Date: 28 April 2020
This release is a summary of Glaston Corporation's Interim Report for January-March 2020. The complete report is attached to this release as a pdf-file. The release is also available on the company's website at the address www.glaston.net.
The interim report provides estimates on future prospects involving risk and uncertainty factors, and other factors as a result of which the performance, operation or achievements of Glaston may substantially deviate from the estimates. Forward-looking statements relating to future prospects are subject to risks, uncertainties and assumptions, the implementation of which depends on the future business environment and other circumstances, such as the development of the coronavirus pandemic.
FIRST QUARTER 2020 IN BRIEF
- Orders received totaled EUR 45.6 (22.9, pro forma 45.3) million.
- Net sales totaled EUR 46.9 (20.8, pro forma 44.3) million.
- Comparable EBITA was EUR 2.0 (0.6, pro forma 2.8) million, i.e. 4.3 (2.7, pro forma 6.3)% of net sales.
- The operating result (EBIT) was EUR 0.1 (-0.8, pro forma 0.8) million.
- The comparable operating result (EBIT) was EUR 0.9 (0.1, pro forma 1.6) million, i.e. 2.0 (0.4, pro forma 3.5)% of net sales.
- Items affecting comparability totaled EUR -0.8 (-0.8, pro forma -0.8) million.
- The comparable earnings per share were EUR 0.007 (-0.006, pro forma 0.041).
- Cash flow from operating activities was EUR -3.1 (1.8) million.
- Realized cost synergies related to the Bystronic glass integration amounted to EUR 0.8 million. Annual cost savings from all of the measures undertaken will amount to EUR 5.0 million.
- In the light of the uncertainty caused by the coronavirus pandemic, Glaston’s Board of Directors has decided to withdraw its profit distribution proposal issued on 11 February 2020 and to propose to the Annual General Meeting that no return of capital be distributed for 2019.
GLASTON’S OUTLOOK FOR 2020 UPDATED
Glaston Corporation estimates that comparable EBITA for 2020 will decline from the 2019 level. Due to low visibility and rapid market movements, the extent of the decline cannot be reliably assessed at this stage. The company’s current assessment is that orders received in the second and third quarters will be at a lower level than normal. The postponement of the delivery of some orders will impact the development of net sales and earnings in the near future. Exceptionally high uncertainty surrounds the assessments, and the situation might change very quickly.
On 20 March 2020, Glaston Corporation published a stock exchange release which stated that, due to the significant deterioration in the global financial situation following the coronavirus situation and the rapid changes in the company’s business environment, Glaston was withdrawing its guidance issued on 11 February 2020 and that it was improbable that company’s comparable EBITA will grow in 2020.
PRESIDENT & CEO ARTO METSÄNEN: A satisfactory quarter in an uncertain market
“The first quarter of 2020 was satisfactory given the prevailing conditions. Since the beginning of the year, COVID-19 coronavirus has impacted the daily lives and work of us all, has weakened demand in Asia, and particularly in China, and later in the quarter has also affected development in Western countries. In the first quarter, however, coronavirus has not yet been reflected significantly in orders received, which were at the level of the corresponding period of the previous year (pro forma).
Demand for insulating glass machines grew strongly, compensating for the weakness in demand for automotive glass machines that had already been evident for some time. Demand for heat treatment machines was nearly at the previous year’s level. Services were affected by travel restrictions and various countries’ national isolation measures, but our extensive service network and our investment in remote services supported the development of the product area, which was at a satisfactory level given the circumstances.
With regard to projects included in the order book, so far we have only seen the postponement of individual deliveries. Ongoing discussions with customers do not indicate order cancellations, but the situation may change rapidly and we closely monitor the development of our order book. All of our production plants are operating normally and a large proportion of deliveries will be delivered as planned. The availability of components has also been secured for the coming months.
When it comes to the Bystronic glass integration, most of the synergy-related measures were implemented on a faster schedule than expected, and estimated cost synergies were exceeded. At the end of the first quarter, annual integration-related cost savings were approximately EUR 5 million. In connection with the acquisition, we estimated that we would achieve annual savings of approximately EUR 4 million by 2021. From now on, the integration projects continue as part of the company's normal management, and separate financial monitoring of integration projects will end in April.
No coronavirus infections have been reported in Glaston to date. Many of our employees have been teleworking for some time now in order to safeguard both their own health and the health of production personnel. I would like to thank all Glaston employees for their resilience, flexibility and adaptation to the rapid change in operating practices.
We have taken prompt action to safeguard the company’s financial stability. We have created tools that will enable us to adapt our operations quickly. In Finland, we have completed an employee cooperation procedure in which we agreed on phased lay-offs for all personnel flexibly, as the situation develops. Corresponding measures have also been implemented or are planned in Germany, Switzerland and in all other operating locations.
We are constantly monitoring the development of the situation, our orders and order book, the company’s cash flow and liquidity, as well as the government and other aid available in different countries. The company’s liquidity situation is currently good, and through these actions we are preparing for the uncertain development of the coming months.
Uncertainty in the market is high and visibility is low. It is still too early, therefore, to reliably assess the effects of the coronavirus crisis, but we expect that comparable EBITA for 2020 will deteriorate from the 2019 level. Due to low visibility and rapid market movements, the extent of the deterioration cannot be reliably assessed at this stage.
