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Business Review January-September 2020, 6.11.2020

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business in normal circumstances are risks related to the business environment (competition and price risk, commodities risks and environmental risks), risks relating to business operations (customer, supplier, productivity, production and process risks, disruptions in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks).

With regard to the COVID-19 pandemic, Componenta is closely monitoring the development of markets and the situation of its customers and will adapt its operations accordingly. The pandemic is estimated to have a somewhat negative impact on net sales and profitability during the last quarter of the year. 

Componenta Group has already adjusted its operations by, for example, transferring payments related to taxes and pensions as permitted by the tax authority and pension companies, by temporarily laying off employees and by agreeing upon postponed payments of restructuring debts with significant creditors of Componenta Castings Oy. In June and August 2020, Componenta was also granted a total of approximately EUR 0.2 million as funding for business development in disruptive circumstances, as well as EUR 0.2 million in business cost support from the State Treasury in September 2020. In addition, Componenta signed a new revolving credit facility agreement of EUR 2.0 million on 22 April 2020. Componenta’s existing credit facilities require renewal next time at the end of November 2021. The Group finances its operations also by non-binding factoring arrangements of its accounts receivables. Termination of the factoring arrangements or not renewing the credit facilities could cause significant uncertainty to Componenta’s liquidity. However, the Group’s liquidity has improved since the end of 2019 which makes it easier to control the situation. 

Should the weak economic situation caused by the pandemic continue, it can have a significant effect on Componenta’s customers and, in turn, on Componenta in the form of increased credit loss risk. The negative effects of the COVID-19 pandemic, if prolonged, may also cause risk of impairment of company’s goodwill, inventories, accounts receivables or fixed assets. Componenta’s management has made estimates and assumptions in determining the valuation of accounts receivables[1] as well as the valuation of inventories and fixed assets. The performed assessment did not lead to significant changes in the valuation. Additionally, when preparing this quarterly business review, the management has assessed if there are any indications of impairment in goodwill and assumed that there is no need for impairment of goodwill. These estimates and assumptions involve risks and uncertainty, and therefore it is possible that as conditions change, especially if the COVID-19 situation continues, these forecasts will change which may affect the assets recoverable amount.

Regarding the ability of Componenta to continue as a going concern, the most significant risks and uncertainties are related to Componenta Corporation and Componenta Castings Oy’s ability to make payments based on the restructuring programmes. Uncertainties and other business risks related to the company’s ability to continue as a going concern have been described in detail in the financial statements published on 17 March 2020 and in the half-year financial report published on 24 July 2020.

[1] The amount of overdue accounts receivables is on normal level when considering Group’s short payment terms. The total amount of accounts receivables is decreased by factoring financing which covers part of the accounts receivables.


Half-Year Financial Report January-June 2020, 24.7.2020

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business in normal circumstances are risks related to the business environment (competition and price risk, commodities risks and environmental risks), risks related to business operations (customer, supplier, productivity, production and process risks, disruptions in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks related to arranging financing and liquidity; currency, interest and credit risks). 

Regarding the COVID-19-pandemic, Componenta is closely monitoring the development of markets and the situation of its customers and will adapt its operations accordingly. The pandemic is estimated to have a somewhat negative impact on net sales and profitability during the second half of the year. Componenta Group has already adjusted its operations by, for example, transferring payments related to taxes and pensions as permitted by the tax authority and pension companies, by temporarily laying off employees, and by agreeing upon postponement of payments of restructuring debts with significant creditors of Componenta Castings Oy. Componenta has also signed a new revolving credit facility agreement of EUR 2.0 million on 22 April 2020. In June 2020, Componenta was also granted EUR 0.1 million by Business Finland as funding for business development in disruptive circumstances. Should the weak economic situation caused by the pandemic continue, it can have significant effect on Componenta’s customers and, in turn, on Componenta in the form of increased credit loss risk. Such prolonged situation could also impact Componenta’s estimates and lead to impairment of assets. However, the Group’s liquidity has improved after the financial statements of 2019, which will help the Group to keep the situation under control.  

