Fortaco Group Holdco Plc’s Half-Year Review January-June 2023 (unaudited, IFRS): Growth and acquisitions continued
This release is a summary of Fortaco Group Holdco Plc’s Half-Year Review January-June 2023. The full release is attached and available on our website at https://investors.fortacogroup.com.
Figures in parentheses refer to the corresponding period of the previous year, unless otherwise stated.
Highlights: April-June 2023
- Net sales was EUR 95.9 million (comparable net sales growth 14.8 per cent).
- Recurring EBITDA was EUR 8.7 million (9.1 per cent of net sales, comparable growth in recurring EBITDA -2.2 per cent). EBITDA was EUR 7.4 million (7.7 per cent of net sales).
- Recurring EBITA was EUR 6.1 million (6.3 per cent of net sales, comparable growth in recurring EBITA -6.6 per cent). EBITA was EUR 4.8 million (5.0 per cent of net sales).
- Net debt was EUR 51.3 million and net debt to comparable recurring EBITDA 1.9x.
- Business activities remained high during the period, with clear comparable growth in net sales achieved. Profitability during the period was reasonably good, supported by good net sales, right pricing and efficiency.
- During the period, several structural business events took place:
On 23 May 2023, Fortaco announced that it has received an approval of the listing prospectus from the Finnish Financial Supervisory Authority concerning bonds issued 22 July 2022. Further it was announced that the application for the bonds to be admitted to trading on the corporate bonds list of Nasdaq Helsinki was submitted. The trading started 25 May 2023.
On 26 May 2023, Fortaco announced the signing of an agreement to acquire the entire share capital of Walter Mauser GmbH. The transaction has not closed at the time of publication of the half-year review, the transaction is expected to close during Q3 2023 and Fortaco will specify the impact of the acquisition to its financials guidance for 2023 after the closing of the acquisition. The transaction has not closed at the time of publication.
On 7 June 2023, Fortaco announced it was investigating the possibility to issue subsequent bonds under its existing bond framework. On 16 June 2023, it was announced that the bond issue was successful in the amount of EUR 27.5 million. The bond issue was closed and funds were received subsequent to the review period in July 2023 (see events after the reporting period).
On 7 June 2023, it was also announced that Fortaco signed a letter of intent to acquire the remaining 65 per cent share in Buisard S.A.S. The transaction has not closed at the time of publication of the half-year review.
On 21 June 2023, it was announced that Fortaco will invest in steel fabrication capacity in the Gliwice region of Poland. Construction is expected to start in H2 2023, with the start of operations during H2 2024.
Highlights: January-June 2023
- Net sales was EUR 192.1 million (comparable net sales growth 22.4 per cent).
- Recurring EBITDA was EUR 16.9 million (8.8 per cent of net sales, comparable growth in recurring EBITDA 19.4 per cent). EBITDA was EUR 14.8 million (7.7 per cent of net sales).
- Recurring EBITA was EUR 11.7 million (6.1 per cent of net sales, comparable growth in recurring EBITA 25.5 per cent). EBITA was EUR 9.6 million (5.0 per cent of net sales).
Key figures
Fortaco Group key financials
| MEUR, IFRS | 4-6/23 | 4-6/22 | 1-6/23 | 1-6/22 | 1-12/22** | Last 12 months | ||||||
| Reported | ||||||||||||
| Net sales | 95.9 | N/A | 192.1 | N/A | 94.9 | N/A | ||||||
| EBITDA | 7.4 | N/A | 14.8 | N/A | 0.6 | N/A | ||||||
| % of net sales | 7.7 % | N/A | 7.7 % | N/A | 0.7 % | N/A | ||||||
| EBITA | 4.8 | N/A | 9.6 | N/A | -2.0 | N/A | ||||||
| % of net sales | 5.0 % | N/A | 5.0 % | N/A | -2.1 % | N/A | ||||||
| Non-recurring items | 1.3 | N/A | 2.1 | N/A | 4.5 | N/A | ||||||
| Recurring EBITDA | 8.7 | N/A | 16.9 | N/A | 5.1 | N/A | ||||||
| % of net sales | 9.1 % | N/A | 8.8 % | N/A | 5.4 % | N/A | ||||||
| Recurring EBITA | 6.1 | N/A | 11.7 | N/A | 2.5 | N/A | ||||||
| % of net sales | 6.3 % | N/A | 6.1 % | N/A | 2.6 % | N/A | ||||||
| Comparable* | ||||||||||||
| Comparable net sales | 95.9 | 83.6 | 192.1 | 156.9 | 332.4 | 367.6 | ||||||
| Comparable EBITDA | 7.4 | 8.4 | 14.8 | 13.4 | 22.8 | 24.3 | ||||||
| % of net sales | 7.7 % | 10.1 % | 7.7 % | 8.5 % | 6.9 % | 6.6 % | ||||||
| Comparable EBITA | 4.8 | 6.0 | 9.6 | 8.6 | 13.0 | 14.1 | ||||||
