Glaston January-September 2013 interim report

As per its January-September 2013 interim report, Glaston reported increased orders received, and has adjusted its outlook, expecting 2013 net sales to exceed 2012 net sales and both EBIT and EBIT excluding non-recurring items to be positive.

Orders received in January-September totalled EUR 90.0 (84.8) million. Orders received in the third quarter totalled EUR 34.2 (28.4) million. The order book on 30 September 2013 was EUR 42.0 (35.3) million. Consolidated net sales in January-September totalled EUR 86.4 (83.4) million. Third-quarter net sales were EUR 26.3 (24.6) million. EBITDA was EUR 7.5 (0.2) million, i.e. 8.6 (0.2)% of net sales.
The operating result, excluding non-recurring items, was a profit of EUR 0.3 (3.9 loss) million, i.e. 0.3 (-4.7)% of net sales. The third-quarter operating result, excluding non-recurring items, was a loss of EUR 0.4 (0.4 loss) million. The operating result was a profit of EUR 4.0 (6.9 loss) million, i.e. 4.7 (-8.2)% of net sales. The third-quarter operating result was a loss of EUR 0.4 (0.4 loss) million.
Continuing Operations’ return on capital employed (ROCE) was 10.3 (-7.6)%. Continuing Operations’ January-September earnings per share were EUR 0.02 (-0.10). Continuing and -Discontinued Operations’ earnings per share totalled EUR 0,02 (-0.15).
Glaston’s interest-bearing net debt totalled EUR 11.4 (56.8) million.
Glaston adjusts its outlook and expects 2013 net sales to exceed 2012 net sales and both EBIT and EBIT excluding non-recurring items to be positive.
President & CEO Arto Metsänen: “Glaston’s operations in the third quarter developed in line with expectations. July-September net sales were slightly higher than the previous year and totalled EUR 26.3 million. Our January-September net sales totalled EUR 86.4 million, also slightly higher than the previous year.
The level of new orders in the third quarter was good, around 20% higher than the previous year. The positive development of the heat treatment machine market in particular continued, and we closed major deals in the US and Spain, for example.
In September, we published our updated strategic guidelines and financial targets for 2013–2016. Our main goal is to deliver profitable growth through innovation and technology leadership in selected product groups. Our company has long traditions in the fields of product development and innovation. In the new strategy, we have also highlighted the customer experience as a key area, and our aim is to offer our customers the best customer experience in the industry.
Seasonal variations are typical in our industry, and traditionally the last quarter of the year has been the strongest. I look towards the end of the year with confidence.”
Glaston expects 2013 net sales to exceed 2012 net sales and both EBIT and EBIT excluding non-recurring items to be positive. (Earlier forecast: Glaston expects 2013 net sales to be on the 2012 level and both EBIT excluding non-recurring items and EBIT to be positive.)
In the third quarter of the 2013, Glaston’s markets developed in line with expectations. The recovery of the North American market continued. In Asia and South America, market development was stable. In the EMEA area, the market situation remained challenging, but among other things, there was positive development in Spain, the UK and Germany.
In January-September, the heat treatment machine market developed in line with Glaston’s expectations, and in the third quarter was even above expectations. In pre-processing machines, the market situation continued to be challenging also in the third quarter. The demand for tools remained stable.
In the third quarter, Glaston closed a deal to a value of approximately EUR 3.0 million for a heat treatment line with the Spanish company Tvitec – Técnicas de Vidro Transformado S.L. The line represents Glaston’s latest technology and is a large-scale flat glass tempering line. In addition, a deal worth approximately EUR 5.5 million for glass processing machinery was closed with the US company Cardinal Glass Industries. The first flat tempering line will be delivered by the end of 2013 and the subsequent lines will be delivered in 2014. The orders were divided between the second and third quarter order books. A new product, the ProL500 flat laminating line, was launched onto the Brazilian market. The machine is manufactured at Glaston’s factory in Brazil and the first machine delivery took place in the third quarter.
In the third quarter, product lines prepared for Vitrum, which was held in October. Among the products presented were the new UC series of automatic cutting lines, the innovative Omnia double edging machine, which is suitable for solar glass applications and the appliance industry, the GlastonAir™ concept, intended for tempering thin glass, and the IriControL™ technology, with which glass processors can measure and minimise anisotropic phenomena in tempered glass.
