Risks and uncertainties
The intense geopolitical situation and the war in Ukraine have caused significant and unprecedented challenges related to raw materials since the late 2021. Supply, and the extremely volatile price levels of key raw materials have posed considerable challenges for our operations. Although we saw falling prices of raw materials at the end of 2022, and less constraints on material availability, the situation is expected to continue volatile in 2023 and to require a lot of efforts to find alternative solutions and to handle the shifting price levels.
The worsened global and European economic outlook is expected to have an impact, especially on the contractor segment in our Explosives business and on our Consulting business. 2023 forecasts related to construction activity in all Nordic countries have turned clearly more negative during the last year.
With the current significant portion of operations taking place in Sweden and Norway, there is a currency risk due to fluctuations in the exchange rate between SEK and EUR and between NOK and EUR. The company has continued efforts to protect itself against currency risks in the contracts and agreements it has entered.
The war in Ukraine and related geopolitical tensions have increased risks related to cyber and hybrid threats. Consequently, the company has made significant investments and increased focus on cyber and physical security.
Prospects for 2023
The outlook for infrastructure construction is clearly negative in Finland and Sweden, driven by the overall economic outlook. The outlook for Norway is more positive. The expectations in the mining segment are neutral versus 2022. Main concerns for 2023 are related to the general economic outlook, inflation and in particular the price development of key raw materials. Competition in the civil explosives market continues to be stiff. However, by sustaining its good level of competitiveness, and with continued focus on development and efficiency, the company expects FORCIT Explosives to be able to continue profitable operations in its main markets.
In January 2023 FORCIT has entered into a Joint Venture together with ENAEX SA around the O-Pitblast business aiming at meeting the increasing market demand for software and products for sustainable mining operations.
FORCIT Defence order book increased significantly during 2022 to an all-time high level supporting the revenue for 2023.
FORCIT Consulting has a strong market position and is well-positioned for further growth through geographical expansion and development of its service offering. Expectations related to the development of the relevant market for FORCIT Consulting is, however, more negative than in many years.
In summary, the company expects an increase in sales in 2023 compared with 2022 but has a cautious view on the development of profitability due to inflation and worsened overall market sentiments in civil explosives and consulting markets.