PONSSE’S INTERIM REPORT FOR 1 JANUARY – 30 JUN

Vieremä, Finland, 2017-08-08 08:00 CEST (GLOBE NEWSWIRE) -- PONSSE’S INTERIM REPORT FOR 1 JANUARY – 30 JUNE 2017 – Net sales amounted to EUR 258.7 (H1/2016 237.1) million. – Q2 net sales amounted to EUR 128.8 (Q2/2016 122.0) million. – Operating result totalled EUR 28.2 (H1/2016 26.2) million, equalling 10.9 (11.1) per cent of net sales. – Q2 operating result totalled EUR 13.9 (Q2/2016 14.1) million, equalling 10.8 (11.6) per cent of net sales. – Profit before taxes was EUR 22.6 (H1/2016 28.2) million. – Cash flow from business operations was EUR -0.7 (3.8) million. – Earnings per share were EUR 0.60 (0.82). – Equity ratio was 47.3 (45.0) per cent. – Order books stood at EUR 141.4 (166.1) million. PRESIDENT AND CEO JUHO NUMMELA: In the second quarter, demand for PONSSE forest machines remained good. Order flow was strong, and the value of the order book at the end of the period under review was EUR 141.4 (166.1) million. The Russian market in particular is extremely brisk. The market situation in the Nordic countries and in Germany and France in Central Europe is also good. During the first half of the year, the company’s net sales was EUR 258.7 (237.1) million, giving a growth in net sales of 9.1 percent. In the second quarter, the company’s net sales was EUR 128.8 (122.0) million, which is a growth in net sales of 5.5 percent compared to the reference period. Net sales for after sales services continued to increase strongly. The growth in the nets sales of after sales services is affected by the significant global growth in machine stock, especially in areas where the annual usage rate of machinery is high. Growth in net sales for used machines picked up slightly in the past quarter. International business accounted for 74.5 (77.9) percent of net sales. The operating result for the first half of the year was EUR 28.2 (26.2) million, giving an operating margin of 10.9 (11.1) percent. The operating result for the past quarter was EUR 13.9 (14.1) million, giving an operating margin of 10.8 (11.6) percent. In the second quarter, expenses grew faster than in the first quarter, which reduced profitability slightly. Cash flow was EUR 0.7 (3.8) million. Our used machine inventory is still larger than planned. Our investments proceeded according to plan. New service centres were completed in Uruguay and France, and our UK subsidiary's new facilities are expected to be ready by the end of the year. The investment for the factory's expansion is on schedule. Construction work will be completed in the autumn of 2017, after which the equipment will be installed. The added benefits of the expansion will begin to be realised as planned, in the second half of 2018. NET SALES Consolidated net sales for the period under review amounted to EUR 258.7 (237.1) million, which is 9.1 per cent more than in the comparison period. International business operations accounted for 74.5 (77.9) per cent of net sales. Net sales were regionally distributed as follows: Northern Europe 42.0 (36.2) per cent, Central and Southern Europe 19.8 (23.5) per cent, Russia and Asia 17.2 (11.8) per cent, North and South America 20.5 (26.5) per cent and other countries 0.6 (2.1) per cent. PROFIT PERFORMANCE The operating result amounted to EUR 28.2 (26.2) million. The operating result equalled 10.9 (11.1) per cent of net sales for the period under review. Consolidated return on capital employed (ROCE) stood at 21.5 (30.9) per cent. Staff costs for the period totalled EUR 40.4 (36.8) million. Other operating expenses stood at EUR 23.9 (21.9) million. The net total of financial income and expenses amounted to EUR -5.6 (1.9) million. Exchange rate gains and losses with a net effect of EUR -5.1 (2.6) million were recognised under financial items for the period. Result for the period under review totalled EUR 16.6 (22.9) million. Diluted and undiluted earnings per share (EPS) came to EUR 0.60 (0.82). STATEMENT OF FINANCIAL POSITION AND FINANCING ACTIVITIES At the end of the period under review, the total consolidated statements of financial position amounted to EUR 320.6 (284.3) million. Inventories stood at EUR 141.9 (128.9) million. Trade receivables totalled EUR 39.2 (36.1) million, while liquid assets stood at EUR 14.1 (15.1) million. Group shareholders’ equity stood at EUR 149.1 (126.2) million and parent company shareholders’ equity (FAS) at EUR 140.1 (118.7) million. The amount of interest-bearing liabilities was EUR 76.0 (70.5) million. The company has used 63 per cent of its credit facility limit. The parent company's net receivables from other Group companies stood at EUR 99.9 (88.6) million. The parent company’s receivables from subsidiaries mainly consisted of trade receivables. Consolidated net liabilities totalled EUR 61.8 (55.2) million, and the debt-equity ratio (net gearing) was 41.4 (43.8) per cent. The equity ratio stood at 47.3 (45.0) percent at the end of the period under review. Cash flow from operating activities amounted to EUR -0.7 (3.8) million. Cash flow from investment activities came to EUR -16.7 (-9.9) million. ORDER INTAKE AND ORDER BOOKS Order intake for the period totalled EUR 280.9 (252.1) million, while period-end order books were valued at EUR 141.4 (166.1) million. DISTRIBUTION NETWORK The parent company Ponsse Plc established a new subsidiary Ponsse Machines Ireland Ltd in Ireland on 13 January 2017. The subsidiaries included in the Ponsse Group are Ponsse AB, Sweden; Ponsse AS, Norway; Ponssé S.A.S., France; Ponsse UK Ltd, the United Kingdom; Ponsse Machines Ireland Ltd, Ireland, Ponsse North America, Inc., the United States; Ponsse Latin America Ltda, Brazil; Ponsse Uruguay S.A., Uruguay; OOO Ponsse, Russia; Ponsse Asia-Pacific Ltd, Hong Kong; Ponsse China Ltd, China and Epec Oy, Finland. The Group includes also the property company OOO Ocean Safety Center, Russia. Sunit Oy, Finland, is an associate in which Ponsse Plc has a holding of 34 per cent. R&D AND CAPITAL EXPENDITURE Group’s R&D expenses during the period under review totalled EUR 7.1 (6.4) million, of which EUR 2.0 (1.8) million was capitalised. Capital expenditure totalled EUR 16.8 (10.0) million. It consisted in addition to capitalised R&D expenses of investments in buildings and ordinary maintenance and replacement investments for machinery and equipment. MANAGEMENT The following persons were members of the Management Team: Juho Nummela, President