Regarding the ability of Componenta to continue as a going concern, the most significant risks and uncertainties are related to Componenta Corporation’s and Componenta Castings Oy’s ability to make payments based on the restructuring programmes. Uncertainties and other business risks related to the company’s ability to continue as a going concern have been described in detail in the half-year financial report tables, published 24 July 2020. 


Business Review January-March 2020, 8.5.2020

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business in normal circumstances are risks related to the business environment (competition and price risk, commodities risks and environmental risks), risks relating to business operations (customer, supplier, productivity, production and process risks, disruptions in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks).

With regard to the COVID-19 pandemic, Componenta is closely monitoring the development of markets and the situation of its customers, and will adapt its operations accordingly. The pandemic is estimated to have a slightly negative impact on net sales and profitability, at least during the second quarter. Componenta Group has already started adjustments by, for example, transferring payments related to taxes and pensions as permitted by the tax authority and pension companies, by temporarily laying off employees and by agreeing upon postponed payments of restructuring debts with significant creditors of Componenta Castings Oy. The Group’s liquidity has improved after the financial statements release, and this will help the Group to keep the situation under control. After the reporting period, Componenta has also signed a new revolving credit facility agreement of EUR 2.0 million.

Regarding the ability of Componenta to continue as a going concern, the most significant risks and uncertainties are related to Componenta Corporation and Componenta Castings Oy’s ability to make payments based on the restructuring programmes. Uncertainties and other business risks related to the company’s ability to continue as a going concern have been described in detail in the financial statements published on 17 March 2020. 


Financial Statements Release 1.1.-31.12.2019, 28.2.2020

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business operations are risks linked to the operating  environment (competitive situation, price risks, commodity risks and environmental risks), risks relating to business operations (customer, supplier, productivity, production and process risks, labour market disruptions,  contractual and product liability risks, personnel and data security risks) and financing risks (risks relating to the availability of financing and liquidity; currency, interest rate and credit risks). 

The availability of certain raw materials, such as recycled steel and pig iron, and energy at competitive prices is essentially important for the company's business. The cost risk associated with raw materials is mainly managed with price agreements according to which the prices of products are adjusted to correspond with the changes in commodity prices. An increase in raw material prices may tie more money than expected in working capital.

Componenta’s potential risks associated with the availability of working capital and liquidity may have a negative impact on the volumes of new trade in the future and may mean that the customers place smaller orders for new products replacing discontinued ones. Possible cases of losing customers due to commercial reasons may also reduce the volumes.

When assessing the ability to continue as a going concern, the most significant estimates and assumptions as well as uncertainties by the company and its management are as follows:

  • Componenta Corporation and Componenta Castings Oy will be able to make the payments in accordance with the restructuring programme. A material risk to the success of the restructuring programmes is the availability of working capital, because the main customers will support Componenta with shorter-than-normal payment terms and because the Group companies undergoing restructuring do not at the moment have access to external financing.
  • Componenta Castings Oy will be able to partly make up for the volume that has decreased due to the bankruptcy of Componenta Främmestad AB with new orders placed by existing and new customers and succeed with the adaptation measures, particularly at the Pori foundry.
     
  • When analysing cash flow and liquidity forecasts for the companies over the next 12 months, the management has estimated the companies’ future sales volumes, net sales, EBITDA margins, capital expenditure and working capital needs.

Business Review January-September 2019, 15.11.2019

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks related to the business environment (competition and price risk, commodities risks and environmental risks), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks).

Regarding the ability of Componenta to continue as a going concern, the most significant risks and uncertainties are related to Componenta Corporation and Componenta Finland Oy’s ability to make payments based on the restructuring programmes. The uncertainties related to the continuity of the company’s operations, as well as other business risks, are described in more detail in the company's financial statements of 12 April 2019.

Half-Year Financial Report January-June 2019, 2.8.2019

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks relating to the business environment (competition risk, situation and pricing risk, commodities risks and risks relating to the environment), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks). Foreign currency loans, deposits and other natural hedging relationships are used to protect against exchange rate fluctuations. Due to the restructuring proceedings, at the moment the company cannot obtain the credit facilities it would need to sign hedging derivatives.

