A substantial decline in demand and prices for many Moelven products is the reason the company lost NOK 90 million kroner on operations in the first quarter.
For the Group overall, first quarter operating revenues totalled NOK 1,456 million (1,951), while the final loss figure was NOK 90 million (plus 110). The division that was hit first and hardest by the fall in demand and prices was the Timber division, which is also the division posting the worst quarterly figures compared to last year. The decline has also been substantial for the Wood division. Even though the Building Systems division has also experience a substantial decline in demand and prices, the division was still able to deliver positive financial figures for the quarter.
The overall ordinary pre-tax result totalled minus NOK 100 million (plus 106) for the Group. The result after accounting for taxes and minority interests was minus NOK 71 million (plus 75).
Is the worst over?
- Even though we are presenting a quarterly pre-tax loss of almost 100 million Norwegian kroner, there are positive signs suggesting that the worst may be over. Total demand for the Group’s products and services is usually lower the first quarter than the rest of the year anyway, and forecasters believe that prices for sawn spruce and pine wood in Europe are close to having reached bottom. We must not accept these predictions as reality just yet, however; we must take one quarter at a time, cautions CEO Hans Rindal.
Mr. Rindal explains the reason for the weak results as follows:
- Prices and demand have fallen fast and substantially for almost all of the Group’s products, and the reason is the slump in the international economy. The reduction of business activity for the Group in the first quarter has been compounded by a seasonal dip in business activity, which is normal for this time of year. Prices on many products have fallen substantially. Even though we implemented major cost and capacity reducing measures nine months ago, the effect of the measures is delayed in relation to the fall in demand and prices, explains Mr. Rindal.
Faith in the future
Despite the poor results, Mr. Rindal still has faith in the future and believes Moelven is here for the long run.
- The decline in demand for the Group’s products is attributable to the prevailing economic conditions and is not a result of changing trends. There have not been any changes in building methods or material preferences that would indicate any lasting reduction in demand for the Group’s products. On the contrary, flexible, environmentally sound, easily erected and cost-effective buildings systems will likely become even more popular in the future. I also want to emphasise that the situation is satisfactory for the Group financially, both in terms of liquidity and solidity. The company’s equity ratio is 44.1 percent, and we have liquidity reserves totalling NOK 540 million. This means that the Group is financially prepared to weather a period of stormy market conditions. In short, I am confident that we will be able to ride out the storm. The Moelven that will emerge from the current global economic crisis will be even stronger than before, says Mr. Rindal.
Cathartic crisis
He is not foreign to the idea that the kind of economic crisis that we are now experiencing can be a healthy experience, and that it is important not to miss out on opportunities to improve on the company’s operations.
- Bad times can bring about progress. All three divisions have companies that have earned money despite the very challenging market conditions the first quarter. These companies are all good role models, and the difficult times must be used to implement improvements in the parts of the Group that are facing problems not relating to the general economic conditions, says Mr. Rindal.
Future prospects
There are some signs that prices for sawn wood internationally are stabilising, both for spruce and pine. Combined with cost-reducing measures that will have an effect on the financial figures in the second and third quarters, this should help improve the situation for the Timber division. The Wood division is experiencing a seasonal improvement in demand, and the level of business activity in the refurbishment, rebuilding and building extensions market (RRB) is good, particularly in Sweden. For the Building Systems division, order reserves are now – with the exception of the modular factories in Sweden -- practically at a normal level. An increase in business activity in the second half of the year is also expected as a result of the government stimulus packages.
The scale of investments in 2009 will be reduced in order to ease pressures on cash flow during this period of negative results. Due to the expected seasonal upswing in demand, combined with the stabilisation of prices and the effect of cost-reducing measures, the Group anticipates improved results in the second quarter.
For more information:
President/CEO Hans Rindal, cell phone: +47 90696910
Director of Finance Morten Sveiverud, cell phone: +47 90980667
Director of Communications and Human Resources Kristin Vitsø Bjørnstad, cell phone +47 90713701
Communications Consultant Tom E. Holmlund, cell phone +47 91668668