Purmo Q1 morning result: Clearly better profitability than we expected, guidance unchanged
Translation: Original comment published in Finnish on 4/26/2023 at 8:53 am.
Purmo's Q1 result was expected in terms of net sales, but profitability was clearly better than expected. Adjusted EBITDA exceeded our expectations by nearly 40% or EUR 7 million. The company reiterated its full year guidance of adjusted EBITDA being on a similar level (+/- 5%) to 2022 (92.9 MEUR). Our estimate has been at the bottom end of the range and the stronger than expected earnings creates pressure to raise our estimates. Thus, we also expect a positive share price reaction today.
Expected drop in net sales mainly due to radiators
Purmo's net sales decreased by 10% or organically by 11%, which was in practice in line with expectations. With the new divisions, the net sales for Climate Products & Systems decreased by 13% but were slightly better than our expectation. As expected, the decrease was caused by the drop in radiator net sales while the net sales of other products were around the level of the comparison period. Purmo’s demand, especially in radiators, deteriorated clearly during 2022, which resulted in its H1’22 figures being relatively good, but H2’22 figures being weak. Climate Solutions division's net sales increased thanks to the acquisition but fell organically by 6% from a strong comparison period and slightly more than we expected.
Earnings down from last year, but clearly better than we expected
Due to the clearly lower net sales, Purmo's result decreased from the comparison period, but it managed to maintain its adjusted EBITDA margin at the level of the comparison period. This was a better performance than we expected. Good profitability was supported by Climate Products & Systems, where the company was able to maintain, even in absolute terms, the adjusted EBITDA (close on 23 MEUR) at the level of the comparison period, even though net sales decreased clearly. This was supported by price increases and the ongoing efficiency program, which according to the company progressed better than planned. For the Climate Solutions division, both the result and margin fell as expected from a strong comparison period. The company also reported clearly stronger cash flow than in the comparison period, although due to the seasonal commitment of working capital, it was still at zero (Q122: -39 MEUR). The hybrid bond issued in February improved the balance sheet situation as expected, and reported net debt/adj. EBITDA was 2.5x compared to 3.0x at the end of 2022. In this calculation, the hybrid bond is not included in net debt.
Guidance for a stable full-year result unchanged, upward pressure in estimates
Purmo repeated its guidance for the full year. It expects 2023 adjusted EBITDA to be at the same level as in 2022, i.e. around EUR 93 million. Purmo says this means a +/- 5% change, or about EUR 88-97.5 million. Our estimate is EUR 88 million, which is at the bottom of the guidance range, and means an adjusted EBITDA margin on par with last year. The clearly better Q1 than we expected puts upward pressure on our estimates toward the top end of the range. The company also commented that retailers’ inventories have normalized, which should support demand in upcoming quarters. The progress of the efficiency program continues to support profitability.
Purmo Group
Purmo Group är verksamt inom komfortlösningar för inomhusklimat i Europa. Bolaget tillhandahåller värme- och kyllösningar till bostadshus och lokaler, inklusive radiatorer, handduksvärmare, golvvärme, konvektorer, ventiler och kontroller. Verksamheten är indelad i ett flertal affärsområden och lösningarna används exempelvis inom industrin samt bland fastigheter. Kunderna återfinns på global nivå med störst koncentration inom Europa. Produkterna riktar sig till företagskunder och privatpersoner.
Read more on company pageKey Estimate Figures2023-04-05
2022 | 23e | 24e | |
---|---|---|---|
Omsättning | 904,1 | 862,4 | 887,4 |
tillväxt-% | 7,18 % | −4,61 % | 2,89 % |
EBIT (adj.) | 60,7 | 55,7 | 67,6 |
EBIT-% | 6,71 % | 6,46 % | 7,61 % |
EPS (adj.) | 0,85 | 0,66 | 0,86 |
Utdelning | 0,35 | 0,35 | 0,35 |
Direktavkastning | 4,25 % | 4,91 % | 4,91 % |
P/E (just.) | 9,70 | 10,84 | 8,27 |
EV/EBITDA | 8,00 | 9,38 | 5,40 |