and CEO, acting as the chairman; Petri Härkönen, CFO; Juha Inberg, Technology and R&D Director; Tapio Mertanen, Service Director; Paula Oksman, HR Director; Tommi Väänänen, Director of Delivery Chain Process and Jarmo Vidgrén, Deputy CEO, Sales and Marketing Director. The company management has regular management liability insurance. The area director organisation of sales is led by Jarmo Vidgrén, the Group's sales and marketing director, and Tapio Mertanen, service director. Area directors and managing directors of subsidiaries report to Jarmo Vidgrén, Ponsse Plc's sales and marketing director. Changes took place in the Ponsse sales organization during the period under review. Separate releases were issued on 20 March 2017 and 4 June 2017 on the changes. The changes concern the division of markets for which area directors and managing directors of subsidiaries are responsible, as well as changes in the responsible persons. The geographical distribution and the responsible persons are presented below: Northern Europe: Jani Liukkonen (Finland), Carl-Henrik Hammar (Sweden, Denmark), Jussi Hentunen (the Baltic countries) and Sigurd Skotte (Norway), Central and Southern Europe: Janne Vidgrén (Germany and Austria), Clément Puybaret (France), Janne Tarvainen (Spain and Portugal), Gary Glendinning (the United Kingdom, Ireland, Hungary, Romania, Slovenia, Croatia and Serbia) and Jussi Hentunen (Poland, Czech Republic and Slovakia). Russia and Asia: Jaakko Laurila (Russia and Belarus), Janne Tarvainen (Australia and South Africa) and Risto Kääriäinen (China and Japan), North and South America: Pekka Ruuskanen (the United States), Eero Lukkarinen (Canada), Marko Mattila (Brazil) and Martin Toledo (Uruguay, Chile and Argentina). PERSONNEL The Group had an average staff of 1,483 (1,412) during the period and employed 1,535 (1,464) people at period-end. SHARE PERFORMANCE The company’s registered share capital consists of 28,000,000 shares. The trading volume of Ponsse Plc shares for 1 January – 30 June 2017 totalled 1,167,941, accounting for 4.2 per cent of the total number of shares. Share turnover amounted to EUR 26.8 million, with the period’s lowest and highest share prices amounting to EUR 20.85 and EUR 25.42, respectively. At the end of the period, shares closed at EUR 23.75, and market capitalisation totalled EUR 665.0 million. At the end of the period under review, the company held 33,092 treasury shares. ANNUAL GENERAL MEETING A separate release was issued on 11 April 2017 regarding the authorizations given to the Board of Directors and other resolutions at the AGM. GOVERNANCE In its decision-making and administration, the company observes the Finnish Limited Liability Companies Act, other regulations governing publicly listed companies and the company’s Articles of Association. The company’s Board of Directors has adopted the Code of Governance that complies with the Finnish Corporate Governance Code approved by the Board of the Securities Market Association in 2015. The purpose of the code is to ensure that the company is professionally managed and that its business principles and practices are of a high ethical and professional standard. The Code of Governance is available on Ponsse’s website in the Investors section. RISK MANAGEMENT Risk management is based on the company’s values, as well as strategic and financial objectives. Risk management aims to support the achievement of the objectives specified in the company’s strategy, as well as to ensure the financial development of the company and the continuity of its business. Furthermore, risk management aims to identify, assess and monitor business-related risks which may influence the achievement of the company’s strategic and financial goals or the continuity of its business. Decisions on the necessary measures to anticipate risks and react to observed risks are made on the basis of this information. Risk management is a part of regular daily business, and it is also included in the management system. Risk management is controlled by the risk management policy approved by the Board. A risk is any event that may prevent the company from reaching its objectives or that threatens the continuity of business. On the other hand, a risk may also be a positive event, in which case the risk is treated as an opportunity. Each risk is assessed on the basis of its impact and probability. Methods of risk management include avoiding, mitigating and transferring risks. Risks can also be managed by controlling and minimising their impact. SHORT-TERM RISK MANAGEMENT The insecurity in the world economy may result in a decline in the demand for forest machines. The uncertainty may be increased by the volatility of developing countries’ foreign exchange markets. The geopolitical situation, in particular, will increase the uncertainty through financial market operations and sanctions. The parent company monitors the changes in the Group’s internal and external trade receivables and the associated risk of impairment. The key objective of the company’s financial risk management policy is to manage liquidity, interest and currency risks. The company ensures its liquidity through credit limit facilities agreed with a number of financial institutions. The effect of adverse changes in interest rates is minimised by utilising credit linked to different reference rates and by concluding interest rate swaps. The effects of currency rate fluctuations are mitigated through derivative contracts. Changes taking place in the fiscal and customs legislation in countries to which Ponsse exports may hamper the company’s export trade or its profitability. OUTLOOK FOR THE FUTURE The Group's euro-denominated operating profit is expected to be at the same level in 2017 as it was in 2016. Ponsse's updated and competitive product range and service solutions have had a significant impact on the company's growth. Our investments are directed at development of the service level and capacity of the delivery chain and spare parts logistics and development of service business network both in Finland and abroad. The expansion of the Vieremä factory is progressing as planned and the construction will be completed at the end of 2017. The investment in the factory is related to the development of safety, productivity, product quality and capacity of the Vieremä factory. The total investment to the factory is approximately EUR 32 million.  

