November 17th, 2022
Consolis continued to grow organically in the third quarter and increased sales by 20 per cent. The quarter closes with a strong and high quality order book and shows solid margin resilience in most markets. Consolis low carbon product line, the Green Spine Line®, continues to attract interest and drive higher margin sales.
Resilience in turbulent times
In the third quarter, Consolis continued to show resilience despite macroeconomic turbulence. Net sales in the quarter amounted to € 317 million. Adjusted EBITDA amounted to € 17.8 million, equal to an adjusted EBITDA-margin of 5.6 percent. Free cash flow amounted to € -3,9 million. Order intake came in at € 223 million, equaling a book-to-bill ratio of 0.7. Order book remained at a strong level of € 828 million.
As a group, we have faced the recent macroeconomic turbulence head on, building a better order backlog with significantly increased index protection in customer contracts. Order book margins are in line with historical margins, and we expect the improved terms to improve our ability to deliver these margins. We have also rebuilt our supply chain in a more robust way. Operating in 17 geographical markets with a broad portfolio and order backlog of non-residential projects ranging from schools, parking garages, hospitals and infrastructure projects also continues to give us resilience as a group against single market volatility. In a majority of our markets, this resilience is also clearly visible in our financials. Looking at the last five years, and excluding the current challenges in the West Nordic region, Consolis EBITDA has traveled in a band between 75 to 100 million euros. Given the market turbulence over the last three years, this is a true sign of resilience of our business model.
In addition to the improvements that we see in our order book for West Nordic in terms of both absolute size, margins and commercial terms that gives us good visibility in 2023, we also see the need to further improve our competitiveness and prepare for a potential prolonged period of lower business activity that could affect H2 2023 in particular. We intend, pursuant to consultations with relevant unions, to launch a restructuring program addressing West Nordic where we intend to book a one-time restructuring charge of € 6-7 million in Q4, and with estimated cost reduction of € 13-15 million impacting 2023 and a going full year effect of € 17-19 million. The majority of the charge relates to personnel reductions across our West Nordic business, but also write-down of loss making projects and cost of transformation. We will provide further details in the Q4 report.
Taking the lead in low carbon concrete as a competitive advantage
In the third quarter, we have continued to build structure and skills that allow us use low-CO2 prefabricated concrete as a competitive advantage across markets. We have seen strong customer interest for the product line in both Finland and Spain, including sales with a higher than average margin profile. We believe this to be solid evidence of a clear willingness among our most advanced customers to pay for competence in material technology. We have also continued to invest in R&D, with a focus on material technology and the next generation of low CO2 concrete.
Moving towards 2023 with confidence – precast concrete set for increased relative competitiveness
In the third quarter, we have seen a continued strong tendering activity across markets. This has allowed us to be more selective when choosing which orders to take, resulting in lower order intake volumes but higher quality in our € 828 million order backlog.
In July, we entered into a new term facility in a principal amount of € 30 million, thus securing additional liquidity headroom for the Group. Our liquidity position today allows us to capture interesting business opportunities across markets also in tougher market conditions.
Looking ahead into 2023 and beyond, we see opportunities in this challenging environment and believe a continued cost inflation and rising labor costs will increase the relative competitiveness of precast concrete. Precast benefits from significant advantages over in-situ concrete and other construction materials, including quicker build times, lower labor intensity and raw material requirements, as well as increased sustainability performance.
Consolis’ business model and part of the construction value chain is holding up well in turbulent times and we are set to emerge stronger and more competitive with our ambition set on delivering carbon free concrete to the market.
Highlights of the third quarter 2022:
- Net sales from continued operations amounted to € 317 million (265), corresponding to 20 percent sales growth. Currency effects had a negative impact of 1.0 percent.
- Operating profit (EBIT) amounted to € 6.3 million (6.3).
- Adjusted EBITDA amounted to € 17.8 million (19.5), corresponding to a margin of 5.6 percent (7.3). Exchange rates had a negative impact of 0.8 percent.
- Order book decreased 9 percent to € 828 million, compared to € 914 million at the beginning of the quarter. Order intake in the quarter totaled € 223 million, and the book to bill ratio corresponded to 0.7.
- Free cash flow from continued operations in the quarter amounted to € -3.9 million (-20.1), primarily explained by working capital seasonality and the stabilization of our level of inventories. LTM cash conversion was 46 percent, 16 percent above Q2 2022.
- On July 21, 2022, Consolis entered into a new term facility by certain of its subsidiaries, in a principal amount of € 30 million, with certain unaffiliated third-party lenders, thus securing additional liquidity headroom for the Group. The facility was fully drawn at September 20, 2022. The new facility matures on May 31st 2025 (if not repaid earlier), and accrues interest at a floating rate based on EURIBOR, with a 700 basis points margin.
Consolis will host a presentation with the possibility to attend through a telephone conference at 10.00 CET today.
The presentation will be held in English and also available as a recorded webcast on www.consolis.com, and the direct link:
To ensure that you are connected to the conference call, please use the following link at least five minutes before the start of the conference call to register your attendance.
The quarterly earnings report and associated presentation will be available on www.consolis.com