| % of net sales | 5.0 % | 7.2 % | 5.0 % | 5.5 % | 3.9 % | 3.8 % | ||||||
| Comparable non-recurring items | 1.3 | 0.4 | 2.1 | 0.8 | 1.8 | 3.1 | ||||||
| Comparable recurring EBITDA | 8.7 | 8.9 | 16.9 | 14.2 | 24.7 | 27.4 | ||||||
| % of net sales | 9.1 % | 10.7 % | 8.8 % | 9.0 % | 7.4 % | 7.5 % | ||||||
| Comparable recurring EBITA | 6.1 | 6.5 | 11.7 | 9.3 | 14.8 | 17.2 | ||||||
| % of net sales | 6.3 % | 7.8 % | 6.1 % | 6.0 % | 4.5 % | 4.7 % | ||||||
| Balance sheet ratios | ||||||||||||
| Return on Capital Employed % (ROCE) | 16.4 % | N/A | 15.8 % | N/A | 10.1 % | |||||||
| Equity ratio, % | 25.7 % | N/A | 25.7 % | N/A | 24.3 % | |||||||
| Net debt | 51.3 | N/A | 51.3 | N/A | 52.0 | |||||||
| Net gearing | 88.1 % | N/A | 88.1 % | N/A | 93.0 % | |||||||
| Net debt / comparable recurring EBITDA | 1.9x | N/A | 1.9x | N/A | 2.1x | |||||||
| *) Figures refer to the comparable financials of the Group, which are based on the full year 2022 financials of the acquired Fortaco Group. | ||||||||||||
| **) Period 12.4.2022-31.12.2022 for reported figures | ||||||||||||
Guidance for 2023 (issued 23 May 2023 in prospectus)
For 2023, net sales are expected to exceed EUR 350 million (comparable net sales in 2022: EUR 332.4 million), with recurring EBITDA higher than comparable recurring EBITDA in 2022 (comparable recurring EBITDA in 2022: EUR 24.7 million).
Comments by Lars Hellberg, President & CEO
During the first half of year 2023, Fortaco’s successful growth continued. The growth of net sales was 22 percent in H1-2023, compared to the corresponding period in the previous year, and totaled to EUR 192 (157) million. Recurring EBITDA grew 19 per cent in H1-2023, compared to the corresponding period in the previous year, and was EUR 16.9 (14.2) million. The balance sheet key indicator of net debt versus EBITDA was on a good level at 1.9. We have good cash position, which enables sustainable business development.
We continued our acquisition path and made the strategic decision to acquire MauserCABS, an Austrian-based company, in May. In addition, Fortaco signed a letter of intent to acquire the rest of the shares in Buisard Cabins, of which we already own 35 per cent. Both transactions are expected to close in Q3-2023. In June, Fortaco successfully issued subsequent bonds in the amount of EUR 27.5 million to provide financial resources for ongoing acquisitions and strategic investments in accordance with our targets. I wish to thank our European bond investors – we are honored to have your trust.
We started several development and co-operation projects to strengthen our business and market position. The Poland Gliwice region capacity extension project is a greenfield investment that consists of a covered production area of 34,000 square meters and new equipment. With this investment, Fortaco expands its footprint for steel fabrication and vehicle cabin operations and gains additional efficiency based on a high degree of automation and strong operational excellence. Serial production is expected to start by the end of the third quarter of 2024. The earlier announced extension of the business site Holic in Slovakia, to build a high degree of automation and capacity, is progressing according to the investment plan. Fortaco Estonia OÜ and Systemair AS, the owner of the real estate housing Well Technology OÜ, signed an agreement where Fortaco Estonia expands its operations into the Well Technology building. Through this deal, Fortaco Estonia extends its capacity by 8,000 square meters of floor space. This strengthens Fortaco’s position as one of the largest, strategic partners for steel fabricated component OEMs (Original Equipment Manufacturers) in Europe. Serial manufacturing is expected to start at the beginning of 2024. Also, there are several implementations ongoing across Fortaco business sites for automation and digitalization to make tomorrow safer and better.
Our order book remained healthy and was EUR 72.2 million. However, we foresee, depending on the market segment and customers, dealers and OEMs aligning their inventories to adjust to the normalized supply chain delivery situation. However, the market segment causing disturbance is the marine and energy market, which is negatively impacting the capacity utilization of two Fortaco business sites. We are closely monitoring global, local, and several other indexes, to be prepared for potential capacity adjustments.
