Now there’s a dedicated company page and an interview for this:
Page: Norrhydro Group - osake - Inderes
Verneri’s interview: Norrhydro harkitsee listautumista - Inderes
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Surprisingly interesting company in the mechanical engineering sector, hopefully they’ll see the listing through! The CEO’s presentation was excellent, a pleasant guy, I like his attitude of wanting to take the company public to promote Finnish ownership, rather than selling to a bigger foreign player (with the caveat that this part wasn’t just a sales pitch 
).
I quickly picked out a few basic things for the beginning of this thread:
Homepage
The new digital product they plan to use for growth. Volvo excavators are apparently a kind of pilot customer; they mentioned that NorrDigi would form 30% of the company’s sales by 2026:
Finder’s numbers. The CEO spoke in the interview about almost tripling revenue to 54 million euros by 2026 and increasing operating profit to over 16 percent.
Kauppalehti article:
Essential content from it:
Last year, Norrhydro, which had a turnover of 20 million euros, is investing approximately 15 million euros in a new production facility. The premises will be more than double in size as the company moves from the old factory to the new one.
The new production facility in Rovaniemi will be completed in the latter half of 2022. Thanks to it, the cylinder manufacturing capacity can be doubled by 2026.
Later, production can even be quadrupled from the current level.
The initial impression is good! This is finally a small company moving into a growth phase (would the company’s valuation in a potential offering be somewhere around 25-35M€?) where even ordinary investors can get in on the early stages of planned future growth. Of course, if there is even average interest from the public, not to mention institutions, then an offering of this size will probably be heavily oversubscribed once again, and shares will be distributed for mere hundreds 
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An interesting case indeed. I’m also curious as to why the company has decided to concentrate all its production in Rovaniemi. The availability of labor there is particularly limited if they plan to hire possibly up to 100 new employees with the new factory investment. Logistically, Rovaniemi is also not the best location for international growth.
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A few highlights from Norrhydro.
- The company states on its website that it is a manufacturer of hydraulic cylinders and a system supplier.
- The company’s headquarters and production are located in Rovaniemi, in addition to which Norrhydro has a product development unit in Tampere and a design office in Kuopio.
History and company milestones: (Source: About the company))
1985 The company is founded in Rovaniemi.
2007 Change of company ownership and strategic change of business from a subcontractor to a technology partner
2010 Renovation of the production line; capacity increase by 50%, start of multi-chamber cylinder deliveries
2011 Cooperation with Tampere University of Technology regarding digital hydraulics and the NorrDigi® system.
2015 Development of the NorrDigi® system in cooperation with Volvo begins.
2018 Modernization of the production line and equipment investments increase capacity by 20%.
2020 Commercialization of the NorrDigi® system and signing of a multi-year cooperation agreement with Volvo.
2021 Investment in the construction of a new modern and automated production facility and significant machine investments.
Financial information:
Segments → Hydraulisylintereitä monille segmenteille vaativiin käyttökohteisiin
Our hydraulic solutions are tailored to meet the demands of various applications while reducing equipment operating costs. Many work machines operate year-round in various environments, from arctic cold to tropical heat. When snow, dust, salt, and heat in the operating environment strain the machine, the cylinders must be first-class.
NorrDigi® - Energy-saving hydraulic system → NorrDigi MCC-energiaa säästävä hydraulijärjestelmä
- Norrhydro Oy has developed the digital hydraulic system NorrDigi in cooperation with Volvo CE.
- According to Norrhydro’s website, the “uniqueness of the NorrDigi® solution is based on the cost-effectiveness and productivity it provides, which is unmatched in the market.”
- The company states that “compared to traditional technologies, NorrDigi® significantly reduces both operating costs and environmental impact.”
New factory
Norrhydro is building a new production facility, which, according to its website, will be completed during 2022. The new factory is said to offer “the best facilities for the manufacture of high-quality hydraulic cylinders and systems, as well as product development.”
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Because moving a factory is expensive? Several smaller factories across Finland are unlikely to be cheap either. It’s easy to establish a new factory in Rovaniemi because old employees can easily be transferred, and there’s no need to start recruitment from scratch.
In my opinion, Rovaniemi is not a problem; Ponsse has also done well in Vieremä. Rovaniemi has a population of 63,000, and Vieremä + Iisalmi combined have 25,000 residents.
