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Ferronordic AB: Interim report 1 January - 30 September 2023

07:30 / 16 November 2023 Ferronordic Press release

Q3 2023: Weak operationally. Key strategically. 

  • Revenue increased by 56% to SEK 643m (412)
  • Operating profit adjusted[1] decreased by 37% to SEK -28m (-21)
  • Operating profit decreased by 109% to SEK -28m (300)
  • Operating margin adjusted[1] increased to -4.4% (5.0)
  • The result for the period decreased by 124% to SEK -89m (366)
  • Basic earnings per share[2] amounted to SEK -6.16 (25.20)
  • Cash flows from operating activities amounted to SEK -88m (240)
  • Revenue increased by 54% to SEK 1,948m (1,268)
  • Operating profit adjusted[1] increased by 29% to SEK -53m (-75)
  • Operating profit decreased by 121% to SEK -53m (246)
  • Operating margin adjusted[1] increased to -2.7% (5.9)
  • The result for the period decreased by 104% to SEK -19m (461)
  • Basic earnings per share[2] amounted to SEK -1.29 (31.70)
  • Cash flows from operating activities amounted to SEK -174m (263)

SEK m (or as stated) 2023 2022 % 2023 2022 % FY2022
Q3 Q3 9M 9M
Revenue 643 412 56% 1,948 1,268 54% 1,973
Gross profit 75 57 31% 244 153 59% 250
Operating profit -28 300 -109% -53 246 -121% 233
Operating profit -28 -21 -37% -53 -75 29% -88
Result from continuing -89 262 -134% -19 134 -114% 183
Result for the period -89 366 -124% -19 461 -104% 440
Earnings per share from -6.16 18.04 -134% -1.29 9.20 -114% 12.58
continuing operations,
Earnings per share, SEK[2] -6.16 25.20 -124% -1.29 31.70 -104% 30.28
Cash flow from operations -88 240 -174 263 215
Net debt (cash) -378 579 -378 579 -957

Gross margin, % 11.7% 13.9% -2.2pp 12.5% 12.1% 0.5pp 12.7%
Operating margin -4.4% -5.0% 0.6pp -2.7% -5.9% 3.2pp -4.5%
adjusted[1], %
Working capital/LTM 20% 18% 2.4pp 20% 18% 2.4pp 11%
Revenue, %
Equity/total assets, % 62% 42% 19.9pp 62% 42% 19.9pp 58%
Return on capital -1% 31% -32.3pp -1% 31% -32.3pp 11%
employed, %
Return on equity, % -2% 35% -37.1pp -2% 35% -37.1pp 30%

[1] "Adjusted" here and in the rest of this report means excluding the effect of a compensation payment from Volvo of SEK 321m in Q3 2022.
[2] Before dilution.

Ferronodic's CEO, Lars Corneliusson, comments:
A few days ago, Ferronordic signed an agreement to acquire Rudd Equipment Company, a major Volvo CE dealer in the US, for USD 105m, using a combination of own cash and debt. In 2022, Rudd had sales of USD 308m and an operating income of USD 16.5m. This transaction is transformational. It is a first step into the world's second largest market for construction equipment and a big step towards rebuilding Ferronordic as a leading service and sales company and key partner to Volvo.

Meanwhile, we have plenty of work to do in our current markets. Operationally, the third quarter 2023 was a setback. Sales increased in both Germany and Kazakhstan, but less than expected, and far below the potential we see. Margins were low, costs were high, and our working capital grew. In Germany, revenue grew by 60% to SEK 574m, but the operating income slipped back to negative and decreased to SEK -16m. Against this backdrop and in the current economic environment, reaching a positive operating result in Germany for the full year 2023 now looks more challenging. In Kazakhstan, revenue grew by 30% to SEK 69m, but operating profit decreased to break-even. As a result, the Group's operating profit for the quarter decreased to
SEK -28m. Net cash decreased to SEK 378m, mainly due to higher working capital and exchange rate effects.

During and after the quarter, we launched initiatives to reduce the Group's costs and bring down working capital. The effects of these measures are expected to become visible in 2024. Most of the cost cuts will be in Germany and mainly affect administrative functions.

Uncertainty about the German economy increased during the quarter. Although there were also some early signs of improvement, higher interest rates and inflation make customers more cautious. The Kazakh market for construction equipment declined despite the economy growing. Longer-term, we however believe that the underlying conditions and business opportunities in our markets are strong. Despite the setback in the third quarter, we remain convinced that our operations in Germany and Kazakhstan have significant potential to grow long-term. Together with our expansion into the US, we therefore look to the future with confidence and optimism.

About Ferronordic
Ferronordic is a service and sales company in the areas of construction equipment and trucks. It is dealer of Volvo Trucks, Renault Trucks and Sandvik mobile crushers and screens in Germany and dealer of Volvo Construction Equipment, Sandvik mobile crushers and screens and Mecalac in Kazakhstan. Ferronordic began its operations in 2010 and currently has 28 outlets and approx. 450 employees. Ferronordic's vision is to be the leading service and sales company in its markets. The shares in Ferronordic AB (publ) are listed on Nasdaq Stockholm.

This information is information that Ferronordic AB (publ) is obliged to disclose pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act (2007:528). The information was submitted for publication on 16 November 2023, 07:30 CET.

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