We have won additional business in the defense market and foresee growth opportunities in the short- and medium term in this segment. Additionally, Fortaco is currently introducing several new global OEM customers to be part of our customer portfolio, and acquisitions are expected to bring us additional, complementary customers. I would like to highlight Fortaco’s robustness, quality, and delivery performance, which make us an interesting strategic partner for our current and new customers.
We have seen an increased activity from our customers to start operations and localization in the United States. As previously announced, Fortaco’s strategic plan contains actions to offer the same business portfolio in the US as in Europe. The Fortaco team has explored the market and we expect the company to be present in the US in the near future. Our joint venture with Tata AutoComp in India is proceeding.
The first cabin samples are manufactured for customer approval, and production is planned to start by the end of 2023. We are expecting the joint venture to accelerate the growth of the local Indian market and exports.
Steel market prices are currently declining, and the margin impact is expected to be neutral for us. In the coming period, we strive to execute further sourcing synergies based on the business growth and acquisitions together with our professional supply chain.
Financial information
The company publishes the Interim Report for January-September 2023 on Monday, 30 November 2023.
Fortaco Group Holdco Plc
Board of Directors
Further information
Lars Hellberg, President & CEO
+358 40 572 9488
lars.hellberg@fortacogroup.com
Kimmo Raunio, Senior Executive Vice President & CFO
+358 40 593 6854
kimmo.raunio@fortacogroup.com
Distribution
Nasdaq Helsinki Oy
Financial Supervisory Authority
Main media
Web: investors.fortacogroup.com
Categories: Stock exchange releases
Listing prospectus for Fortaco Group Holdco Oyj’s EUR 27,5 million subsequent senior secured bonds available; listing application submitted
Fortaco Group Holdco Oyj (the “Company“) issued on 22 July 2022 senior secured bonds with a principal amount of EUR 75 million (the “Bonds“) which have since been admitted to trading on the corporate bonds list of Nasdaq Helsinki Ltd under the trading code “FORJVAIH27”. The Company has on 3 July 2023 issued subsequent bonds in an amount of EUR 27.5 million under the terms and conditions of the Bonds (the “Subsequent Bonds“). In accordance with the terms and conditions of the Bonds, the Company shall apply for the Subsequent Bonds to be listed on the corporate bonds list of Nasdaq Helsinki Ltd.
The Finnish Financial Supervisory Authority has today approved the listing prospectus of the Subsequent Bonds (the “Prospectus“). The Prospectus is available in English on the Company’s website at investors.fortacogroup.com. The summary of the Prospectus has been translated into Finnish.
The Company has today submitted an application for the Subsequent Bonds to be admitted to trading on the corporate bonds list of Nasdaq Helsinki Ltd. Trading on the Subsequent Bonds is expected to commence on or about 25 August 2023 under the same trading code “FORJVAIH27” as the Bonds.
Pareto Securities AB acted as the bookrunner in connection with the issue of the Subsequent Bonds.
For further information, please contact:
FORTACO GROUP HOLDCO OYJ
Kimmo Raunio
Senior Executive Vice President & CFO
kimmo.raunio@fortacogroup.com
+358 40 593 6854
Distribution:
Nasdaq Helsinki
Principal media
www.fortacogroup.com
Categories: Stock exchange releases
Lean Machine
How automobiles and a highly-organized personality turned Matti Kärkölä into an advocate for lean manufacturing.
Fortaco's Operational Development team is all about cultivating a zero-defects manufacturing culture where improvement is the norm. And they know that the most important variable in the manufacturing equation is people. So if you want to improve, you'd better have the right team.
The newest member of the OD team is Matti Kärkölä. Joining Andrzej Wrona, Mateusz Kożuch, Jaroslav Kocik, Dominik Stępień, and Kamil Zdeb, Matti is the sixth team member, but the first from Finland.
Suomen kieli
With several thousand employees operating across a dozen business sites, "English is of course Fortaco's main language of communication," says Kärkölä, "but it's always easier for people to be involved in making change if they can do it in their native language.” As a native Finnish speaker, part of Kärkölä’s role is to serve as OD’s chief evangelist in Finland.
He brings much more to the team than language, of course, and OD team leader Andrzej Wrona has referred to him as a natural leader. “That’s very nice to hear,” says Kärkölä, “though it’s very difficult to praise oneself.” Beginning in his student days, he’s often found himself in leadership roles. “When necessary, and when I can bring added value, I’m willing to help with things that haven’t been formally assigned to me.”
From automotive to off-highway
Once upon a time Kärkölä worked as an auto mechanic. An interest in cars led him to the automotive engineering program at Seinäjoki University of Applied Sciences. "I was interested in car tech, but the work opportunities in that area seemed to be as a car inspector, a supervisor in a car repair shop, or selling spare parts. These didn't appeal to me, but I learned that I loved manufacturing."
