Financial statement bulletin 1 january – 31 december 2023

Comments from Lars Hellberg, President & CEO

Fortaco continued its path of a consistent strategy during the period H2 under review. We further strengthened our position as a leading brand-independent strategic partner for heavy off-highway machine manufacturers in Europe and globally.

Uncertainties in the global operating environment continued to be reflected in our businesses during the period as the market continued to soften. Inflation, which has been at a high level for a long time, is now on a downward trend in Europe averaging 2.9 per cent at the end of December 2023 compared to 9.3 per cent at the end of 2022. The inflation rate was 5.9 per cent at the end of August and 3.6 per cent at the end of October. The profitability of the marine, energy, and heavy project businesses continued to be negatively impacted during the period due to low order intake and current customer strategic re-structuring. The cumulative net sales and EBITDA of the segment for full year 2023 amounted to EUR 40 million and -6 million, respectively. As announced 28 February 2024, Fortaco has started a strategic evaluation of its marine, energy, and heavy project businesses while these businesses are not considered strategic anymore. The evaluation is expected to be completed during H1 2024.

The acquisition of MauserCABS was completed as planned in the second half of the year, and the company is reported as part of Fortaco Group from 6 September 2023 onwards. MauserCABS is an Austrian company that manufactures high-quality safety cabins and operates on an international market. On 24 October 2023, Fortaco acquired the remaining part of shares and reached 100 per cent ownership of Buisard Cabins in France and the company has been reported as part of Fortaco Group since the acquisition date mentioned above.

In addition, we announced the inauguration of the Tata AutoComp manufacturing facility for state-of-the-art vehicle cabins in Pune, India. Together we will provide safe and ergonomic vehicle cabins to the Indian and international markets. Safety cabin manufacturing is made by Tata AutoComp and it is based on Fortaco’s cabin design and manufacturing technology. The product offering will include cabins for Indian agriculture, construction equipment, and other off-highway applications, and also exports in all volume categories.

Together, our premium brands of Buisard, Fortaco, MauserCABS, and Tata AutoComp offer high-quality vehicle cabins and technology development to off-highway machine manufacturers worldwide. Fortaco’s vehicle cabin business sites are located in Austria, Finland, France, Slovakia, and India. After these acquisitions, Fortaco is one of the leading players in the vehicle cabin business in the European market, having more capacity to expand its vehicle cabin offerings, technology, and manufacturing.

The ongoing project in Gliwice, Poland, with its aim to increase production capacity of steel fabricated components, is progressing as planned, though real estate works have been somewhat delayed. The capacity investment in Holic, Slovakia, is proceeding as planned. The capacity investment in Narva, Estonia, is also proceeding as planned.

Net sales grew by 7 per cent in Q4 2023, compared to the corresponding period in the previous year, driven by acquisitions of MauserCABS and Buisard, and totalled to EUR 102 (95) million. Recurring EBITDA was basically flat in Q4 2023, compared to the corresponding period in the previous year, and was EUR 5.0 (5.2) million, which included MauserCABS and Buisard since the closing. The profitability was negatively impacted by EBITDA losses generated in the marine, energy, and heavy project businesses.

During Q4 2023 we saw declining order intake driven by softening market demand. Depending on the market and customer segment, retailers and OEMs continue to adapt their warehouses after extraordinary supply chain issues in 2021/2022, as the distribution situation in the supply chain normalizes after the Covid pandemic. Along with the normalization of inventories in various industries a general weakening of customer demand has also been seen in several industry segments, due to inflation and high interest rates compared to recent years.

We see growth in customer needs in the US market, and we have won business from US customers to be delivered from our European operations. As earlier communicated, we plan to expand our business in this market in the near future. In accordance with our strategy, we plan to offer the same business portfolio in the US and Europe in the future.

The development of our internal processes continued in Q4 2023. The SAP S4/Hana project is progressing with a slight delay and the first deployment for two business sites is expected at the end of Q2 2024. In the review period, we have moved forward with our sustainability development plan to set the right targets, engagement, and actions. Sustainability is a focus of our operations, and we develop solutions together with our clients to reduce global warming, among other things.

Fortaco is seen as an attractive partner resulting in increased market share, new customers, and the introduction of new products. We have a strong new business order book to be implemented in 2024 and 2025.  We have good opportunities to win new customers and increase our market share. We have a solid and established market position, quality performance, and an excellent delivery performance that make us an interesting strategic partner for both current and new customers.

We closely follow global-, local-, and several other indices, as well as our listed customers’ quarterly reports, and keep a constant dialogue with customers to anticipate development of the market. Additionally, Fortaco is executing capacity adjustments warranted by the changing demand situation. In H2 2023, Fortaco reduced its workforce by 12 per cent. The outlook for the near future is coloured by uncertainties in the global economy. In the longer term, the outlook is good for Fortaco. Fortaco’s diversified industry exposure provides protection from cyclicality. We have a good cash position, which enables sustainable business development. I would like to thank our customers and business partners for your trust. Also, I would like to thank our employees for their dedication to the path towards achieving our common goals.