Huh, that was a strong report, accompanied by the release of loan loss provisions. Even adjusted, it’s a powerful performance. If the rest of the year continues at the same pace, this is what you call “actually cheap.” Time for some coffee!
Edit: Here’s a link to the review: https://www.inderes.fi/fi/tiedotteet/kesla-oyj-puolivuosikatsaus-382021
OHO!
Moro System & Co., Kesla hardly releases any information, not even about the distribution of orders or revenue by industry, let alone individual customers. My understanding is that the expansion into non-forest customer segments in Valtra’s distribution network, i.e., defense forces, property maintenance, and municipal engineering, is progressing well, but the volumes are still small in relation to the overall picture. The order received from the defense forces is, according to my very rough estimate, at most a few hundred thousand euros. Regards, Eki
€6.2 and deduct, the share price really got ahead of itself for a small earnings beat.
Quite promising prospects:
It’s quiet in the Kesla (Kesla) thread, but hopefully it will pick up soon…
Thanks @Erkki_Vesola for the Q3 comment.
Kesla’s reports are unfortunately very limited. Depreciation, financing costs, working capital or changes to it, etc., have not been unnecessarily included in the business reviews… In every report, the operating cash flow is of a completely different magnitude than the operating profit. Could you elaborate a bit on what is actually happening behind the figures presented by Kesla?
Hi Ummon and others, Kesla’s Q1 and Q3 reports are not actual earnings reports but business reviews that only present key figures and comment on the situation and outlook. Q2 and Q4 reports, or more accurately H1 and H2 reports, are more detailed. In previous years, Kesla only published these semi-annual reports, so the direction of disclosures is correct. Another question concerned operational cash flow, which is better compared to EBITDA (earnings before interest, taxes, depreciation, and amortization) than to operating profit, so that non-cash depreciation does not obscure the interpretation. It is true that in the period 2020-H1’21, Kesla’s operational cash flow was even greater than EBITDA, but this was mostly due to the market disruption caused by the coronavirus, which allowed the company to free up a significant amount of net working capital and thus improve cash flow. In other words, inventories have been smaller than before, and the (usually positive) difference between accounts receivable and accounts payable has also been smaller as the company has not been able to deliver/invoice. Kesla’s cumulative EBITDA over the last 10 years (EUR 23.8 million) is indeed greater than the operational cash flow (EUR 20.1 million), so in this respect, the situation is normal, and this will probably continue to be the case. Regards, Eki
Based on the interpretation of sanction regulations by a financial institution, money transfers related to Kesla’s significant Russian customer have been suspended by said financial institution.
Kesla has initiated an EU-level authority investigation related to the interpretation of sanction regulations, the response to which is expected in the near future.
As a precautionary measure, deliveries and manufacturing of orders for the customer have been suspended for now. Otherwise, Kesla’s production operates normally. The suspension affects an order backlog of approximately 10 million euros. The freed-up capacity has been allocated to other customer orders.
https://www.inderes.fi/fi/tiedotteet/kesla-oyj-tilinpaatostiedote-822022
A strong recovery from the 2020 COVID year, but risks have increased in the eastern neighbor. “Russia grew to be the group’s largest market in received orders during the financial period, surpassing the domestic market.”
This thread was last written in eight months ago. 
Below are Eki’s comments on Kesla’s Q3 Business Review, which will be published on Monday, October 24.
Kesla’s equipment platform machine market has remained satisfactory in the company’s key areas, and a strong order book carries the company into next year. We expect the company to reiterate its old 2022 guidance. The stock’s valuation is high with our current forecasts. Our Reduce recommendation and target price of 4.50 euros remain unchanged before the report.
Below are Eki’s comments on the profit warning: 
Kesla issued a negative profit warning for 2022 yesterday at 7:30 p.m., the interpretation of which remained quite open. The reasons for the weaker-than-expected development are mainly found in the supply chain. Since the Q3 business review will be published already on Monday, October 24th, we will not touch our forecasts at this stage but will update our view on the company and the share in connection with the said review.
Here is Salkunrakentaja’s (Portfolio Builder) article on this controversial profit warning.
”The war launched by Russia strongly reflected in steel prices and the availability of purchased components. The rapid change in our production program created bottlenecks in our supplier base, from which recovery lasted well into June. The aforementioned factors slowed down our production, weakened the group’s result, and rapidly increased the value of inventories and, consequently, the need for working capital financing,” Saastamoinen stated.
Here is Eki’s new Kesla company report. 
Kesla’s Q3 figures fell short of your expectations in terms of orders, revenue, and profitability. Profitability drivers are gradually correcting themselves, but at the same time, the demand outlook for 2023 has darkened.
https://www.inderes.fi/fi/system/files/company-reports/yhtiopaivitys_kesla_241022_check.pdf
Here’s a video from a month ago, from the “Welcome to Our Home!” days, showcasing the Joensuu factory. It’s a clip filmed by a YouTuber, but they ask good questions and you get to see a little bit of the factory from the inside. Worth watching if you’re interested in the company!
