Orders received in January-June totalled EUR 66.0 (75.5) million. Orders received in the second quarter were EUR 33.2 (36.7) million. The order book on 30 June 2012 was EUR 35.7 (38.7) million. Consolidated net sales in January-June totalled EUR 69.2 (75.9) million. Second-quarter net sales were EUR 33.7 (41.6) million. EBITDA was EUR 1.3 (4.3) million, i.e. 1.8 (5.6)% of net sales. The operating result excluding non-recurring items in January-June was a loss of EUR 2.4 (0.3 profit) million, i.e. -3.5 (0.4)% of net sales. The second-quarter operating result excluding non-recurring items was a loss of EUR 1.8 (1.2 profit) million. The operating result in January-June was a loss of EUR 5.7 (0.4 profit) million, i.e. -8.3 (0.5)% of net sales. The second-quarter operating result was a loss of EUR 1.8 (1.3 profit) million. Return on capital employed (ROCE) was -8.9 (0.4)%. January-June earnings per share were EUR -0.09 (-0.09).
President & CEO Arto Metsänen:
“Owing to global economic uncertainty, market conditions remained challenging. Despite the difficult operating environment, Glaston managed to maintain its market position.
Glaston’s second quarter was unsatisfactory. Economic uncertainty was reflected in business activity. Customers’ caution was evident in delayed decision-making, with transactions being shifted to the latter part of the year, and in the postponement of orders already agreed. In larger investments, customers also had difficulties in financing the investments. In the second quarter, net sales totalled EUR 33.7 million and in January-June net sales were EUR 69.2 million. Our operating result excluding non-recurring items was a loss of EUR 2.4 million for the first six months of the year.
Despite the weak start to the year, we continue to believe that we will achieve our net sales and operating profit targets for the full year, due to our order book, competitive product range and cost-efficient operations.
Glaston expects that 2012 net sales will be at least at the 2011 level and that the operating result excluding non-recurring items will be positive.
In the second quarter of 2012 Glaston’s market slowed. In Asia, market growth continued to level off. The EMEA market remained challenging due to the euro area’s economic difficulties and the unstable political situation in the Middle East. No major changes occurred in the South American market. In North America, the glass processing machine market showed slight signs of recovery.
In the second quarter of 2012, the development of Machines segment’s market in Asia continued to level off. The cautiously positive development of the North American market continued in the second quarter. The EMEA market was relatively stable, but the uncertain economic outlook in Europe led to the postponement of purchasing decisions. No major changes occurred in the South American market.
In the second quarter of the year, the first sales of the Glaston RC200™ machine were made to the US and Mexico, and the first Glaston CHF2000™ machine was sold to the US. This continuously operating flat tempering machine has been designed particularly to meet the needs of solar energy and appliance industries. The launch of the new XtraEdge™ double edging machine continued in the second quarter of the year on a positive note. Significant sales were made in the Middle East, Italy and the UK. The new Hiyon™ edging machine was also launched at the Glass South America Fair in May, and the machine was well received by customers. After the fair, a number of sales were concluded in South America.
In January-June, the Machines segment’s net sales totalled EUR 43.6 (47.6) million. The operating result excluding non-recurring items was a loss of EUR 2.6 (1.7 loss) million.
In the second quarter, machine modernization services developed positively in the EMEA area, particularly in Russia and Turkey. In Central Europe, demand was centred especially on machine relocation services. In North America, customers were interested in upgrades that increased capacity and machine performance. In Asia, a new furnace chamber refurbishment package was well received. In South America, demand was focused on machine control system upgrades.
In the second quarter of the year, the revamped Glaston Care service agreement family, which contains four levels, was launched onto the market. The product family now covers the maintenance needs of glass processors of all sizes. The CareEasy™ contract is an easy way to begin regular and systematic maintenance. The Glaston Care™ level is a comprehensive, preventative maintenance programme. The CarePlus™ maintenance contract includes, in addition to the latter, extensive process consultation. The CareWarranty5™ service contract is a five-year warranty for new tempering machines.
The published products also include the machine relocation service GlastonMove™. Glaston is the only machine supplier to offer a complete turnkey relocation service package, which covers documentation, start-up and training. Customers can also select only parts of the service package.
The Services segment’s January-June net sales totalled EUR 15.5 (16.9) million and the operating result excluding non-recurring items was EUR 2.7 (3.8) million.
In the second quarter of 2012, the Software Solutions segment’s market was challenging. Economic uncertainty in Europe extended customers’ investment decision-making times and led to the postponement of orders. Price competition also intensified.
Cost-efficiency, energy saving and carbon footprint reduction are increasingly influencing customers’ investment decisions. In the review period, demand was directed at technical software systems, production planning systems and optimizers. Sales of maintenance contracts again developed in line with expectations during the second quarter. The Glass South America Fair, which was held in Sao Paolo, Brazil in May, showed that there are significant growth opportunities for the segment’s products in the South American market.
