The first half of 2021 is behind us. Hardly anyone, in even the wildest scenarios, could have predicted a year ago that it would eventually become one of the best ever in terms of sales growth in the trade and industry sectors! Although COVID-19 is still a major player in the lives of all of us, and despite the uncertainty it has caused, the growth rates in the metal industry have also been excellent. I think we can already talk about economic overheating, which has led to a shortage of raw materials and components. The rise in raw material prices has been exceptionally rapid, whether for wood, fertilizers or metals. The results of the companies in our sector in the first half of the year are generally excellent, although concerns about accelerating inflation and the continuing rise in costs are causing uncertainty about the future outlook, despite the fact that order backlogs are at record levels. Good profitability and the outlook are also reflected in share prices, which are currently high.
Developments in the future economic situation are still unusually difficult to predict. However, the rather common perception is that the good situation will continue for at least another six months, possibly a year. Confidence in the future is boosted by a strong government stimulus policy, which focuses in particular on investment in infrastructure construction and the reduction of greenhouse gas emissions. The biggest threats to the good development of our industry are seen as the lack of availability of the necessary labour, raw materials and components, as well as their rapidly rising prices. Problems with the availability of components have caused and will cause production disruptions during the rest of the year, which will inevitably increase costs as well. However, it is particularly difficult for us to ensure the availability of steel as stocks are empty and delivery times are very long. The situation is also not going to get easier in the near future, as steel mills are very rigid about increasing their production. Rather, they allow the excess demand to continue and they sell their production to the highest paying customers.
As we reported in the spring release, the number of orders at Jame-Shaft began to grow strongly at the end of last year and the pace only intensified towards the spring. The same trend continued throughout the early part of the year, although the situation began to level off in the summer. The growth in demand was so rapid that we were not able to increase our capacity fast enough, which unfortunately then led to a significant deterioration in security of supply. This is despite the fact that we were able to increase our capacity by more than 35% compared to autumn 2020. Measured by net sales, this meant that in the financial year 1 July 2020-31 June 2021, our net sales exceeded € 20 million for the first time. Our budget was € 17 million and the entire surplus of € 3 million was made in January-June 2021. A turnover of € 25 million has been budgeted for the current financial year and measures to achieve it are well under way. At the moment, our situation is that our capacity and incoming orders are in balance, but unfortunately we have not yet been able to reduce the delay. We are doing our best to bring security of supply back to an acceptable level, but this is not happening at the moment because there is not enough skilled labour available. Training additional staff takes time before the results can been seen in output.
One significant part of the increase in capacity are investments in machinery and equipment, which began as soon as demand began to grow at the end of last year. We told you about some of them in the spring, but in order to give you the big picture, all of this year’s projects have been collected in the following summary. Investments will continue also next year and the total amount of the investment plan scheduled for 2021 and 2022 is in the order of EUR 4 million. About half of this will take place this year. As a whole, the investment plan is by far the largest in Jame-Shaft’s history.
Another important factor in increasing capacity is the recruitment of new staff. At the beginning of the year we did quite well because we were among the first to start the recruitment process. So far, we have hired about 20 new staff. In order to secure the future of the industry, during the summer we have also had about 20 young people in summer jobs or internships, all either studying or aspiring to the industry. However, this is not enough, and we have launched the REKRY training program, which involves 12 people in training. We guarantee a job for all of the participants who successfully complete the training programme. Hopefully, a sufficient number of motivated course participants will be found and they will bring more skill sets into production.
At present, particular concern and uncertainty is caused by rising prices and the availability of raw materials. This has already been seen here as a delay in starting work due to a lack of raw materials or the use of oversized material, which causes additional work and costs. There have been difficulties, especially in the availability of hollow bars, but tempering and carburizing steel have also had to be procured in smaller and more expensive batches in order to keep the production moving. Material prices have also been rising at an ever-accelerating pace. Thanks to our good supplier relationships and longer contracts, we have managed to delay its impact on our sales prices, but unfortunately now we are forced to pass on these drastically increased costs to our sales prices as well. There is no rapid turnaround in this case either, although the rather general assumption is that the rise will turn into a decline in the first half of next year. The effect of raw material prices on our sales prices will be explained in more detail in a separate announcement.
In the next press release, we will tell you more about the measures we have taken to ensure sustainability and personnel job satisfaction. The importance of these issues will be further emphasized in the future, and we believe that they will also be an important competitive advantage for both personnel and customers.
We have just got the information that Alihankinta 2021 fair will be held in Tampere 21.-23. September as planned. We made anyway the decision to cancel our participation due to healthy reasons. If you will participate the fair we can anyway arrange an appointment in Tampere at the same time or even better in our factory. Here you could see the latest investments and other improvements which we have made lately. We will see in Alihankinta 2022 when it is safe again. Let’s hope that the positive development in our industry will continue. By developing activities together, we will overcome the challenges ahead as winners. Hopefully we will also be able to meet in person as soon as possible.
We wish all our customers a successful and productive autumn 2021!
We have a positive and busy time ahead of us that gives us the opportunity for further development.
Best wishes,
Mika Tuunainen
Managing Director
Jameshaft Oy