Latest results

During the third quarter, the market continued to be mixed. As during the first half, we were successful in winning important Pulp and Paper projects. As already anticipated in our half-year review, the Oil and Gas project situation slowed during the third quarter compared with the high level of activity in the first half of the year. During the third quarter, our Services and MRO-driven businesses saw increasing market activity in many market areas compared with the second quarter, but continued to be negatively impacted by postponements in customers’ planned large maintenance shutdowns, mobility restrictions and lockdowns, as well as customers’ tightening cash management actions. The increased market activity in Services and MRO-driven businesses has therefore yet to materialize in orders.

Our sales grew 2% sequentially from the second to the third quarter, despite negative impact from exchange rates. Thanks to the continued cost saving actions that we had already initiated during the second quarter, we were able to maintain solid profitability during the reporting period, despite the low sales volume. Cost savings included temporary measures such as reduced working time, which we plan to mostly end during the fourth quarter. In the second quarter, we also undertook some permanent cost-saving actions, mainly in the US and Finland, from which we already started to see savings during the third quarter. We also increasingly focused on managing our net working capital and cash flows and achieved a reduction in our inventory levels.

During the third quarter, there has been considerable debate about, and public interest in the ownership situation of Neles Oyj. In the midst of this, management and employees have been focusing on daily business, serving customers and executing the growth strategy Neles’ Board approved on July 1.

We expect the market activity in Pulp and Paper projects to continue at a good level.

Market activity in Oil and Gas projects is expected to continue to decline from the good level in the first half of the year, due to general economic concerns. Postponements and global uncertainties are reducing visibility in the Oil and Gas project business.

Market activity for Services and the customer Maintenance, Repair and Operations-driven (MRO) businesses is expected to gradually improve from the suppressed levels during the reporting period, because customers’ operations are resuming to a more normal level. Large shutdowns are still being postponed due to the Covid-19 pandemic situation and customers’ tightening cash management actions.

The ongoing Covid-19 pandemic continues to create uncertainties and risks of abrupt changes in all markets.

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.