PONSSE GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR 1,000)

 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR 1,000)

   *⁾ Change in accounting principle, more information in the note 3. CONSOLIDATED STATEMENT OF CASH FLOWS (EUR 1,000) 

   CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR 1,000) 

 SEGMENT INFORMATION (EUR 1,000)

The accounting principle concerning the provision has been changed as of 1 January 2017 so that the amount shown as guarantee provision equals the amount to which the Company is bound by the terms and conditions of the sales contract. The change has not had effect on the result.    

   FORMULAE FOR FINANCIAL INDICATORS Return on capital employed, %: Result before tax + financial expenses --------------------------------------------------------------------------------------------------------------------- Shareholder´s equity + interest-bearing financial liabilities (average during the year) * 100 Average number of employees: Average of the number of personnel at the end of each month. The calculation has been adjusted for part-time employees. Net gearing, %: Interest-bearing financial liabilities – cash and cash equivalents ----------------------------------------------------------------------------------- Shareholders’ equity * 100 Equity ratio, %: Shareholders’ equity + Non-controlling interests ------------------------------------------------------------------------ Balance sheet total - advance payments received * 100 Earnings per share: Net result for the period - Non-controlling interests ----------------------------------------------------------------------------------------------------------- Average number of shares during the accounting period, adjusted for share issues Equity per share: Shareholders’ equity --------------------------------------------------------------------------------------------- Number of shares on the balance sheet date, adjusted for share issues    

   The stock exchange release for the interim report has been prepared observing the recognition and valuation principles of IFRS standards and all of the requirements of IAS 34 have been complied with. The same accounting principles were observed for the interim report as for the annual financial statements dated 31 December 2016. The Group´s assessment of the impact of the new standards IFRS 9 “Financial Instruments”, IFRS 15 “Revenue from Contracts with Customers” and IFRS 16 “Leases” are described in the annual financial statements dated 31 December 2016. The above figures have not been audited. The above figures have been rounded and may therefore differ from those given in the official financial statements. This communication includes future-oriented statements that are based on the assumptions currently made by the company’s management and its current decisions and plans. Although the management believes that the future expectations are well founded, there is no certainty that these expectations will prove to be correct. This is why the results may significantly deviate from the assumptions included in the future-oriented statements as a result of, among other things, changes in the economy, markets, competitive conditions, legislation or currency exchange rates. Vieremä, 8 August 2017 PONSSE PLC Juho Nummela President and CEO FURTHER INFORMATION Juho Nummela, President and CEO, tel. +358 400 495 690 Petri Härkönen, CFO, tel. +358 50 409 8362 DISTRIBUTION NASDAQ OMX Helsinki Ltd Principal media www.ponsse.com Ponsse Plc is a company specialising in the sales, manufacture, servicing and technology of cut-to-length method forest machines and is driven by genuine interest in its customers and their business. Ponsse develops and manufactures sustainable and innovative harvesting solutions based on customers’ needs. The company was established by forest machine entrepreneur Einari Vidgrén in 1970, and it has been a leader in timber harvesting solutions based on the cut-to-length method ever since. Ponsse is headquartered in Vieremä, Finland. The company’s shares are quoted on the NASDAQ OMX Nordic List.