The Covid-19 pandemic continues to pose significant short-term risks and uncertainties for the markets. The spread and severity of the pandemic continue to be difficult to predict. Abrupt measures taken by various national and local governments to restrict the spread of the virus have increased the unpredictability of the demand for Neles’ products and services. The pandemic-related mobility restrictions have impacted Neles’ operations by restricting Neles’ ability to provide services at customer sites, as well as the running of manufacturing sites when lockdowns were imposed. These uncertainties are expected to continue in the fourth quarter.
In the third quarter, customers have returned to more normalized operations compared to the second quarter, but large maintenance projects are still largely postponed due to mobility restrictions and tightening cash management by customers. The situation has caused slow-down in Services and MRO-driven businesses. Also, due to earlier shutdowns, there has been some deterioration in supplier delivery times during the third quarter. Thus far, Neles has experienced no material credit losses or cancelations of orders in the order backlog.
During the second and third quarters, management took proactive measures to ensure the safety of employees, and to control costs and preserve cash flow to protect Neles’ financial position. The measures included a variety of enforced safety procedures at manufacturing sites, remote working and strict travel restrictions, cuts on external spending across the organization, as well as cost-saving and optimization activities. Increased attention was also paid to managing net working capital.
There is an increased risk that global economic growth will significantly deteriorate because of the pandemic, which, with uncertain political and trade-related developments, could affect Neles’ customer industries, reduce investment appetite and customer spending, thus weakening the demand for Neles’ products and services, as well as affecting the company’s business operations and profitability. There are also other market- and customer-related risks that could cause planned and ongoing projects to be postponed, delayed or discontinued.