In the second quarter, a significant project for an integrated production planning system was agreed with the German company Glas Blessing. After a rigorous evaluation process, the customer opted for A+W Business and A+W Production solutions. A number of small and profitable service projects were also implemented in the review period. Consulting organization utilization remained high during the second quarter.
An extensive operational development programme being implemented in the segment advanced during the second quarter to the implementation stage, and had a positive impact, particularly on the sales organization and product development. The strong investment in developing new products, such as software tools and software architecture, continued.
The Software Solutions segment’s January-June net sales totalled EUR 10.7 (12.2) million. The operating result excluding non-recurring items was EUR 1.1 (1.3) million.
Glaston’s orders received during the first six months of the year totalled EUR 66.0 (75.5) million. Of orders received, the Machines segment accounted for 60%, the Software Solutions segment 15% and the Services segment 25%.
Orders received during the second quarter of the year totalled EUR 33.2 (36.7) million.
Glaston’s order book on 30 June 2012 stood at EUR 35.7 (38.7) million. Of the order book, the Machines segment accounted for EUR 30.8 million, the Services segment EUR 3.3 million and the Software Solutions segment EUR 1.6 million.
Net sales for the review period totalled EUR 69.2 (75.9) million. The Machines segment’s net sales in the first half of the year were EUR 43.6 (47.6) million, the Services segment’s net sales EUR 15.5 (16.9) million and the Software Solutions segment’s net sales EUR 10.7 (12.2) million.
April-June net sales totalled EUR 33.7 (41.6) million. The Machines segment’s net sales in the second quarter were EUR 21.7 (27.6) million, the Services segment’s net sales were EUR 7.0 (8.5) million and the Software Solutions’ net sales were EUR 5.3 (6.2) million.
The operating result excluding non-recurring items in January-June was a loss of EUR 2.4 (0.3 profit) million, i.e. -3.5 (0.4)% of net sales. The Machines segment’s operating result excluding non-recurring items in January-June was a loss of EUR 2.6 (1.7 loss) million. The Services segment’s operating result excluding non-recurring items was a profit of EUR 2.7 (3.8) million, and the Software Solutions’ operating result excluding non-recurring items was a profit of EUR 1.1 (1.3) million.
The January-June operating result was a loss of EUR 5.7 (0.4 profit) million. Non-recurring items of EUR -3.3 million were recognized in the first quarter of the year.
The second-quarter operating result excluding non-recurring items was a loss of EUR 1.8 (1.2 profit) million, i.e. -5.4 (2.9)% of net sales. The Machines segment’s operating result excluding non-recurring items in April-June was a loss of EUR 1.7 (0.2 profit) million. The Services segment’s operating result excluding non-recurring items was a profit of EUR 1.0 (2.3) million, and the Software Solutions segments’ operating result excluding non-recurring items was a profit of EUR 0.9 (0.3) million.
The second-quarter operating result was a loss of EUR 1.8 (1.3 profit) million.
Glaston’s net financial expenses were EUR -3.4 (-7.6) million. The previous year’s financial expenses were elevated by, among other things, expenses arising from the conversion of the convertible bond. Second-quarter net financial expenses were EUR -1.9 (-1.3) million.
The result for the review period was a loss of EUR 9.3 (8.7 loss) million and earnings per share were EUR -0.09 (-0.09). The result for the second quarter was a loss of EUR 4.1 (0.6 loss) million and earnings per share were EUR -0.04 (0.00).
Return on capital employed (ROCE) in January-June was -8.9 (0.4)%.
In the second quarter, production capacity in Asia was adjusted to correspond with demand through a reduction in personnel numbers. Adjustment measures, primarily personnel reductions, were also implemented in Brazil. In Italy, temporary layoffs of personnel continued.
The implementation of the Software Solutions segment’s operational development programme continued in the second quarter, with the focus being on the sales organization and product development. The number of personnel was also reduced.
At the end of the review period, the consolidated asset total was EUR 172.3 (194.0) million. The equity attributable to owners of the parent was EUR 43.9 (57.7) million, i.e. EUR 0.42 (0.55) per share. The equity ratio on 30 June 2012 was 27.8 (31.9)%.The equity ratio on 31 December 2011 was 31.1%.Net gearing was 125.9 (93.4)% (on 31 December 2011: 93.5%).
Return on equity in January-June was -38.2 (-35.7)%.
Cash flow from operating activities, before the change in working capital, was EUR 0.6 (-3.9) million in the review period.The change in working capital was EUR -3.0 (0.6) million. Cash flow from investments was EUR -3.0 (-2.3) million. Cash flow from financing activities in January-June was EUR -1.9 (10.6) million.
The Group’s loan agreements contain covenant terms and other commitments that are linked to consolidated key figures. The covenants in use are interest cover, net debt/EBITDA, cash and gross capital expenditure. During the review period, Glaston renegotiated some of the loan covenants with lenders.