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Norrhydro was listed on Privanet’s (Privanet) lists as an unlisted company before the Privanet marketplace was shut down. At that time, the company’s market value was approximately €14 million, with approximately 8 million shares, and a share price of €1.7. In 2019, its net sales were €20.8 million, operating profit €1.3 million, equity €2.8 million, and balance sheet €15.3 million.
Already in 2019, Privanet’s brokers were pushing the stock with the sentiment that it would soon be listed.
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Thanks for the package! It certainly looks good - product-led machine shops and technology companies have always been close to my heart. I do think it will be priced well over the 25-35M level, but we’ll see, we’ll see 
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Norrhydro’s Half-Year Report 1.1.-30.6.2021, which was not available until recently, has now also been published on Norrhydro’s website.
January–June 2021 in brief
• Net sales grew by 27.4% to EUR 11,871 (9,319) thousand
• The Group’s operating margin (EBITDA) was EUR 1,485 (613) thousand
• Operating margin percentage was 12.5% (6.6%)
• The Group’s operating profit (EBIT) was EUR 1,099 (252) thousand
• Earnings per share were EUR 0.08 (-0.01)
• Return on equity was 30.1% (-2.1%)
• Equity ratio was 21.5% (8.6%)
• Cash flow from operations was EUR 1,135 (-156) thousand
Quote, from page 5:
Estimate of likely future development
The net sales estimate for 2021 is EUR 22,500-23,200 thousand, which corresponds to an increase of approximately 13-16% compared to the previous year. The operating margin percentage for 2021 is estimated to be 11-12%, which is above the long-term historical average. The increase in raw material and component prices may have an impact on profitability, as the transfer of cost increases to customer prices occurs with a delay.
Net sales in 2022 are estimated to grow by 5-10% from 2021. The new production facility will be completed during summer 2022, after which operations will move to the new facility and production ramp-up will begin in the new production facility. Due to this change, no precise guidance on profitability will be provided for 2022. The Group’s goal in the coming years is an operating margin of over 12%, and the long-term goal is an annual operating margin of over 16%.
Quote, from page 4:
The cornerstones of Norrhydro’s strategy for the strategy period 2021−2026 are:
-
Revenue growth organically and through selected acquisitions
Norrhydro aims to grow revenue organically and through acquisitions. The goal is profitable growth and net sales of EUR 54 million in 2026. Growth is sought not only from the cylinder business but also from international business and by increasing the share of digital solutions to 30 percent of net sales. Acquisitions are intended to support Norrhydro’s position as a technology leader in its field. -
Expansion into new geographical markets, especially with the commercialization of energy-efficient solutions and the NorrDigi control system.
Norrhydro’s business consists of two pillars: a profitable and steadily cash-generating cylinder business and a business based on the NorrDigi control system, from which the company seeks strong future growth and opportunities to expand into new geographical markets. The NorrDigi control system, which combines artificial intelligence and digitalization, represents global, leading-edge technology used in the excavators of the company’s development partner, Volvo. The goal is to significantly reduce emissions through the system, which will revolutionize the entire industry. According to current estimates, commercialization, the start of mass production, and the introduction of the system to new customers will take place no later than 2024. -
Expansion of technological expertise and production capacity
Norrhydro aims to renew the mobile machinery and equipment industry with its own innovations. Norrhydro is a technology leader in its field, for whom its own patented products and in-house product development provide a decisive competitive advantage. The company continues close development cooperation with leading original equipment manufacturers (OEMs) and research institutions.
Norrhydro also aims to expand its technological expertise through acquisitions and
grow its production capacity by investing in a new production facility in Rovaniemi.
The new factory is scheduled to be commissioned in 2022 and will serve both the NorrDigi business and the cylinder business.
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I’m sure they can find 100 factory workers 
. And logistics should work reasonably well (of course, Tornio might have been better, but it’s not that far), at least half of Finland’s mines have managed to arrange their logistics in the area… And BRP’s snowmobile factory… as well as paper and steel mills. Or Norway’s train transports to China… of course, those also go through Tornio, not Rovaniemi.
It’s hard to say the real reason, it’s probably historical.
Edit: Could the cost of premises be one reason? They are making quite a good profit, at least…
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Some historical articles I happened to find:
15.9.2009 Sitra and Profita invest 2M€. 45 digital hydraulics patents in 2009
3.9.2010 Deepest recession over, NorrHydro expanding into China. New technology developed in Tampere since 2007, first prototypes being made.