Kärkölä did an internship with Fortaco in 2018. He later authored a Bachelor’s thesis for Škoda Auto on production and logistics, after spending several months at a Škoda factory in the Czech Republic. “I worked with a team whose job was to track parts for production, figuring out where they are when they'll arrive. Škoda has amazing processes to solve these problems so that production is never stopped."
Since joining Fortaco full time, he's spent time at a Toyota factory in Derby, England, and has received internal training to work with steel fabrication and lean production management. Since Fortaco benchmarks itself to the automotive industry, this experience is critical. "It’s all in the name of working more like the automotive industry and less like a smithy," says Kärkölä.
Operations Expansion in Narva
Great news to our old and new customers - Fortaco Estonia expands its capacity again.
Fortaco Estonia OÜ and Systemair AS the owner of the real estate housing Well Technology OÜ have signed an agreement where Fortaco Estonia OÜ expands its operations into the Well Technology building.
The extension creates additional 8.000 m2 floor space for Narva Business Site operations, allowing us to serve the old and new customers and also create a workplace for approx. 40-50 new employees in the beginning.
The plan is also to invest approximately 7 MEUR in an advanced production specialization line with prefabrication equipment, welding robots, and CNC-machinery centres, including painting.
Fortaco is a flexible and reliable strategic partner for steel fabricated components in Europe and this extension is a great confirmation on it.
Read the whole press release here.
Szilvia Sándor’s Homecoming
When Fortaco’s Szilvia Sándor joined the Jászberény team it was a bit like coming home.
“Life is sometimes strange,” says Szilvia Sándor, Finance Manager for Fortaco Group’s Jászberény business site. Strange, because joining the company in 2020 was something of a homecoming for her: Szilvia's father worked in the same plant for almost 40 years.
“The Jászberény plant has been around since 1951,” she says, “and before the multinational era my father was a turner and machine operator in the plant. I vividly recall spending summers at the factory’s holiday house at Lake Balaton. I remember lots of happy people together, warm water, and the weather was always perfect. It isn’t true, of course, but that’s how memory works. I also spent my last semester from university in the factory and wrote my thesis about Aprítógépgyár, the name of the Jászberény business site before Fortaco.”
2020: Not quite utopia
After supervising the move of an Electrolux factory from Hungary to China – and the elimination of her own job – Szilvia landed at Fortaco, as head of the finance department, in September of 2020. The factory was familiar, but the pandemic had made it less of the utopia she remembered as a student.
2020 had been a rough year. “Orders had dropped and production was at a low level,” she says. “We were working four days per week, instead of five, during that summer. We were experiencing losses and operating in a mode to build for the future.
But 2021 was different. “2021 was a recovery period for us. Production is still increasing, we won lots of new business with both existing- and new customers. The good news was that the value of orders was already higher than we could meet.”
Growing fast
In the second half of 2021, and in 2022, everything was looking up. “We’re staffing up, increasing machine capacity, which is challenging for us,” Szilvia says. “It was very exciting, but it was also a time to be cautious: growing fast needs extra attention.”
Szilvia says growth can be complicated. “Growth is easy if you just keep your prices, but you have to make sure growth is profitable. We’re seeing increased raw material prices, high energy prices and customers queueing for products. To be profitable we have to monitor ourselves carefully, choosing customers and products prudently.” Fortunately, she says, Fortaco customers understand that the post-Corona manufacturing environment is different and complex.
Getting the ‘right price’
Since Szilvia joined Fortaco she’s been able to build her team, as well, adding a chief accountant, finance assistant, and controller. Her team’s work is critical in this quick-changing environment, and they check financial results and do cost forecasts on a monthly basis. “There’s a plan,” she says, “and then there’s reality. The nature of business is that unexpected things happen – a machine will break down, or Corona will cause fewer workers on the CNC machine.”
In 2022, her team implemented Fortaco’s Right Price Project. The project, already used in Fortaco factories, is an SAP development program which enables very clear margins both per project and per customer. “This program allows much more information to be collected at the product- and customer levels. It will ensure that we’re always offering the right price to our customers.”
The lake community
The house at Lake Balaton is still owned by Fortaco and, aside from some basic improvements, it looks very much the same as it did during Szilvia's youth. While she hasn’t visited the house, she still is very much looking forward to rebuilding what the house symbolizes to her: the Fortaco community.
“Corona and the year 2020 have done a lot to separate us physically,” she says. “People split up in order to not meet each other. We worked different days at the office so we wouldn’t interact. There was no Christmas dinner.” But the normal life was returning. “Corona was not easy from the point of view of team spirit. And I knew, we’re coming back.”