Regarding the ability of Componenta to continue as a going concern, the main risks and factors ­causing uncertainty are related to the ability of ­Componenta Corporation and Componenta Finland to pay the restructuring debts accordingly with the payment ­programs. Componenta Främmestad AB is adjusting its operations to comply with lower deliveries and is negotiating for agreements with customers. If these downscaling activities and negotiations for agreements do not result in required profitability, the ability for Componenta Främmestad AB to continue as a going concern is jeopardized. Uncertainties and other business risks related to the company’s ability to continue as a going concern are described in the accounting principles of this half-year financial report and in the financial statements for 2018 published on 12 April 2019.

Business Review January-March 2019, 16.05.2019

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks relating to the business environment (competition risk, situational and price risk, commodities risks and risks relating to the environment), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks). Foreign currency loans, deposits and other natural hedging relationships are used to protect against exchange rate fluctuations. Due to the restructuring proceedings, at the moment the Company cannot obtain the credit facilities it would need to conclude hedging derivatives agreements.

Regarding the ability of Componenta to continue as a going concern, the most significant risks and uncertainties concern the ability of Componenta Corporation and Componenta Finland Ltd to make payments based on the restructuring programmes. Uncertainties and other business risks related to the company’s ability to continue as a going concern have been described in the financial statements published on 12 April 2019.

Financial Statements Release 1.1.-31.12.2018, 22.03.2019

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business operations include the risks linked to the operating environment (competitive situation, price risks, commodity risks and environmental risks), business risks (customer, supplier, productivity, production and process risks, labour market disruptions, contractual and product liability risks, personnel and data security risks) as well as financing risks (the risks related to the availability of financing and liquidity as well as currency, interest rate and credit risks). Exchange rate fluctuations are hedged using foreign currency loans and deposits, as well as other natural hedging relationships. Due to the restructuring procedures, the company does not currently achieve the necessary limits for hedging derivative contracts.

Essential for the Group’s business operations is the availability of certain commodities, such as recycled steel, pig iron and energy, at competitive prices. The cost risk related to raw materials is primarily managed using price agreements, on the basis of which the product prices are adjusted in line with the changes in the commodity prices. Rising raw material prices may result in more money being tied to working capital than estimated.

Componenta’s potential risks related to liquidity and access to working capital may weaken the volume of future trading and reduce the number of orders that will be placed on new products by customers in the future. Volumes may also shrink because of customers lost for commercial reasons.

From the point of view of the continuity of operations, the most significant risks and uncertainties related to the restructuring procedures are as follows:

  • Componenta Corporation and Componenta Finland Ltd will be able to make the payments in accordance with the restructuring programme that will begin in May 2019. A material risk to the success of the restructuring programmes is the availability of working capital, because the main customers will support Componenta with shorter-than-normal sales terms and because the group companies do not at the moment have access to external financing.

  • The objective of the change of Componenta Främmestad AB’s operational model is the structural reduction of committed working capital and need for working capital. Changing the operational model includes the risk that the projected sales volumes and margins will not be realised if the customers in question switch over to the competition.

  • When analysing cash flow and liquidity forecasts for the companies over the next 12 months, the management has estimated the companies’ future sales volumes, net sales, EBITDA margins, capital expenditure and working capital needs.

Business Review January-September 2018, 13.11.2018

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks relating to the business environment (competition risk, situation and pricing risk, commodities risks and risks relating to the environment), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks). Foreign currency loans, deposits and other natural hedging relationships are used to protect against exchange rate fluctuations. Due to the restructuring proceedings, at the moment the Company cannot obtain the credit facilities it would need for signing hedging derivatives. Uncertainties and other business risks related to the Company’s ability to continue as a going concern have been described in the financial statement published on 30 April 2018.

Regarding the ability of Componenta to continue as a going concern, the main risks and factors causing uncertainty are related to the ability of Componenta Corporation and Componenta Finland to pay the restructuring debts in accordance with the payment programs. A material risk regarding executing the restructuring programs is the adequacy of working capital, because the main customers support Componenta with shorter payment terms in sales and because the group companies are unable to obtain external financing at the moment. The change of operation model in Componenta Främmestad AB aims on structured reduction of invested capital and need of working capital. There is a risk that changing the operation model results in customers moving their large volume products to competitors. The realisation of this risk, however, is not expected to materially decrease the profitability of the Group after deduction of corresponding expenses.

