Proventia Group Corporation: Business Review January-September 2024

President and CEO Jari Lotvonen:

Net sales for the third quarter of 2024 decreased by 5.7% to EUR 10.7 (11.3) million. The profit for the period fell significantly from the comparative period to EUR -0.8 (0.4) million. The weak development in net sales and profitability was especially due to one of our customers in the Test Solutions business area filing for bankruptcy, which led to the discontinuation of two ongoing projects to this customer.

In the third quarter of the year, net sales of the Off-Road Machinery Systems and Components business were higher than in the comparison period, amounting to EUR 9.0 (8.8) million. In the OEM customer segment, the growth in delivery volumes has been slower than expected due to weak demand for off-road machines. Particularly agricultural machinery manufacturers have reduced their production this year, which has been reflected in the delivery volumes of Proventia’s emission control systems and thermal insulation components. In the autumn, we started the serial production of two new emission control products at the Czech factory, and the deliveries of these new products are offsetting the weakened demand caused by the challenging market situation for off-road machines.

During 2024, we have concentrated the production of thermal insulation components to our Czech factory. This will improve our competitiveness in emission control and thermal component products in the future. The construction of the 2,000 m² expansion at our Czech plant started during the third quarter. The plant expansion should be completed earlier than expected, during the first half of 2025.

In battery operations, we announced our cooperation with the Norwegian battery cell manufacturer Morrow Batteries during the third quarter. The goal of the partnership is to develop a wholly European lithium-iron-phosphate (LFP) battery system for heavy off-road machine applications. The expanding battery product range provides growth opportunities for battery operations not only in the off-road machinery industry but also in other industrial sectors that have similar electrification demands to off-road machines.

Net sales for the Test Solutions business were EUR 1.7 (2.6) million in the third quarter of the year.  Net sales decreased by 33.1% compared to the corresponding period of the previous year. EVA product family projects, which were still largely in the design and preparation phase during the first half of the year, moved into production in the summer. However, three of these projects were halted at the end of the review period as  battery manufacturer customers belonging to the same group delivered us  notices of suspension of work. After the review period, one of these customers informed us that it had filed for bankruptcy. The continuation of these projects depends, for one project, on the customer’s plan and, for the other two projects, on the outcomes of  the bankruptcy  and discussions with alternative customers. According to our assessment, it is not likely that the projects will continue during the rest of 2024. The suspended projects are estimated to amount to EUR 1.0 million loss, which has been recognized in the third quarter. We have reorganized resources in the Test Solutions business and brought forward the start of customer projects scheduled for 2025. Despite these actions, the  Test Solutions business area’s net sales are estimated to remain low, and the result is estimated to be negative in the last quarter.

During the third quarter, Sanna Raatikainen, general counsel, and Jari Granath, product manager for batteries, were appointed to our Management Team.

We are continuously working on securing significant new customers, and there is strong interest from our customers in our products. Therefore, we remain very confident about our growth prospects for the coming years.

Key figures

EUR 1,000	7-9/2024	7-9/2023	1-9/2024	1-9/2023	1-12/2023
Net sales	10,690	11,338	34,970	39,038	54,296
Change in net sales, %	-5.7%	- *	-10.4%	- *	5.4%
Operating profit	-784	808	942	3,409	6,134
Operating profit, %	-7.3%	1.5%	2.7%	8.7%	11.3%
Earnings per share (EPS), undiluted, EUR	-0.05	0.02	0.03	0.15	0.29
Earnings per share (EPS), diluted, EUR	-0.04	0.02	0.03	0.14	0.27
Return on equity (ROE), %	11.2%	- *	11.2%	- *	20.9%
Equity ratio, %	62.4%	60.5%	62.4%	60.5%	62.9%
Return on capital employed (ROCE), %	14.4%	- *	14.4%	- *	22.7%
Interest-bearing liabilities	3,706	5,341	3,706	5,341	4,939
Net debt	-6,058	-1,228	-6,058	-1,228	-6,394
Investments	970	392	2,435	2,165	3,321

* The key figure is not available for the periods 1-9/2023 or 7-9/2023, as IFRS comparative data has not been prepared for the corresponding periods of the financial year 2022.

Outlook

Net sales and operating profit for 2024 are estimated to be lower than in 2023. In 2023, net sales were EUR 54.3 million, and the operating profit rate was 11.3%.