Acting CEO Morten Kristiansen says that the decline in profit is mainly due to the accounts being charged with price adjustments on inventories in the Wood and Timber divisions, which operate
sawmills and planing mills (mechanical wood) in Norway and Sweden.
“Additionally, write-downs were implemented for Moelven Elektro related to the conclusion of projects. The total write-down in the electrical operations and the effect of price adjustments in mechanical wood has had a negative impact on profits of 26 million,” says Kristiansen.
Much to be pleased about
Despite the drop in revenue, Kristiansen sees much to be pleased about.
“During the winter, activity is ordinarily lower, particularly in the Wood division. In comparison to the same period the year before, Q1 2014 was a quarter where the combination of market conditions, raw material prices and finished product prices had a positive impact on the Group's earnings. This year we have seen the opposite situation. In total, in operating terms the first quarter is on a par with the corresponding period the previous year,” Kristiansen says.
If the CEO was to highlight success stories, he is of the opinion that the plywood company Moelven Vänerply AB is a good example.
“Moelven Vänerply – where significant investments were made in 2013 and 2014 – improved its operating profit by around 4.5 million compared to Q1 2014,” Kristiansen says.
Increasing revenue
For the Group, operating revenue increased in Q1 by 2.5% to NOK 2,316 million (2,260). The Timber division saw approximately the same turnover as for the same period last year. The Wood division had a decline of eight per cent, which was due to an abnormally high product deliveries in the same period last year.
“The Building Systems division experienced a welcome growth in operating revenue of 105 million. The companies in the division retain a healthy and well-composed order backlog – particularly in the housing segment,” Kristiansen says.
Some weaker units
Despite the fact that the result is positive, taking into consideration the season and write-downs, Kristiansen says that there are still units with poor results that also have a negative impact on the Group's profits.
“In the plan of action that has been prepared to reach the Group's target profitability, significant resources have been allocated to improvement work in these units. This work will continue at full steam throughout 2015,” Kristiansen says.
In terms of results across the divisions in Moelven, both Timber and Wood have provided a weaker operating result, while Building Systems has performed somewhat better.
Outlook
There is still good demand for sawn timber in many markets, while the supply has also increased after a period of high production levels, especially for spruce products.
Continued weak growth for housing construction is expected in Norway. In Sweden, housing construction is increasing, but from a low level. The main portion of the Group's deliveries is made to the renovation, reconstruction and extension market, which are more stable than the new build market.
At the start of the second quarter the Building Systems division has a better and more diversified order backlog than at the same time last year. The divisions' companies have adapted their capacity and cost structure to the prevailing market conditions.
Operating conditions have been good in the winter. The supply of sawn timber has been good. A continued high level of activity is expected in the forests toward the summer.
The Board expects that the Group's underlying operations and earnings will improve further in 2015.
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