Currently, we consider that orders received in the second and third quarters will be at a lower level than normal. The postponement of the delivery of some orders will impact the development of net sales and earnings in the near future. It is clear that there is exceptionally high uncertainty surrounding assessments and that the situation might change very quickly. In the light of the uncertainty, Glaston’s Board of Directors has decided to withdraw its profit distribution proposal issued and to propose to the Annual General Meeting that no return of capital be distributed for 2019.”
GLASTON GROUP KEY FIGURES
Glaston Corporation’s acquisition of Bystronic glass was completed on 1 April 2019. The comparison data of this financial interim report for the period 1 January – 31 March 2019 do not include figures for Bystronic glass. Glaston Corporation has prepared unaudited pro forma financial information to illustrate the impact of the Bystronic glass acquisition, completed on 1 April 2019, on the Group’s operational result and financial position and to improve the comparability of financial information.
The unaudited pro forma financial information for 1 January – 31 March 2019 and 1 January – 31 December 2019 presented in this interim report is presented as if the acquisition would have already been completed on 1 January 2018. Pro forma financial information has been titled Pro forma information in the places in the interim report where the information is presented.
As of 1 January 2020, the company has three reporting segments: Glaston Heat Treatment, Glaston Insulating Glass and Glaston Automotive & Emerging Technologies. Services business is included in the reporting segments. Machine and Services sales, order intake and order book are also reported separately as additional, product area, information. On 18 March 2020, the company published comparative information according to the new structure.
|Pro forma 1–12/2019|
|of which service operations||15.5||7.4||42.6||17.4||68.3|
|of which service operations, %||34.0%||32.5%||26.3%||38.4%||37.0%|
|Order book at end of period||82.3||42.8||79.5||104.2||79.5|
|of which service operations||16.5||7.7||57.1||17.7||67.1|
|of which service operations, %||35.2%||37.2%||31.6%||39.9%||32.8%|
|Items affecting comparability||0.8||0.8||7.2||0.8||7.2|
|Comparable EBITDA, %||6.4%||6.2%||7.8%||8.9%||8.2%|
|Comparable EBITA, %||4.3%||2.7%||5.4%||6.3%||5.9%|
|Operating result (EBIT)||0.1||-0.8||-1.3||0.8||0.3|
|Comparable operating result (EBIT)||0.9||0.1||5.9||1.6||7.5|
|Comparable operating result (EBIT), %||2.0%||0.4%||3.3%||3.5%||3.7%|
|Profit/loss before taxes||-0.1||-1.1||-4.4||0.3||3.8|
|Profit/loss for the period||-0.2||-1.1||-6.4||-0.3||3.1|
|Comparable earnings per share, adjusted with share issue, EUR||0.007||-0.006||0.011|
|Number of registered shares at end of period adjusted with share issue (1,000)||84 290||38 727||84 290|
|Cash flow from operating activities||-3.1||1.8||10.8|
|Net interest-bearing debt at end of period||37.2||8.4||33.0|
|Return on investment (ROI), %, (annualized)||0.3%||-4.7%||-1.3%|
|Comparable return on capital employed (ROCE), %, (annualized)||3.1%||-3.4%||8.7%|
|Equity ratio, %||40.7%||55.1%||41.6%|
|Net gearing, %||50.7%||16.8%||45.0%|
|Number of employees at end of period||752||350||790|
UNCERTAINTIES AND FACTORS AFFECTING NEAR FUTURE DEVELOPMENT
In the first quarter of 2020, as a result of the coronavirus situation, the global economic situation has deteriorated significantly, rapid changes have taken place in Glaston's business environment and willingness to invest has decreased. Due to low visibility and strong market movements, there is an exceptional amount of uncertainty associated with demand in all of the company’s business areas. In addition equipment installations have become more difficult and the operating conditions for the services business have deteriorated due to travel restrictions and customer production restrictions or plant closures.
Uncertainty in the market may affect both Glaston’s latest orders as well as orders in the order book, which may be postponed significantly or cancelled. Glaston is maintaining an ongoing dialogue with customers to survey and mitigate the situation.
If the COVID-19 virus pandemic depresses the global economy for a longer period and Glaston customers’ willingness to invest in new equipment decreases significantly, and the operating conditions of the services business will not be restored, this will have an impact on the company’s net sales, earnings and cash flow. If the weak economic conditions continue for a long time, the company’s liquidity might deteriorate.
Should the company’s earnings and financial position deteriorate sharply, the covenants of the financing agreement may be breached, which could lead to a significant increase in financing costs. The company manages risk through cost savings, tighter spending, and risk management as well as through proactive discussions with providers of finance.
The spread of the coronavirus pandemic to a company’s production sites might lead to the closure of one or more production facilities, and this could have a significant impact on the company’s financial development. The company has initiated prompt measures to prevent such risk from materializing, and its personnel have, for example, been teleworking for some time now in order to protect their own health and the health of production personnel.
Glaston’s President and CEO Arto Metsänen and CFO Päivi Lindqvist will present the financial result to analysts, investors and media representatives on the publication day at 15.00 in Finnish (Finnish time).
The live audiocast can be accessed through the link: https://glaston.videosync.fi/2020-04-28-q1. An on-demand version of the presentation will be available on the company's website later during the same day.
The participants can also join a telephone conference that will be arranged in conjunction with the live audiocast. The participants are asked to dial in 5-10 minutes prior to starting time using the Participant Phone Number and Participant Passcodes below.
Dial in number(s)
Finland: +358 981 710 310
Sweden: +46 856 642 651
United Kingdom: +44 333 300 0804
United States: +1 631 913 1422