“The invention is estimated to be in production in two years. If everything goes according to Norrhydro’s plans, the company will start their production at the Rovaniemi factory in 2012.”
23.1.2014 First NorrDigi prototypes nearing completion, billion-euro market
16.9.2015 NorrHydro sells majority of its China factory to a Chinese company. (Apparently the rest were also sold at some point, as it’s no longer mentioned anywhere)
24.3.2017 NorrHydro raises €2M in two weeks through crowdfunding
21.3.2019 Seeking funding with a bond
2021 Towards Growth and Internationalization -webinar, where CEO Yrjö Trög explains how Rovaniemi-based Norrhydro Oy sought – and received – direct EU funding
https://arcticsmartness.fi/yritysten-kansainvalinen-rahoitus/
Presentation material from the event held on 5.11.2020
https://arcticsmartness.fi/wp-content/uploads/sites/5/ASG-webinaari_5.11.2020_esitys_Yrjo_Trog.pdf
27.1.2021 Digital leap during the COVID-19 pandemic
The product development arc has evidently been quite long here as well. This was partly influenced by the fact that customers may not have been willing to adopt new technology without proper references, which prevented testing in real conditions. This collaboration with Volvo CE in recent years has certainly been a major jackpot for the company, as they have gained direct access to a large customer’s machines and received important information about development needs. Now, it seems the product is finally at a point where mass production can begin.
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A lot of positives:
- Good growth percentages forecast for a five-year period.
- A mature company that is already profitable.
- Own patented products!
- Developer of new technology, a market disruptor.
- Rides the trends of energy saving and emission reduction.
Challenges:
- Convincing new customers about the technology.
- Growth will require expensive investments. Digitalization cannot be scaled indefinitely without the production of physical units.
Pricing:
- For an engineering company, EV/LV (Enterprise Value/Sales) metrics are in the range of 0.9 - 1.4. The 2021 LV forecast is around EUR 23 million, which gives a valuation range of EUR 20.7 - 32.2 million.
- If the valuation exceeds this range, then more positive growth factors, new customer acquisitions, and scaling of production and results must be found.
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Norrhydro to First North with an Offering
> Norrhydro Group Plc plans an initial public offering and listing on the First North marketplace
> Norrhydro Group Plc | PRESS RELEASE 28.10.2021
Information on the planned IPO
The goal of the listing is to support the company’s strategy-driven growth and internationalization. The listing would also enable the use of the company’s shares as consideration in potential M&A transactions, raise financing from capital markets, increase the liquidity of the shares, and enhance the company’s recognition and reputation. The company estimates it will raise gross proceeds of approximately 8 million euros through the IPO, assuming all offered shares are subscribed.
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I’ve been eagerly awaiting Norrhydro’s listing. Now that I’ve read more detailed information about it, I’m wondering about the impact of the Motiomax Oy share transaction, which will take place after Norrhydro’s listing, on Norrhydro’s share value. Half of the purchase price would be paid through a directed share issue. What are your thoughts on this?
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It’s hard to say anything about that yet when the valuation isn’t even known. Or was there a mention somewhere of how many shares will be distributed for those 8 million? We’ll probably have to wait for the listing prospectus for more precise figures to see what the company has to offer.
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Some company, sometime, somewhere, justified the placement of its factory by saying that if the product is good, people will come from anywhere in Finland to get it.
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According to Yle’s reporting on April 28, 2021, skilled personnel and city support convinced Norrhydro to stay in Rovaniemi.
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Alright, things are moving forward!
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According to Kauppalehti, Norrhydron’s market value was approximately 14 million euros in spring 2020, and now the listing aims for approximately 34 million euros. Quite a nice profit for those who dared to buy already during the Privanet era.
To my eye, this IPO doesn’t seem like an outrageous valuation. Based on last year’s results, the P/E is roughly 17 and P/S is 1.7.
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The valuation range was exceeded somewhat. The valuation is indeed higher than the average in the engineering sector, but how many other companies in this sector have such high growth targets? In my opinion, the IPO valuation is not bad if the company’s growth targets are met. If they are not, then this offering is, of course, overpriced.
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That 34 million is after the offering, 26M before the offering.
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