Koskisen Q2 morning result: Guidance is already starting to look very cautious
Translation: Original comment published in Finnish on 8/25/2023 at 9:05 am EEST.
Koskisen's Q2 results published this morning were better than our expectations, with both operating divisions exceeding our estimates despite the mixed market conditions. Koskisen reiterated its guidance for the current year, as we expected, although after a good H1 the guidance is starting to look very cautious. We expect a positive price reaction for Koskisen today relative to the general market thanks to the better-than-expected Q2 report, which is also supported by the relatively low valuation of the stock (2023e P/B 1x).
Both divisions exceeded our estimates
Koskisen had not disclosed comparison figures before the Q2 report, but it was known that the figures reached during the hottest phase of the sawmill cycle were very strong and the report revealed that Q2'22 was Koskisen's quarterly record for earnings. In Q2, Koskisen’s revenue decreased by 22% to EUR 74 million, which was slightly below our estimates. Volumes fell quite markedly in both businesses and timber prices also declined in a weak sawmill business cycle. The record high prices due to the supply disruption in birch plywood caused by the war pushed the Panel industry to expected growth.
Koskisen's adjusted EBITDA was EUR 13.7 million in Q2. Operating profit fell by more than 50% from the fierce level of the comparison period but was still well above our estimate. As expected, the order intake was mixed as Panel Industry generated a record result supported by high prices and slightly exceeded our expectations. As in Q4'22 and Q1’23, Sawn Timber Industry clearly outperformed many of its peers in Q2. Thus, despite the weak price level and inflation, the unit was able to support the consolidated result with an EBITDA of EUR 1.7 million, which exceeded our estimate more modestly. The result from other operations was in line with our expectations at zero. On the lower lines, depreciation and the tax rate were broadly in line with our expectations, while financial charges were against our expectations and probably exceptionally positive. Through these, EPS exceeded our estimate and stood at EUR 0.43. Cash flow from operating activities also turned clearly positive in Q2 after a sluggish Q1, probably reflecting normal seasonal factors, and free cash flow after investments was also positive.
No change in the outlook for the current year, but guidance already looks very cautious
Koskisen repeated the guidance given in the prospectus for 2023, based on which it expects that its 2023 revenue will not exceed the 2022 level (311 MEUR), and its adjusted EBITDA margin is 12-14% (2022: 21%). Maintaining the guidance at this stage of the year was expected, but after a very strong H1, the guidance already looks very cautious (H1: adjusted EBITDA margin 18%). Based on market comments and our estimates, the lack of Russian birch plywood supply that provides strong support to the Panel industry is not exiting quickly, which means that the outlook for the segment remains very strong in the short term. Correspondingly, there is no clear light in the tunnel for the demand of Sawn Timber Industry that is driven by construction. However, the stronger than expected performance of Sawn Timber Industry in the last 9 months has increased confidence in the unit's ability to navigate a poor market situation and the construction of the new Järvelä sawmill line, which started in July and is progressing as planned, should also support the unit's productivity by next year at the latest.
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Koskisen
Koskisen is active in the forest industry. The company specializes in the manufacture and distribution of industrial wood products. The company's product portfolio is broad and mainly includes wood products such as sawn wood, plywood, chipboard, and veneer. The business is run via various business segments and the customers can be found in a number of industries around the global market. The largest presence is found in Finland. The company was founded in 1909 and has its headquarters in Järvelä, Finland.
Read more on company pageKey Estimate Figures10.08.2023
2022 | 23e | 24e | |
---|---|---|---|
Revenue | 317.7 | 296.2 | 301.0 |
growth-% | 2.06 % | -6.77 % | 1.63 % |
EBIT (adj.) | 58.5 | 32.6 | 21.6 |
EBIT-% (adj.) | 18.42 % | 11.01 % | 7.16 % |
EPS (adj.) | 1.74 | 1.07 | 0.66 |
Dividend | 0.43 | 0.32 | 0.25 |
Dividend % | 6.92 % | 4.29 % | 3.35 % |
P/E (adj.) | 3.60 | 6.96 | 11.32 |
EV/EBITDA | 1.75 | 3.56 | 4.51 |
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