Thanks for the tip. Nice clip. The only minus was the poor audio quality of the video. It was hard to make out what was being said over the roaring machines. Otherwise, it was informative.
I own a tiny, tiny slice. In the hundreds. A sympathetic domestic basic industry company. It suffered badly when Putin started acting crazy next door and the white-Z followed suit. Otherwise, my balance would probably be in the green too. Nice to own (a negligible slice). It has done well so far, and I have a strong belief that it will do well in the future too. That’s why I’m holding and not selling, even though I’m down -15%.
The factory premises looked neat and proper. It seems that the production lines are impressive hi-tech, and everything seems to be in order. The presenter answered questions like clockwork. I don’t understand anything about machinery, but I watched it with a layman’s eyes. I wish all the best to this company, whether I own it or not.
This time I wrote about Kesla. This will not be an analytical text, and this industry (too) is difficult for me, so there will be no amazing independent conclusions. I googled for information about the company, read this thread, and naturally, I have extensively reviewed Inderes’ materials for this company, read other websites, and, of course, the company’s own homepage.
Kesla is a machinery engineering group over sixty years old that develops, manufactures, and markets forest technology. The company’s products include truck and industrial cranes, timber harvesting equipment, and tractor attachments.
Kesla is a modern forest technology and material handling operator that produces contemporary and sustainable products, aiming for long-term customer relationships. Products are often made to fit the specific needs of each customer; Kesla may not compete on price, but it certainly does on quality and usability.
Russia’s and Belarus’s share of the company’s turnover was about 17 percent before the war, so this is Kesla’s biggest concern. The events in Russia ultimately came as a surprise, so Kesla didn’t really have time to prepare for them, which has been very strongly reflected in the figures and other performance. The company canceled orders worth 22 million euros concerning Russia, and the war also brought inflation and challenges in component availability.
Speaking of problems, cyclicity is a challenge, but it’s part of the business. The long-term outlook for the industry is hazy, but on the other hand, over the years, Kesla has performed reasonably well, even considering the cycles. However, the cycles of the company’s different sectors may run at slightly different paces, which somewhat balances the situation.
The third major challenge is margin issues and cost structure. The cost structure is rather rigid, and as far as I understand, there isn’t much flexibility, which combined with delightful inflation, is not an ideal situation. However, Kesla has the NOSTE automation project, which aims to make investments and developments that would improve the utilization of automation and digitalization in various areas, such as business processes, alleviate capacity and productivity bottlenecks, etc.
What fascinates me about Kesla is its innovativeness, high-quality products, and customer-friendliness. Also, long customer relationships, a strong market position, widely diversified customer base, and opportunities for acquisitions make me somewhat interested in this company that just issued a negative profit warning. The company is also working to address problems, for example, through the NOSTE project.
Russia became a big minus for the company, but on the other hand, there is potential to expand more strongly in Latin America and Southeast Asia, where the importance of these regions is growing in this industry. Through partners and various distributors, Kesla can gain new opportunities, and Kesla’s development-oriented approach may bring it additional revenue streams, for example, through lifecycle services. Could this become a very significant area for Kesla over the years?
Kesla faces really big challenges and various issues over which it ultimately has quite limited control. I don’t know if I can say this, but I will anyway; Kesla seems like a good company in itself, despite current challenges and a recent negative profit warning. With the help of partners and acquisitions, it has opportunities to grow; the company takes a long-term view and is development-oriented, the NOSTE project should increase profitability, and if we forget about Russia, there are long-term growth drivers in the market.
I omitted writing about things I didn’t fully grasp, so my writing is quite incomplete in many respects. I may also have misunderstood texts from Kesla, Inderes, or others, and I have drawn independent conclusions, which I would view with great reservation.
The Kesla thread has been very quiet, and the industry or the company is not very appealing to the masses, which is why I wanted to research this company, hoping that at some point I might find a good buying opportunity before others, if/when the company establishes a good and long upward trend. 
Kesla gets a new CEO.
Simo Saastamoinen, who has served as Kesla’s CEO since 2015, is stepping down today.
Analyst’s comment:
“Kesla’s financial development in recent years has been sluggish and below the company’s own targets, so a swift change in CEO is not a huge surprise. In our assessment, Marko Pekkola, who has been appointed CEO, has a strong resume from large companies, which makes the new CEO’s profile seem suitable for Kesla.”
Pekkola previously served as Vice President of Oil Products at Neste.
→ https://www.neste.com/fi/nesteen-öljytuotteiden-tuotantojohtajaksi-marko-pekkola
Before that, he was Production Director for the Consumer Board division at Stora Enso. Earlier, he was Plant Manager at Stora’s Imatra mills and M-Real’s Simpele and Joutseno mills.
→ Uutisvuoksi: Marko Pekkola Stora Enson Imatran tehtaiden johtajaksi | Tekniikka&Talous
