Greetings to Inderes TV viewers. Norrhydro Group reported its Q3 earnings release today, and I have the company's CEO Yrjö Trög in an interview. Welcome to the interview, Yrjö.

Good morning and thank you.

Indeed, Norrhydro. Sales increased in Q3 and EBITDA even doubled year on year. Where did this development stem from, and particularly by what means have you improved margin so significantly?

One thing is of course clear, that our operating leverage is such that when sales increase, it boosts our EBITDA. Because we still have quite a lot of fixed costs that do not increase as sales grow. So that has a big impact. And the second thing is also that we have worked on the productivity side, meaning we have achieved productivity and decreased production costs, and otherwise also achieved some savings on the cost side overall. So purposeful work has been done, and they gradually deliver earnings all the time. Then.

Yeah. Do you expect these cost-side measures to support that margin in the coming quarters as well? Or was there something exceptional in this quarter? For example, regarding the mix of sales or the timing of some costs?

Well, yes, absolutely. I mean yes, compared to Q2 of course. Those went a bit the other way, so there was a bit of a bounce back then perhaps to some extent. The sales mix also affected that improvement in margin, but particularly these measures and the sales growth then.

Yeah, there has been a lot of talk about the acceleration of cost inflation. Not perhaps so much related to you, but generally due to these geopolitical reasons. But is it? Has it significantly affected your own costs yet? And do you have a perspective on this going forward?

Well yes, things are quiet right now. Q2 already came. So back when this Iran war started, there were quite a few increases in raw materials and other things. And of course we have then passed those on to prices. Increases to prices as well. Right now the situation is calm, and the message from a lot of our supplier base is that at least for the rest of the year there are no cost pressures, meaning the ones that have happened, those costs have risen. Of course if this situation continues longer, it might be that then some kind of cost impacts will start coming from there for next year.

But you have nevertheless managed to maintain that margin there despite these.

Yes, exactly.

Yeah yeah. Well then, looking at the demand side. Could you elaborate a bit on this recent development and how? How has demand developed since the publication of that Q2 results report?

Well yes. That Q2, we talked about that then. There were quite a lot of inventory decreases among customers, and everyone was afraid of a recession. And now we have returned to a normal situation. So in that regard, the situation has naturally normalized. But it is still visible. Meaning in such a way that there is a lot of uncertainty, and particularly in certain sectors that uncertainty is very visible, and sales cycles have become very short.

So for example, even right now we are still selling November, whereas in a normal situation November would usually already be fully sold in. And December is also far along. But but. Customers are also ordering with a quite short cycle now. Actually they find from our contracts. We go utilizing almost the minimum times. And this is the situation that causes the cycles to be quite short in many segments.

Yeah, that was an interesting point and probably speaks to the uncertainty on the customers' side. The forestry and construction sectors have been subdued in recent years, but what does this situation look like now? Is there any recovery in sight?

Regarding construction, one can say that perhaps the bottom has been reached and we have come up a little, but the construction sector is still. It is still at a very low level in terms of volumes, but the worst trough has been passed. On the forestry side there are still a lot of uncertainties, which affects the contracting side, and partly related to construction is also that if construction does not take off, there is less need for wood for the sawmills and so on. So indeed in the forestry sector that uncertainty seems to continue.

Yes, and indeed you mentioned those short ordering cycles, and you highlighted in the report as well that these customer-specific order outlooks can change rapidly. Do you see this causing some kind of uncertainty regarding your guicance for this year?

Well well, if it affects, it affects sales of course. It could be then, if it happens that there is. Very significant. A decline in orders still for the year-end compared to what the estimates are, but regarding margin we are at least currently in a quite strong position regarding that.

Yeah, well then. The balance sheet position has overall moved in a good direction and net debt has decreased by 1.8 million euros over the past year. From that, perhaps something else I would also like to bring up is that the liquidity in terms of cash and facilities is quite limited. Do you have, so to speak, sufficient flexibilities available regarding liquidity, should you need, for example, more working capital?

Well yes, of course that was perhaps just at the end of September the situation. Of course we had quite a lot of goods in inventory for the autumn, so that will be released from there during this year-end. Another thing we have is that our trade receivables have grown. We changed partner on that side last spring, as we sell these receivables quite a lot, so they have a different way of operating and that has increased our trade receivables. So the cash circulation has slowed down towards us. That partly affects.

So now of course we are thinking and looking at solutions to get back to the same cash circulation as before, and that also affects. It will then ease that situation.

Yes, regarding NorrDigi, you also mentioned in the report that you have prototype orders on the electric cylinder side from the defense sector, as well as ongoing negotiations for larger orders. Do you expect NorrDigi to generate significant revenue for the company, for instance, during next year?

Well, yes, in my view it will certainly generate more revenue than this year, so it is growing. That part of the business. However, it will not yet make up a significant share of the overall business, as those projects always progress slowly there too. But then once things move into volume and series production, more and more orders will keep coming in. So. But it is definitely growing, and a special focus is being put on it right now, and there are a lot of good negotiations underway.

Right, but overall it sounds like you have managed to navigate this turbulent market quite well, and you are heading towards your guidance. Thank you, Yrjö, for this interview, and let's talk again next quarter.

All right, thank you and have a great autumn!