Koskisen Q1 morning result: The report was twofold, but Sawn Timber’s performance resulted in an earnings overshoot

Analytikerkommentar

Translation: Original comment published in Finnish on 5/24/2023 at 9:20 am.

The Q1 result published by Koskisen this morning was better than we expected, as the Sawn Timber industry in particular managed to stay clearly in the black in terms of EBITDA despite the poor market. In the Panel industry, the quarter was strong as expected in the favorable market situation. As we anticipated, Koskisen reiterated its 2023 guidance.

As expected, the Panel industry was responsible for the performance, but the Sawn Timber industry was a positive surprise

Koskisen had not published comparison figures before the Q1 report, but it was well known that the comparison figures generated during the hottest sawn timber cycle were very high. In Q1, Koskisen’s revenue decreased by 7% to EUR 73 million, which was slightly above our estimates. Volumes fell in both businesses and timber prices were also depressed in a weak sawn timber 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 12.6 million in Q1. The operating result decreased by about 20% from the strong comparison level, but it still exceeded our estimate clearly. As expected, the order intake was mixed as the Panel industry generated a record result supported by high prices and slightly exceeded our expectations. However, the positive surprise relative to our estimates came mainly from the Sawn Timber industry, which in Q1 performed clearly better than many of its peers as it had in Q4 and was able to support consolidated earnings with a EUR 1.6 million EBITDA, despite low price levels and inflation. The Sawn Timber industry’s result was expected to be at zero level due to the difficult market situation and seasonally weak demand in Q1. In addition, the items not allocated to businesses exceeded our expectations. On the lower lines, depreciation and the tax rate were roughly in line with our expectations while financial expenses were slightly below our expectation. Thus, EPS exceeded our estimate with a lever and decreased by 45% from a very high comparison level to EUR 0.38. Cash flow in Q1 was clearly negative, but this naturally also includes seasonal factors.

No changes to 2023 outlook, Q1 also provided a good basis for the guidance

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, and its adjusted EBITDA margin is 12-14% (2022: 21%). Repeating the guidance at this stage of the year was expected, but the strong Q1 relative to the guidance, increased our confidence in the company achieving its guidance. 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 the Sawn Timber industry that is driven by construction. On the other hand, the stronger than expected performance in the Sawn Timber industry in the last six months and the Järvelä investment that will be completed this summer and improve productivity have increased confidence in the unit’s ability to beat the weak market situation in a satisfactory manner even though the effects of the recent weakening in the pulp and energy markets on the outlook of the Sawn Timber industry's by-product sales has to be examined more closely.