The demand for Componenta products continued as viable in the first half of the year. Profitability increased due to cost reducing activities.
We aim to change operations in Componenta, particularly in Componenta Främmestad AB in order to engage less working capital and financial requirements in the operations. The changes in operation models are being negotiated with customers. The objective of these actions is to decrease invested capital and increase profitability. The possible changes are not anticipated to have effect on net sales or the result on the current year. The progress of this subject will be reported in the future business reviews and financial statement.
The restructuring program is proceeding according to plan and liquidity has remained on a good level. There are no restructuring debts left, which fall due in 2018.
The strong demand for Componenta products continued in the first quarter of the year. Due to cost reducing activities the profitability increased from previous year. In the beginning of the year, Componenta has already paid its restructuring debt that fall due in July 2018. There are no restructuring debts left, which fall due in 2018.
“The year 2017 was the Group’s first profitable financial year since 2009. We continued to systematically implement restructuring measures and focused on improving Componenta’s profitability. The restructuring programmes of the parent company and its operational subsidiaries were confirmed in Finland and Sweden. Following the confirmation of the restructuring programmes, the Group companies’ debt burden in foundry operations was reduced to a level that can, to the best of my understanding, be managed with cash flow from operations.
The Group is no longer engaged in the forge business after Componenta Wirsbo AB and Componenta Arvika AB, which had been under corporate restructuring, filed for bankruptcy in July. The forge companies were unable to pay their restructuring debts within the specified time. I have no regrets about the loss of the forge business, as its profitability was low and it would have required a very significant injection of working capital. As the forge business has had no synergies with the foundry business, its loss has no negative impact on the remaining business operations.
As planned, we divested the highly indebted Turkish foundry business by agreeing on the sale of our shares in Componenta Dökümcülük Ticaret ve Sanayi A.Ş. Componenta’s guarantee liabilities were reduced by EUR 80 million in connection with the transaction.
The restructuring measures taken by the Group have been essential for securing Componenta’s future. The measures have led to a downsizing of the Group’s business, but also a substantial reduction in the Group’s debt. At the balance sheet date, the Group’s equity ratio stood at 34.8% (-165.3%).
Componenta Främmestad AB paid off all of its short-term restructuring debt after the end of the financial year. As of the time of writing, the Group has approximately EUR 15.3 million in long-term external interest-free restructuring debt, of which EUR 2.5 million is in Sweden and the rest is in the Group companies in Finland, as well as EUR 0.8 million in interest-bearing long-term restructuring debt.
The Finnish Group companies must pay external restructuring debts amounting to approximately EUR 1.7 million per year from 2019 to 2022. The remaining amount, approximately EUR 7.2 million, must be paid in 2023. The Swedish Group company must pay an external restructuring debt of EUR 2.5 million within the next six years if the company’s result makes payment possible.
The improved profitability was primarily due to lower fixed costs. The Group also implemented operational efficiency improvement measures in 2017 to not only achieve cost savings, but also to ensure the quality of our products. Close cooperation with customers is at the heart of our day-to-day operations. Our goal has been to ensure that the renewal measures and changes in our operations correspond to customer needs. Having stabilised our operations, we will focus even more on the growth of our operations, particularly with respect to our existing customers. We adopted a flat line organization structure in 2016 and transferred the customer service function to our production facilities. This has substantially improved our service capacity and will enable improved profitability going forward.”