CEO's greetings

On the whole, 2022 was a very challenging year for Partnera. Due to difficulties with KPA Unicon’s project deliveries, Partnera recognized a significant write-down of goodwill and provisions for the negative effects of projects. Uncertainty and risks have been increased by the prolonged COVID-19 pandemic and the war in Ukraine. Foamit Group’s net sales increased in spite of the challenging market conditions.

For Foamit Group, demand remained good during the year, and net sales grew by 49% in January–December 2022. While the acquisition of the Norway-based Glasopor was a factor behind the increase in net sales, Foamit Group’s business also grew organically by 23%, driven particularly by the successful expansion of the customer base.

Foamit Group’s profitability improved after a weak start to the year, when war-related increases in energy prices significantly drove up the costs of raw materials and transport. Towards the end of the year, cost increases were partly passed on to prices, and the company implemented various efficiency measures to improve profitability. These measures are still ongoing.

One of the highlights of the year was a large order for foam glass in Norway. The deliveries will be made during 2022–2023. Foam glass was chosen as a lightening material for a hospital construction project in Drammen, Norway, due to its technical and environmental attributes.

Near the end of the year, we also made the important decision to complete the planning on a significant investment by Foamit Group. When completed, the investment will double the production capacity of the Onsoy factory in Norway. In connection with the upgrade, the production equipment will be converted to be powered by electricity instead of fossil fuels. As the factory uses renewable electricity, its production will be almost zero-emission in the future.

The development of KPA Unicon’s business was compromised by prolonged delivery difficulties. The slower-than-expected completion of projects that have delivery difficulties, the cancellation of a project in Denmark and the general rise in costs led to profitability being considerably below the target. Furthermore, the war in Ukraine has increased the probability of credit loss risk related to KPA Unicon’s Russian subsidiary. For these reasons, we recognized write-downs and provisions totaling EUR 18.0 million during the financial year in relation to KPA Unicon’s business. The capital of KPA Unicon’s group companies was strengthened by converting loans and credit facilities into shares and subordinated loans in proportion to the shareholdings.

KPA Unicon’s net sales declined by 16.7% in January–December 2022. In spite of the challenges, KPA Unicon’s service business developed according to plan during the year, and the company received several new orders for plant modernization. Profitability was weakened and business was contracted by the slower-than-expected progress of projects that have gone on for a long time, as well as delays in new projects. The comparable operational EBIT was also affected by project-specific write-downs and provisions totaling EUR 10.0 million, as well as the rise in the general cost level. In KPA Unicon’s project business, forecasts concerning the progress of projects and the cash flow received from them involves uncertainty. KPA Unicon’s liquidity situation remains weak. The financing of KPA Unicon involves substantial uncertainty with regard to the next 12 months, and this may affect the continuity of KPA Unicon’s operations. Securing financing is subject to KPA Unicon’s project completion and sales progressing according to plan and the successful negotiation of KPA Unicon’s financing solution with financing providers. KPA Unicon’s situation does not affect the continuity of operations of the parent company Partnera.

During the year, KPA Unicon updated its strategy and made changes to its organization. Matti Huttunen was appointed as the company’s new Managing Director after the end of the review period, in January 2023. Under his leadership, KPA Unicon’s focus going forward will be on strong technology expertise and the service business. With regard to the scope of plant deliveries, the focus will be on partial deliveries. Complete delivery projects will only be offered with careful consideration. Partnera is assessing its strategic options concerning its ownership of KPA Unicon.

The operating environment in 2023 is expected to remain challenging in spite of the rise in the costs levelling off. We expect Foamit’s market position to remain good, although the potential slowing of economic growth does cast a shadow over the construction industry. KPA Unicon’s markets are active due to the energy crisis and the green transition, and the company will seek to target its sales activities in accordance with its new strategy. KPA Unicon’s primary goals are to improve its liquidity, complete the delayed delivery projects and build a foundation for profitable growth.

Jari Pirkola
CEO