In January-September, the Machines segment’s net sales totalled EUR 64.5 (62.0) million. The operating result, excluding non-recurring items, was a profit of EUR 0.6 (3.1 loss) million. Third-quarter net sales totalled EUR 19.1 (18.4) million and the operating result, excluding non-recurring items, was EUR 0.0 (0.5 loss) million.
In the services market, Glaston position’s remained strong in the third quarter, despite the challenges posed by sales of heat treatment machine spare parts and upgrade products. In spare parts sales for pre-processing machines, the very aggressive price competition continued. Despite this, Glaston succeeded in increasing spare parts sales in Asia and the EMEA area. Maintenance work sales developed in line with expectations.
The third quarter’s most significant deals were a sale worth EUR 0.5 million to the US, in which the customer will upgrade its flat tempering line with heating and cooling chambers, and a sale valued at EUR 0.3 million to Poland, in which a machine will be modernised to meet today’s low-E requirements.
In January-September, the Services segment’s net sales totalled EUR 22.2 (22.4) million and the operating profit, excluding non-recurring items, was EUR 3.6 (4.0) million. Third-quarter net sales totalled EUR 7.5 (6.8) million and the operating profit, excluding non-recurring items, was EUR 1.2 (1.2) million.
Glaston completed the sale of its Software Solutions business area in the first quarter. The sales price was approximately EUR 18 million, of which a portion is contingent. The result of Glaston’s Discontinued Operations in 2013 includes the result of the Software Solutions business area for the period 1 January–31 January 2013 as well as the result on the sale of the business area.
During the first quarter, Glaston also completed the sale and leaseback of the Tampere factory property complex in Finland. The sale resulted in a non-recurring capital gain of EUR 3.7 million.
Glaston’s order intake in the review period totalled EUR 90.0 (84.8) million. Of orders received, the Machines segment accounted for 76% and the Services segment 24%. Orders received during the third quarter of the year totalled EUR 34.2 (28.4) million.
Glaston’s order book on 30 September 2013 was EUR 42.0 (35.3) million. Of the order book, the Machines segment accounted for EUR 40.0 million and the Services segment for EUR 2.0 million.
Glaston’s January–September net sales totalled EUR 86.4 (83.4) million. The Machines segment’s net sales in January–September were EUR 64.5 (62.0) million and the Services segment’s net sales were EUR 22.2 (22.4) million.
Third-quarter net sales totalled EUR 26.3 (24.6) million and were distributed across the business segments as follows: Machines EUR 19.1 (18.4) million and Services EUR 7.5 (6.8) million.
The operating result, excluding non-recurring items, in January–September was a profit of EUR 0.3 (3.9 loss) million, i.e. 0.3 (-4.7)% of net sales. The Machines segment’s operating result, excluding non-recurring items, in January-September was a profit of EUR 0.6 (3.1 loss) million and the Services segment’s operating result, excluding non-recurring items, was a profit of EUR 3.6 (4.0) million.
Of the non-recurring items totalling EUR 3.7 million recognised in the first quarter of year, the most significant was a capital gain arising from the sale of the Tampere property complex. A goodwill impairment loss of EUR 3.0 million directed at the Pre-processing operating segment, which belongs to the Machines segment, was recognised as a non-recurring item in the first quarter of 2012.
The third-quarter operating result, excluding non-recurring items, was a loss of EUR 0.4 (0.4 loss) million, i.e. -1.7 (-1.7)% of net sales. The Machines segment’s operating result, excluding non-recurring items, in July-September was EUR 0.0 (0.5 loss) million and the Services segment’s operating profit, excluding non-recurring items, was EUR 1.2 (1.2) million.
During the first quarter, Glaston repurchased convertible bonds with a nominal value EUR 2 million at a price below the nominal value. This repurchase yielded a financial income of EUR 0.9 million. Similarly, during the first quarter, the remaining convertible bond and debenture bond with accrued interest were used as payment in a share issue (conversion issue).
As the subscription price of the conversion issue was higher than the fair value of the share at the time of subscription, financial income of EUR 1.9 million arose to Glaston in connection with the conversion issue. These financial income items had no impact on cash flow. The Group’s net financial items in January-September were EUR 0.0 (-5.1) million. In the third quarter, net financial items were EUR -0.9 (-1.7) million.
Continuing Operations’ result in January-September was a profit of EUR 3.0 (11.9 loss) million and in the third quarter a loss of EUR 1.3 (2.0 loss) million. The result, after the result of Discontinued Operations, was a profit of EUR 3.0 (17.1 loss) million. Return on capital employed (ROCE) for Continuing Operations in January-September was 10.3 (-7.6)%. Return on capital employed was 10.5 (-13.1)%.
