Anora Q1 morning result: Slight earnings improvement led by the main segments

Translation: Original comment published in Finnish on 5/7/2024 at 9:13 am EEST.

Anora's Q1 revenue declined more than we expected and its earnings improvement was weaker than expected. However, the result improved as expected in the Wine segment, which performed dismally last year, and even exceeded our expectations in the Spirits segment, while the smaller Industrial segment was a disappointment. Anora reiterated its full year guidance, i.e. full year adjusted EBITDA in the range of 75-85 MEUR. At first glance, we do not see any need for material changes to our forecasts. 

Revenue down more than expected across the board

Anora's revenue decreased by 8%, somewhat more than we expected. The decline came from all segments, as weak international sales in Spirits also pushed the segment down against our expectations. The Wine and Industrial segments declined more than we had forecast. In the Wine segment, this was partly due to the discontinuation of filling contracts in Denmark, which have a more limited impact on the result, and, as expected, the loss of distribution contracts last year. Revenue in the Industrial segment declined by 12%, weighed down by lower prices and volumes.  

Earnings improvement below expectations, but in the right places

Anora's performance weakened in 2022-23, mainly due to a number of challenges in the Wine segment (exchange rates, loss of partners, and poor performance of Globus Wine in Denmark). The result turned around year-on-year in Q4'23 and continued the same trend in Q1'24, albeit at a slightly slower pace than expected. However, the Wine segment improved in line with our expectations and the Spirits segment also improved year-on-year, exceeding our expectations despite slightly lower revenue. In both segments, the profit improvement was supported by price increases and cost control. The Industrial segment, on the other hand, achieved an adjusted EBITDA of just under 1 MEUR, versus 2.5 MEUR in the comparison period and our expectations of 3 MEUR. But Industrial is Anora's smallest segment, and we have expected it to remain stable. It is also less important for the company's value than the other two segments, so we see the Q1 result as an improvement in the right places for the company's growth and value.

Anora's cash flow from operating activities was 45 MEUR negative, due to typical seasonal fluctuations in working capital. The figure for the comparison period (4 MEUR positive) was significantly boosted by the sale of trade receivables. By contrast, the negative impact of inventories and trade payables was clearly lower than in the comparison period (-47 MEUR vs. -84 MEUR). Anora's net debt/adj. EBITDA was 2.6x at the end of the quarter, close to the company's target level (below 2.5x). 

Guidance unchanged, our estimate close to the midpoint

As expected, Anora reiterated its full-year outlook and expects an adjusted EBITDA margin of 75-85 MEUR in 2024. In our forecasts, the earnings improvement will largely come from the recovery of the Wine segment's earnings to the level of 2022 (adjusted EBITDA 24 MEUR vs. 12 MEUR in 2023), although even this is not a good level in our view. For the last 12 months, the group's adjusted EBITDA is around 70 MEUR, so the trend of improving results needs to continue throughout the year to reach the guidance. The comparison figures are quite weak, so we foresee that this will happen. Our estimate for adjusted EBITDA for the whole year is 81 MEUR.