Financial Statements Release 1.1.-31.12.2017, 29.03.2018

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks relating to the business environment (competition risk, situation and pricing risk, commodities risks and risks relating to the environment), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks). Foreign currency loans, deposits and other natural hedging relationships are used in order to protect from exchange rate fluctuations. Due to the restructuring proceedings, at the moment the company cannot obtain the credit facilities it would need for signing hedging derivatives

For the Group’s business operations it is imperative that it can source certain raw materials, such as recycled steel, iron blocks and energy, at competitive prices. The cost risk associated with raw materials is primarily managed using pricing agreements, with which the prices of products are adjusted according to the prices of their raw materials. A rise in the price of raw materials can tie up more funds than estimated in working capital.

Componenta’s possible risks related to working capital and liquidity issues may adversely affect the volumes of future new sales and lessen the size of orders placed by customers for products to replace discontinued products. Volumes may be weakened by possible customer losses due to commercial reasons.

Concerning the continuity of operations, the significant estimates and assumptions made by the company and management as well as uncertainties are as follows:

  • Componenta Finland Ltd and Componenta Corporation are able to make payments stipulated in the restructuring programme. 
  • Componenta Främmestad AB will be able to pay its restructuring debts in accordance with the agreed payment schedules in July 2018. After the end of the financial year Componenta Främmestad has paid all its short-term restructuring debts, EUR 2.9 million. Furthermore, Componenta Främmestad AB has a debt of EUR 2.5 million to Componenta Dökümcülük. The debt will be paid off in six years after payment of other restructuring debts. The repayment is tied to the EBITDA of Componenta Främmestad. 
  • Componenta Wirsbo AB and Componenta Arvika AB filed for bankruptcy at the local district courts in July. In Componenta’s opinion, the failure of the restructuring proceedings for Componenta Wirsbo AB and Componenta Arvika AB is not estimated to have a significant impact on the restructuring proceedings for other Group companies or on the ability of the parent company to continue as a going concern. 
  • When analysing cash flow and liquidity forecasts for the companies over the next 12 months, the management has estimated the companies’ future sales volumes, net sales, operating margins, capital expenditure and working capital needs.