Continuing Operations’ earnings per share in the review period were EUR 0.02 (-0.10), while Discontinued Operations’ earnings per share were EUR 0.00 (-0.05), i.e. a total of EUR 0.02 (-0.15).
In the first quarter of the year, Glaston implemented extensive measures to strengthen the company’s financial position. These measures included a share issue, the completion of the sale of the Software Solutions segment, the conversion of convertible and debenture bonds into shares by using them as payment in the conversion issue, a new long-term financing agreement, and the sale and leaseback of the Tampere factory property complex.
In February 2013, Glaston signed a new long-term financing agreement. The financing agreement is for three years and it is valid until 31 January 2016. The covenants in use are interest cover, net debt/EBITDA, cash and cash equivalents, and gross capital expenditure. The covenants will be monitored, depending on the covenant, monthly, quarterly, semi-annually or annually. With respect to the interest cover covenant, the first monitoring date is after the first quarter of 2014.
The Group’s liquid funds at the end of the review period totalled EUR 14.7 (10.1) million. Interest-bearing net debt totalled EUR 11.4 (56.8) million and net gearing was 21.7 (157.0)%; net gearing was 188.4% on 31 December 2012.
The share issues executed during the first quarter improved Glaston’s equity ratio significantly. The equity ratio was 46.6 (24.3)% on 30 September 2013, and was 21.6% on 31 December 2012.
At the end of September, the consolidated asset total was EUR 128.0 (163.4) million. The equity attributable to owners of the parent was EUR 52.1 (35.9) million. The share issue-adjusted equity per share was EUR 0.27 (0.32). Return on equity in January-September was 9.6 (-51.1) %.
Cash flow from the operating activities of Continuing and Discontinued operations, before the change in working capital, was EUR 3.2 (0.1) million in January-September. The change in working capital was EUR 0.1 (-1.8) million. Cash flow from investments was EUR 23.2 (-4.3) million. Cash flow from investing activities was influenced by proceeds from the sales of the Software Solutions segment and the Tampere factory property, a total of EUR 25.3 million. Cash flow from financing activities in January–September was EUR -22.0 (-1.0) million.
The gross capital expenditure of Glaston’s Continuing and Discontinued Operations totalled EUR 2.0 (4.4) million. In the review period, there were no significant individual investments; the most significant investments were in product development.
Depreciation and amortisation of Continuing Operations on property, plant and equipment and on intangible assets totalled EUR 3.4 (4.0) million. A EUR 3.0 million goodwill impairment loss, directed at the Machines segment, was recognised in the first quarter of 2012.
Glaston’s Continuing Operations had a total of 585 (627) employees on 30 September 2013. Of the Group’s employees, 22% worked in Finland and 28% elsewhere in the EMEA area, 34% in Asia and 16% in the Americas. In the review period, the average number of employees was 593 (830).
strategic guidelines and financial targets for 2013–2016. Glaston’s goal is to deliver profitable growth through innovation and technology leadership in selected product groups, while at the same time ensuring the best customer benefit and experience in the industry.
The safety glass market, which is Glaston’s main field of business, is expected to grow by nearly 7% per year up to 2017. In addition, the company is seeking to grow particularly in tools (consumables relating to pre-processing machines) and in services covering the entire lifecycle of products.
The financial targets underlying Glaston’s strategy will run until 2016 and they are: growth in net sales of over 8% per year (CAGR), operating profit margin (EBIT) over 6%, and return on capital employed (ROCE) over 10%.
Glaston Corporation’s paid and registered share capital on 30 September 2013 was EUR 12.7 million and the number of issued and registered shares totalled 193,708,336. The company has one series of share. At the end of September, the company held 788,582 of the company’s own shares (treasury shares), corresponding to 0.41% of the total number of issued and registered shares and votes. The counter book value of treasury shares is EUR 51,685.
Every share that the company does not hold itself entitles its owner to one vote at a General Meeting of Shareholders. The share has no nominal value. The counter book value of each registered share is EUR 0.07.
During the first nine months of the year, approximately 25.4 million of the company’s shares were traded, i.e. around 15.4% of the average number of registered shares. The lowest price paid for a share was EUR 0.22 and the highest price EUR 0.44. The volume-weighted average price of shares traded in January-September was EUR 0.33. The closing price on 30 September 2013 was EUR 0.40.
