mika Mustakallio, M.Sc. (Econ.), and Mr. Pekka Suominen, M.Sc. (Econ.) as members of the Board.

Based on the evaluation of independence, Chairman Erkki Pehu-Lehtonen and members Risto Hautamäki, Ilpo Helander, Mika Mustakallio, and Pekka Suominen are independent of the company. Vice-Chair Sinikka Mustakallio, who chaired Raute’s Supervisory Board from 1996 to 1998 and has been a member of the Board since 1998, is dependent on the company. The Chairman of the Board (Mr. Erkki Pehu-Lehtonen) and two Board members (Mr. Ilpo Helander and Mr. Risto Hautamäki) are independent of major shareholders.

Raute Corporation’s Board of Directors has an Appointments Committee and a Working Committee. The Appointments Committee is chaired by Mr. Erkki Pehu-Lehtonen and its members are Ms. Sinikka Mustakallio and Mr. Ville Korhonen, who was elected by the major shareholders from amongst their number. The Working Committee is chaired by Mr. Erkki Pehu-Lehtonen and its members are Ms. Sinikka Mustakallio and Mr. Risto Hautamäki. The Audit Committee’s tasks are handled by the Board of Directors.


Risks in the near term continue to be driven by the global economic situation and the uncertainty concerning its development. Hazards related to the growing debt of some European countries and the United States have led to mounting uncertainty about the development of the global economy and financial markets. During the reporting period, there have been no essential changes in the business risks described in the 2010 Board of Directors’ report and financial statements. The most significant risks for Raute in the near term are related to the development of net sales and profitability.


Raute Corporation has published stock exchange releases on the following events after the reporting period:

October 25, 2011 Raute’s profit outlook for the full year 2011 weakened.


Raute’s business operations are characterized by the sensitivity of investment demand to cyclical fluctuations in the global economy and the financial markets.

Uncertainty related to the trends in the global economy and financial markets has increased since the end of summer and throughout the autumn. The market situation for Raute’s customer industries is expected to remain uncertain. Demand for wood products has not recovered to its pre-recession level. The upswing in demand seen early in the year has leveled out in recent months and in a few market areas demand has fallen again due to the hazards of growing debt among European countries and in the United States.

Demand for investments and services in the wood products industry is not expected to recover to its pre-recession level in the near future. However, upgrade investments in the plywood industry to ensure quality and maintain market shares will probably remain at a reasonable level in the near future, provided that the economic uncertainty does not spiral into a new crisis. Production line and mill-scale investment projects are being planned in several market areas. Their implementation and timing will depend on investors’ confidence that the market for wood products will remain at a reasonable level and on the arrangement of financing for customer projects in some market areas.

Thanks to its strong financial and market position and the development measures it has carried out, Raute is well positioned to respond to growing demand once the markets recover. The implemented adaptation measures have led to a lighter cost structure and business is more profitable than before, even in a difficult market situation.

Raute issued a profit warning on October 25, 2011, due to the weakened profit outlook. Net sales will increase from the year 2010, and the operating result is estimated to remain at the break-even level or be somewhat in the negative. The operating result will depend on whether the new orders forecast for the end of the year are realized and on the amount of revenue generated by them for 2011.

Forestweb Editor’s Note: In an omitted table, the company reported a Q3 operating profit of €1.011 million, net sales of 21.626 million and diluted earnings per share of 0.17. For the same period a year ago, the company reported an operating profit of 4.932 million, net sales of 19.490 million, and diluted earnings per share of €1.00.

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