So you did mention it, I somehow missed that. But my interpretation of the situation is different.
I.e., if the change in inventory had been at the same level as a year ago, would revenue and especially operating profit have been weaker?
The change in inventories is particularly related to purchases made (materials and services). If the change in inventory had been smaller, then purchases would likely also have been smaller. And the profit would have increased, just as it did now. An increased inventory balance most likely indicates a positive growth outlook, as the company prepares for future deliveries by purchasing more materials.
Now we are only talking about the inventory of finished and work-in-progress products, not materials, according to the company.
In any case, if (in a theoretical situation) the change in inventory value were replaced with the same value as a year ago, the operating profit would drop sharply into the red.
Isnât it generally a bit questionable to include the change in inventory in the income statement?
Larger companies deduct the change in inventory directly from material costs, so that it is not even shown as a separate line item in the income statement. If a similar change in presentation were made to Norrhydroâs income statement, then material and service costs would decrease for January-September 2025 and would increase for the comparison period. In this case, it would be seen that the costs attributable to the period grew significantly less than revenue.
Products are made from materials, so yes, they are also closely related to finished and work-in-progress products. The change in inventory is a crucial factor in evaluating the income statement.
A startup company starts from scratch. The progress of the period is monitored in real-time, day by day.
Day 1: Company is established
Revenue 0
Change in inventory 0
Materials 0
Other expenses 0
Operating profit 0
Cash 0
Inventory 0
Equity 0
Liabilities 0
Day 2: A metal bar is bought on credit for a hundred
Revenue 0
Change in inventory 100
Materials -100
Other expenses 0
Operating profit 0
Cash 0
Inventory 100
Equity 0
Liabilities 100
Day 3: A machinist makes a cylinder from the bar, which incurs a cost of ten, and the value of the inventory increases by the same amount
Revenue 0
Change in inventory 110
Materials -100
Other expenses -10
Operating profit 0
Cash 0
Inventory 110
Equity 0
Liabilities 110
Day 4: The cylinder is sold for 200 euros. The money from the sale is used to pay off debts
Revenue 200
Change in inventory 0
Materials -100
Other expenses -10
Operating profit 90
Cash 90
Inventory 0
Equity 90
Liabilities 0
In practice, we are more cautious, and after 3 days of machining, the inventory could be valued at 105 euros. In this case, the change in inventory would have been 105 and the operating profit -5. Similarly, the metal bar could be valued at a lower amount than its purchase price after acquisition.
Volvo is setting up a new excavator plant nearby. Hopefully, weâll get digital products into production there, or at least more demand for traditional cylinders.
It would be great if this were the case, so that one doesnât have to go all the way to Malmöâs CEES unit to install NorrDigi.
But can someone answer, in what style Volvo (or some other company) sells excavators; how precisely customized for the customer?
Are they sold to known customers with the technology and accessories the customer wants? That is, does a potential customer contact Volvo, and then when deals are being negotiated, Volvo asks at some point, do you want the excavator with NorrDigi or with more traditional technology? And then when the customer has ordered a certain number of excavators with NorrDigi, does Volvo manufacture exactly that number for exactly that customer?
Or are excavators made more in such a way that a certain number of them are produced in advance - some with NorrDigi and some with more traditional technology - and then the customer chooses an excavator from the ready-made products, either with NorrDigi or without it?
If that factory is meant to produce 3500 excavators a year, then I would imagine at least some of them are manufactured in advance before a customer is known, and then NorrDigi would probably also be installed in some of the excavators already? But tell me if Iâm wrong.
At least in Finland, machine sales are made with equipment chosen by the customer. That is, when ordering, you choose the equipment and wait for the machine to arrive. In North America, the customer drives into the yard, chooses a machine from a row, and takes it with them immediately. A very different style. In Finland, machine dealers keep small quantities of stock and demo machines, in the most popular size classes. Accessories are roughly determined by the export countries. So, if Volvo builds a factory in Sweden, intended to serve the Nordic countries and Europe, it is most likely that the standard equipment and accessory selection will include many things favored in the Nordic countries. For example, an auxiliary heater does not interest British and Central European manufacturers. Volvo probably had it as standard or had installation readiness as standard. The equipment list and standard features come from customer requirements, and thatâs why Swedish manufacturers suit Finland, as they work in the same conditions and in the same style. Machine manufacturers for whom exports to the Nordics region account for 5% of their turnover are not very interested in whether they work in frost or how many work lights there should be.
I would guess that if NorrDigâs added value is a real customer benefit and there is customer demand for it here, it will quickly come from the production line. In sales, it is a big advantage that the standard product is the most suitable option for the customer.