On 30 September 2013, the market capitalisation of the company’s registered shares, treasury shares excluded, was EUR 77.2 (29.3) million. The share issue-adjusted equity per share attributable to owners of the parent was EUR 1.48 (0.88).
The Annual General Meeting of Glaston Corporation was held in Helsinki on 17 April 2013. The Annual General Meeting adopted the financial statements and discharged the Members of the Board of Directors and the President & CEO from liability for the financial year 1 January–31 December 2012. In accordance with the proposal of the Board of Directors, the Annual General Meeting resolved that no dividend be distributed for the financial year ending 31 December 2012.
The number of Members of the Board of Directors was resolved to be six. The Annual General Meeting decided to elect Claus von Bonsdorff, Anu Hämäläinen, Teuvo Salminen, Christer Sumelius, Pekka Vauramo and Andreas Tallberg as Members of the Board of Directors. Public Accountants Ernst & Young Oy were elected as auditor for 2013.
The Annual General Meeting authorised the Board of Directors to decide on the issuance of shares as well as the issuance of options and other rights granting entitlement to shares. The authorisation covers a maximum of 20,000,000 shares. The authorisation is valid until 30 June 2014 and it invalidates earlier authorisations.
The Annual General Meeting resolved to establish a permanent Nomination Board, consisting of shareholders or representatives of shareholders.
After the Annual General Meeting, the Board of Directors held an organising meeting, at which it elected Andreas Tallberg as Chairman of the Board and Christer Sumelius as Deputy Chairman of the Board.
Glaston’s Nomination Board consists of the representatives of the four largest shareholders of the Company as of 2 September 2013 and, in addition, the Chairman of the Company’s Board of Directors, who serves as an advisory member of the Nomination Board.
The following people have been selected as members of the Nomination Board: Jari Puhakka (Etera Mutual Pension Insurance Company), Mikko Koivusalo (Varma Mutual Pension Insurance Company), Kimmo Viertola (Finnish Industry Investment Ltd) and Ari Saarenmaa (GWS Trade Oy, merged with Oy G.W.Sohlberg Ab). Andreas Tallberg, Chairman of the Company’s Board of Directors, serves as an advisory member of the Nomination Board.
In its organising meeting, the Nomination Board elected Ari Saarenmaa from among its members to be Chairman.
On 27 September 2013, Glaston received a notification that Oy G.W.Sohlberg Ab’s share of the total number of shares and voting rights in Glaston Corporation has exceeded 10% following the merger of GWS Trade Oy with its parent company Oy G.W Sohlberg Ab. Oy G.W.Sohlberg Ab’s ownership rose to 26,266,100 shares, which is 13.56% of all Glaston shares and votes.
Glaston’s business environment remains challenging. Low economic growth and uncertainty in the financial markets may affect the timing of large machine orders. The general economic uncertainty continues to affect customers’ investment activity.
Global economic uncertainty and its impact on the development of the sector have been taken into account in the short-term forecasts. If the recovery of the sector is delayed further or slows, this will have a negative effect on future cash flows.
Glaston performs annual goodwill impairment testing during the final quarter of the year. In addition, goodwill impairment testing is performed if there are indications of impairment. Due to prolonged market uncertainty, it is possible that Glaston’s recoverable amounts will be insufficient to cover the carrying amounts of assets, particularly goodwill. If this happens, it will be necessary to recognise an impairment loss, which, when implemented, will weaken the result and equity.
Glaston has recognised a total of approximately EUR 3.8 million of loan, interest and trade receivables from a counterparty whose financial situation is challenging. Glaston is continuously monitoring the situation and will recognise an impairment loss on these receivables, if necessary.
We expect that the cautious pick-up of the market will continue in the final quarter of the year. The stable development of the South American and Asian markets is expected to continue. In North America, the tentative recovery of the market has continued and the prospects for the construction industry are more positive than in 2012. In Europe, the market will continue to be challenging.
Due to global economic uncertainty and overcapacity, the market for new glass processing machines will remain challenging. Demand for heat treatment machines began to grow cautiously in the second quarter and continued in the third quarter. We expect this positive development to continue in the final quarter of the year.
Glaston adjusts its outlook for 2013. Glaston expects 2013 net sales to exceed 2012 net sales and both EBIT and EBIT excluding non-recurring items to be positive. (Earlier forecast: Glaston expects 2013 net sales to be on the 2012 level and both EBIT excluding non-recurring items and EBIT to be positive.)