Glaston’s gross capital expenditure totalled EUR 3.0 (2.5) million. In the review period, there were no significant individual investments; the biggest investments were capitalizations of product development expenditure.
In the review period, depreciation and amortization on property, plant and equipment, and on intangible assets totalled EUR 4.0 (3.8) million. A EUR 3.0 million goodwill impairment loss, directed at the Machines segment, was recognized in the first quarter.
In June, Glaston announced changes in its Executive Management Group. Roberto Quintero was appointed Senior Vice President, Machines Business Area, Pre-processing and Tools product lines, and he also became a member of Glaston’s Executive Management Group. Juha Liettyä, formerly Senior Vice President, Services, was appointed Senior Vice President, Machines Business Area, Heat Treatment product line, and Pekka Huuhka, formerly Senior Vice President, Supply Chain was appointed Senior Vice President, Services.
The appointments were effective from 1 July 2012.
On 30 June 2012, Glaston had a total of 813 (907) employees. Of the Group’s employees, 19% worked in Finland and 41% elsewhere in the EMEA area, 25% in Asia and 15% in the Americas. In the review period, the average number of employees was 837 (912).
Glaston Corporation’s paid and registered share capital on 30 June 2012 was EUR 12.7 million and the number of issued and registered shares totalled 105,588,636.The company has one series of share. At the end of June, the company held 788,582 of the company’s own shares (treasury shares), corresponding to 0.75% of the total number of issued and registered shares and votes. The counter book value of treasury shares is EUR 94,819.
Every share that the company does not hold itself entitles its owner to one vote at the Annual General Meeting. The share has no nominal value. The counter book value of each registered share is EUR 0.12.
During the first six months of the year, a total of around 11.1 million of the company’s shares were traded, i.e. around 10.6% of the total number of shares. The lowest price paid for a share was EUR 0.24 and the highest price EUR 0.74.The volume-weighted average price of shares traded during January-June was EUR 0.46.The closing price on 30 June 2012 was EUR 0.27.
On 30 June 2012, the market capitalization of the company’s shares, treasury shares excluded, was EUR 28.3 (106.9) million. The equity per share attributable to owners of the parent was EUR 0.42 (0.55).
The 2011 Annual General Meeting authorized the Board of Directors to decide on a share issue, including the right to issue new shares and/or convey treasury shares. The share issue authorization covers a maximum of 20,000,000 shares and is valid until the end of the 2013 Annual General Meeting. The authorization includes the right to decide on a share issue without payment. The Board of Directors also has the right to issue and/or convey shares in derogation of the pre-emptive subscription right of shareholders. At the end of the review period, the Board of Directors still had in respect of this authorization the authority to issue 16,907,499 shares. The Board of Directors has no other authorizations.
Glaston’s uncertainties and risks in the near future are to a large extent linked to the development of the world economy. In addition, political instability, particularly in the Middle East, will affect the development of the EMEA area. Slower economic growth may continue to result in the postponement of orders and changes in machine delivery schedules. Customers’ difficulties relating to finance arrangements may restrict customers’ investment opportunities. These might be reflected in the development of the latter part of the year.
The underlying nature of the sector is expected to remain unchanged, so development in the coming years is expected to be positive. If the recovery of the sector is delayed or slows, this will have a negative effect on Glaston’s result. The shift of the geographical focus of business activity to areas of higher economic growth will, however, dampen the financial impact of a possibly slower recovery in Western Europe and North America, despite a levelling off of the Asian and South American markets.
Due to 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 recognize an impairment loss, which, when implemented, will weaken the result and equity.
Glaston’s markets will remain challenging in the latter part of 2012. Growth in the Asian market has clearly levelled off in the early part of the year and we expect this trend to continue in the latter part of the year. In the South American market, we expect cautiously positive development. The North American market continues to show signs of recovery, and we believe this positive trend will continue. In the EMEA area, the market will continue to be challenging.
The cornerstones of Glaston’s operations remain the architectural glass segment and the solar energy market. The architectural glass segment creates the foundation for the company’s future growth. In the longer term, prospects for the solar energy segment are good. The automotive industry also offers good growth opportunities.
The prevailing uncertainty in the operating environment combined with customers’ investment caution will result in more intense competition. Despite the difficult operating conditions, we believe that the positive development in the Services and Software Solutions segments will continue during the latter part of the year. We will continue to invest heavily in these areas. In the Machines segment, market uncertainty will be reflected most strongly in larger machine orders. Due to our existing order book and to sales transferred from the early part of the year, we continue to believe that we will achieve our target for the full year. It is typical for the sector that deliveries are weighted towards the final quarter of the year.
Glaston expects 2012 net sales to be at least at the 2011 level and that the operating result excluding non-recurring items will be positive.”