Half-Year Financial Report January-June 2018, 8.9.2018

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks relating to the business environment (competition risk, situation and pricing risk, commodities risks and risks relating to the environment), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks). Foreign currency loans, deposits and other natural hedging relationships are used to protect against exchange rate fluctuations. Due to the restructuring proceedings, at the moment the Company cannot obtain the credit facilities it would need for signing hedging derivatives. Uncertainties and other business risks related to the Company’s ability to continue as a going concern have been described in the financial statement published on 30 April 2018. 

Regarding the ability of Componenta to continue as a going concern, the main risks and factors causing uncertainty are related to the ability of Componenta Corporation and Componenta Finland to pay the restructuring debts accordingly with the payment programs. A material risk regarding executing the restructuring programs is the adequacy of working capital, because the main customers support Componenta with shorter payment terms in sales and because the group companies are unable to obtain external financing at the moment. The change of operation model in Componenta Främmestad AB aims on structured reduction of invested capital and need of working capital.

Business Review January-March 2018, 18.05.2018

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks relating to the business environment (competition risk, situation and pricing risk, commodities risks and risks relating to the environment), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks). Foreign currency loans, deposits and other natural hedging relationships are used in order to protect from exchange rate fluctuations. Due to the restructuring proceedings, at the moment the company cannot obtain the credit facilities it would need for signing hedging derivatives. Regarding the ability of Componenta to continue as a going concern, the main risks and factors causing uncertainty are related to the ability of Componenta Corporation and Componenta Finland to pay the restructuring debts accordingly with the payment programmes. Uncertainties and other business risks related to the Company’s ability to continue as a going concern have been described in the financial statement published on 30 April 2018.

Financial Statements Release 1.1.-31.12.2017, 29.03.2018

Risks and factors causing uncertainty to business

The most significant risks to Componenta’s business are risks relating to the business environment (competition risk, situation and pricing risk, commodities risks and risks relating to the environment), risks relating to business operations (customer, supplier, productivity, production and process risks, upsets in the employment market, contract and product responsibility risks, personnel and data security risks) and financing risks (risks relating to arranging financing and liquidity; currency, interest and credit risks). Foreign currency loans, deposits and other natural hedging relationships are used in order to protect from exchange rate fluctuations. Due to the restructuring proceedings, at the moment the company cannot obtain the credit facilities it would need for signing hedging derivatives

For the Group’s business operations it is imperative that it can source certain raw materials, such as recycled steel, iron blocks and energy, at competitive prices. The cost risk associated with raw materials is primarily managed using pricing agreements, with which the prices of products are adjusted according to the prices of their raw materials. A rise in the price of raw materials can tie up more funds than estimated in working capital.

Componenta’s possible risks related to working capital and liquidity issues may adversely affect the volumes of future new sales and lessen the size of orders placed by customers for products to replace discontinued products. Volumes may be weakened by possible customer losses due to commercial reasons.

Concerning the continuity of operations, the significant estimates and assumptions made by the company and management as well as uncertainties are as follows:

  • Componenta Finland Ltd and Componenta Corporation are able to make payments stipulated in the restructuring programme. 
  • Componenta Främmestad AB will be able to pay its restructuring debts in accordance with the agreed payment schedules in July 2018. After the end of the financial year Componenta Främmestad has paid all its short-term restructuring debts, EUR 2.9 million. Furthermore, Componenta Främmestad AB has a debt of EUR 2.5 million to Componenta Dökümcülük. The debt will be paid off in six years after payment of other restructuring debts. The repayment is tied to the EBITDA of Componenta Främmestad. 
  • Componenta Wirsbo AB and Componenta Arvika AB filed for bankruptcy at the local district courts in July. In Componenta’s opinion, the failure of the restructuring proceedings for Componenta Wirsbo AB and Componenta Arvika AB is not estimated to have a significant impact on the restructuring proceedings for other Group companies or on the ability of the parent company to continue as a going concern. 
  • When analysing cash flow and liquidity forecasts for the companies over the next 12 months, the management has estimated the companies’ future sales volumes, net sales, operating margins, capital expenditure and working capital needs.