Half-Year Review January – June 2023

Comments from Lars Hellberg, President & CEO

In June, Fortaco successfully issued subsequent bonds in the amount of EUR 27.5 million to provide financial resources for ongoing acquisitions and strategic investments in accordance with our targets.

During the first half of year 2023, Fortaco’s successful growth continued. The growth of net sales was 22 percent in H1-2023, compared to the corresponding period in the previous year, and totaled to EUR 192 (157) million. Recurring EBITDA grew 19 per cent in H1-2023, compared to the corresponding period in the previous year, and was EUR 16.9 (14.2) million. The balance sheet key indicator of net debt versus EBITDA was on a good level at 1.9. We have good cash position, which enables sustainable business development.

We continued our acquisition path and made the strategic decision to acquire MauserCABS, an Austrian-based company, in May. In addition, Fortaco signed a letter of intent to acquire the rest of the shares Buisard Cabins, of which we already owned 35 per cent. Both transactions are expected to close in Q3-2023. In June, Fortaco successfully issued subsequent bonds in the amount of EUR 27.5 million to provide financial resources for ongoing acquisitions and strategic investments in accordance with our targets. I wish to thank our European bond investors – we are honored to have your trust.

We started several development and co-operation projects to strengthen our business and market position. The Poland Gliwice region capacity extension project is a greenfield investment that consists of a covered production area of 34,000 square meters and new equipment. With this investment, Fortaco expands its footprint for steel fabrication and vehicle cabin operations and gains additional efficiency based on a high degree of automation and strong operational excellence. Serial production is expected to start by the end of the third quarter of 2024. The earlier announced extension of the business site Holic in Slovakia, to build a high degree of automation and capacity, is progressing according to the investment plan. Fortaco Estonia OÜ and Systemair AS, the owner of the real estate housing Well Technology OÜ, signed an agreement where Fortaco Estonia expands its operations into the Well Technology building. Through this deal, Fortaco Estonia extends its capacity by 8,000 square meters of floor space. This strengthens Fortaco’s position as one of the largest, strategic partners for steel fabricated component OEMs (Original Equipment Manufacturers) in Europe. Serial manufacturing is expected to start at the beginning of 2024. Also, there are several implementations ongoing across Fortaco business sites for automation and digitalization to make tomorrow safer and better.

Fortaco is currently introducing several new global OEM customers to be part of our customer portfolio, and acquisitions are expected to bring us additional, complementary customers.

Our order book remained healthy and was EUR 72.2 million. We expect our customers’ order books to be on a good level on an annual basis. However, we foresee, depending on the market segment and customers, dealers and OEMs aligning their inventories to adjust to the normalized supply chain delivery situation. However, the market segment causing disturbance is the marine and energy market, which is negatively impacting the capacity utilization of two Fortaco business sites. We are closely monitoring global, local, and several other indexes, to be prepared for potential capacity adjustments.

We have won additional business in the defense market, and foresee growth opportunities in the short- and medium term in this segment. Additionally, Fortaco is currently introducing several new global OEM customers to be part of our customer portfolio, and acquisitions are expected to bring us additional, complementary customers. I would like to highlight Fortaco’s robustness, quality, and delivery performance, which make us an interesting strategic partner for our current and new customers.

We have seen an increased activity from our customers to start operations and localization in the United States. As previously announced, Fortaco’s strategic plan contains actions to offer the same business portfolio in the US as in Europe. The Fortaco team has explored the market and we expect the company to be present in the US in the near future. Our joint venture with Tata AutoComp in India is proceeding. The first cabin samples are manufactured for customer approval, and production is planned to start by the end of 2023. We are expecting the joint venture to accelerate the growth of the local Indian market and exports.

Steel market prices are currently declining, and the margin impact is expected to be neutral for us. In the coming period, we strive to execute further sourcing synergies based on the business growth and acquisitions together with our professional supply chain.