According to Ponsse at the beginning of the first quarter, the forest machine market outlook was at a good level. Russia’s invasion of Ukraine led to a deterioration of the situation and subsequent closure of the large forest machine market. In other market areas, the company’s demand was good throughout the quarter, and the order flow in these areas continued to develop positively. Source: Timberbiz
Efforts to quickly find new customers for the machines pulled from the Russian market were partly successful. All machine orders for Russia were removed from the order books, which impacted the order intake by EUR 109 million.
Following the withdrawal of wood and sawn timber exported from Russia from the European market, the volumes of harvested timber are expected to grow. This will have a positive effect on the near-term demand in the European forest machine market.
Ponsse condemns the Russian invasion of Ukraine. The crisis in Ukraine has a significant impact on Ponsse’s operations and finances. All export operations for machines and spare parts to Russia and Belarus were suspended following the company’s announcement on 2 March 2022.
Ponsse has also temporarily discontinued the operations of the Russian subsidiary. Ponsse’s products subject to export sanctions include forwarders and related maintenance, training, spare parts and digital services.
Ponsse has approximately 3,000 forest machines in the scope of maintenance services in Russia, the life cycle services for which include various local contracts and obligations. The company is monitoring the situation and seeking solutions to contractual obligations. It is important that to be able to ensure the safety of the management of its subsidiary and local Ponsse’s personnel.
Russia has been the world’s largest market for CTL machines, accounting for 20% of Ponsse’s net sales in the previous financial year. Its Russian subsidiary OOO Ponsse has been the largest business branch of the Ponsse Group. It will be challenging to offset the business of such scale.
The war in Ukraine is still severely hampering the availability of parts and components. There is a shortage of semiconductors, castings, hydraulic components and transmission components in particular.
The European steel market is also in a difficult situation. Component availability issues combined with challenges related to raw materials and energy have elevated inflation to extraordinarily high levels.
This will affect Ponsse’s profitability in the coming quarters. The company was forced to raise prices for products however, with no immediate effect because its long order books. The machines that will be completed in the next few months were sold to customers almost a year ago, when the product costs were clearly more moderate.
The difficult situation with the availability of parts and inflation were clearly reflected in the company’s profitability in the last quarter with its operating profit decreased significantly.