âGroundwork is estimated to begin during the first half of 2026 with start of production within two years from project initiationâ. So, groundwork begins next
Norrhydro appears to be a quintessentially Finnish company in all the negative aspects that almost invariably characterize the businesses and business ideas of this sullen and gray nation. Itâs a domestic top product, and as a result of extensive R&D, a solution with competitive potential has certainly been achieved. However, the productâs sales are not invested in to the same extent as, for example, Swedish engineering companies do. The company has globally identified about twenty customers who could integrate NorrDig, and through that, the company could easily generate revenue.
The problem with this sales culture is the belief that a neutrally tested and validated product information brochure automatically handles the sales work, and that it has been perfectly executed once the 1-2-3 steps with the customer have been completed and the Salesforce ladder climbed up to the submitted offer.
In international integration trade, one has to burn several, several millions for a breakthrough. Finnish companies rarely have the desire or even the resources for this. Money must be spent almost like bribes, entertaining genuine influencers/decision-makers in international and high-earning organizations, just to even find the beginning of the path leading to a deal.
In NorrHydroâs situation, the best thing would be for an international private equity investor to buy the company and install a CEO in Trögâs place who would have new energy, risk-taking ability, and resources to overhaul the sales organization and shift gears. By announcing a rights issue, the company is jumping straight into the grave, waiting for the gravediggers to arrive and cover the pit.
I also came to the same conclusion some time ago. The lesson doesnât come for free⊠The technology seems genuinely good, but the management/(owners) lack the drive to make a breakthrough. A similar company in the US with slightly more âMusk-likeâ management was 10x more valuable. And has made offerings this year tooâŠ
Trög also mentioned in the latest Inderes interview that NorrDigiâs revenue would still be around 10% next year. I donât recall what targets were previously given for this, but it feels quite low, considering a large production facility was built in Rovaniemi with IPO funds.
The balance sheet is very tight, and surely some offering will still come to strengthen the cash position. I donât know, but perhaps it would have been wiser earlier to make, for example, a directed issue to a large investor with the intention of properly commercializing NorrDigi. Now the share price has hit rock bottom, and perhaps for good reason, so money cannot be raised as effectively. If an offering comes now, it will likely just go towards continuing operations without a clearer change in strategy on how this innovative product could actually be commercialized. Surely there would be demand if the product is really as good as they say.
Good video! Iâll also highlight the slides from there separately regarding the commercialization of NorrDig, as it has been discussed. As someone following oil, the oil and gas industry seems like a lost cause, as oil prices are predicted to have a terrible run for the next couple of years.
The products seem excellent and competitive, but commercialization is progressing slower than an investor would like, and the cash reserves donât allow much room for additional sales investments
Thanks for the video on my behalf too, Iâll raise a couple of thoughts from the video.
Positives:
Yrjö commented on his share sales. He wants to lighten his ownership, but intends to remain the largest owner. Iâm not concerned about his commitment to the company.
âEggs are not in one basketâ: Six different categories were presented (see @Pohjolan_Ekaâs previous message), which lowers the risk regarding sales success.
Concerns:
At the 30-minute mark, itâs mentioned that the goal is to establish a global sales network within a few years.
Even though âeggs are not in one basketâ, quite a few categories are in testing or have had individual deliveries â> no guarantee of a breakthrough.
Considering the above points, itâs challenging to see rapid revenue growth from NorrDigi. Hopefully Iâm wrong
Quite a positive video. If one wants to consider the interests of the company and shareholders, children should certainly not be taken onto the board. The role of the board is absolutely crucial for the success of the company, and every board member should have something to contribute in that role. That board cannot be a training ground for shareholders or family members, or it can be, but it can be costly for shareholders. Instead of having a relative learning on Norrhydroâs board, there could now, for example, be an experienced international marketing professional bringing added value. For the future of the company, it sounds good that the composition of the board will be re-evaluated.
Over a year ago, an agreement was made with the American company Aberdeen Dynamics for the exclusive right to represent NorrDigi MCC technology in the US oil and gas industry. On Aberdeenâs website, Norrdigi is prominently featured right at the top: https://www.aberdeendynamics.com/
How has this progressed, given that the last earnings report made no mention of the cooperation or revenue streams? If the product brings significant savings, one would think it would be sold even in a weaker economic climate.
Actual oil production is at its peak, but investments in drilling equipment do not need to be made, as there is sufficient capacity available on that side, and service sector companies do not foresee a new boom or abundant cash flow, because the current oil price does not encourage a large number of additional drillings. Service-side companies are rather going bankrupt globally, including in the United States.
An easier comparison for Finns to understand would be, for example, the sale of a new innovative paper machine solution to Finland over the last 10 years. Not even a good solution helps if new investments are not necessary.
Indeed, that particular partner is exceptionally aggressive in an American style when promoting Norrhydroâs solution, so in this case, a large market was opened with quite moderate investments. Norrhydro does not have oil and gas industry professionals, so itâs probably not worth taking any overly strong market views there when such a good opportunity presented itself.
