Raute - Uncertainty continues to run high
Uncertainty is high as many regions grapple with the crisis
Raute posted EUR 24m in Q2 revenue vs our EUR 29m estimate. Services revenue was as expected (EUR 10m) while project deliveries were EUR 5m below our EUR 19m expectation. Russian revenue, at EUR 12m, was EUR 7m lower than we estimated, and the low figure is explained by order book timing with regards to the large EUR 58m Russian order to be delivered mostly this year. Order book timing as well as the pandemic (which complicated installations and services) meant profitability was weak also in Q2 as the company recorded EBIT at EUR -1.0m vs our EUR 1.3m estimate. Order intake, at EUR 13m, was also lower than we expected (EUR 19m) and was due to softness in both machinery and services orders. Order intake declined by half y/y as the pandemic postponed project decisions. Russian orders were lower in Q2 than we expected (EUR 3m vs our EUR 9m estimate). Although no major projects were initiated during the quarter Raute says cancellations are unlikely and many investment decisions could receive green light when the situation stabilizes.
We make minor estimate changes
According to Raute activity levels are still good in Russia and China, and customers are planning some big strategic investment projects but for now there’s no way to reliably estimate a time frame during which the leads might translate to actual orders for Raute. We expect Q2 to prove the slowest quarter for Raute in terms of order intake, but there’s significant uncertainty as to how rapidly order intake might improve in H2.
Long-term strategy intact yet short-term outlook hazy
We continue to view Raute’s prospects beyond this year’s weak results. A significant pick up in order activity would likely follow the operating environment’s inevitable normalization, but this might take some time to be reflected in the order book. We view Raute well positioned to capture large plywood and LVL machinery orders in the coming years once the sector is ready to commit itself to new capacity investments. However, in the current uncertain environment we see the overall valuation picture neutral. Our new TP is EUR 20 (21), rating HOLD (BUY).