CEO’s review

Componenta Corporation’s Business Review 1 January–30 September, 2024, 1 November 2024/ Sami Sivuranta, CEO:

“Our performance in the first three quarters of 2024 was at a more moderate level than expected. Volume and order book development remained at a clearly lower level throughout the review period than was expected in the first half of the year. The main reasons for this are slow general economic recovery and particularly the exceptionally low level of demand in the agricultural machinery industry, which has continued across Europe. Although order books and backlogs have gradually begun to pick up for some customers in the second half of the year, expectations of growth have been postponed until 2025 for the majority of customers. Despite of weaker than expected operating environment, current volume outlook and orderstock as well as product portfolio development, timing of customer deliveries and sales price changes support our full year 2024 guidance.

Low utilisation rates, especially in our iron foundries, had a negative impact on our profitability in the first quarter. Despite the low utilisation rates, we ramped up serial production for volume products, which had a negative impact on production efficiency and quality level. Starting in the second quarter, our high-quality production capability has improved through systematic measures.

Overall, the decrease in net sales in the review period was caused by lower delivery volumes and lower main raw material and energy index levels in the first half of the year. These indices are included in our sales prices.

Our order book started to grow slightly in the second quarter. The growth continued in the third quarter, when our total sales were higher than in the comparison period. However, order book development in the first half of the year was more modest than expected, and we have implemented a temporary pricing change that will take effect at the beginning of the last quarter of the year. We have also actively adjusted our operations to meet the lower volume and order book levels. As a result of our improved high-quality production capability and our adjustment measures, profitability improved clearly in the second and third quarters, compared with the first quarter. Our liquidity remained at a good level throughout the review period.

We were able to maintain good service capability across the Group despite the challenging operating environment. Inflation has stabilised at a moderate level, and the availability of raw materials, other materials and components is currently at a good level. We are actively monitoring market developments and ensuring that our own supply chains continue to work effectively. At the moment, there are no significant near-term risks in the availability of electricity, but the general price level of electricity involves uncertainties. Significant price fluctuations within a day and their management have become part of daily life in energy-intensive industries.

During the third quarter, we also made preparations by planning integration measures related to the acquisition we announced in July concerning the Kalajoki plant and the Sepänkylä machining and service centre. The transaction was completed as planned at the beginning of October. The expertise and technologies gained through the acquisition will expand the company’s production portfolio and complement its overall offering as a contract manufacturer also for heavier production. Componenta will also be able to make more extensive use of internal supply chains in terms of sheet metal cutting deliveries and heavy machining, for example.

We have continued to implement our strategy in accordance with our action plans. We are determined to continue to meet our customers’ expectations and demands in the coming years, even more actively than today. As a contract manufacturer, we will continue to pursue measures to strengthen our market position, and we are working to be the preferred sustainable total supplier to our customers, with a wide offering.”