Koskisen Q2'24 flash comment: Progress largely very much in line with expectations

Translation: Original comment published in Finnish on 8/16/2024 at 9:16 am EEST.

Although Koskisen's Q2 result this morning was in itself, as expected, significantly weaker than the comparison period, there were only minor deviations from our and consensus forecasts for the Q2 numbers. Koskisen repeated its rather broad guidance for the current year, as anticipated, and we do not think there were any major surprises in the market comments relative to the expectations already set by peers and the news flow. We do not expect a particularly strong price movement for the stock today in either direction in relation to the general market.

Profitability deteriorated in Q2 at a pace broadly in line with expectations

Koskisen's revenue grew by 5% to 77.8 MEUR in Q2, slightly above our forecast and well in line with consensus expectations. In the Sawn Timber Industry, revenue grew by more than 20% due to a slight increase in prices, additional capacity at the new Järvelä saw line and postponed deliveries from Q1 due to strikes. However, revenue in the Sawn Timber Industry was slightly below our forecast due to a slightly lower than expected increase in the average price, probably as a result of postponed deliveries. In the Panel Industry, revenue fell by 6% on a volume-driven basis, but volumes were still better than we had expected and Panel Industry's revenue exceeded our forecast. The average price in the Panel Industry seems to have been in line with our forecasts.

Koskisen's adjusted EBITDA was 9.3 MEUR in Q2. The operating result fell by more than 30% from a strong comparison level but was very close to both our and consensus forecasts.  In the Sawn Timber Industry, the operating result remained flat year-on-year due to the somewhat slower than expected progress of the new sawmill in Järvelä and high raw material prices. In the Panel Industry, on the other hand, the result was clearly down from the strong comparison figures on a volume-driven basis, but thanks to higher-than-expected volumes, the Panel Industry nevertheless exceeded our forecast and compensated for the underperformance of the Sawn Timber Industry. There were no surprises in the figures for the other operations. The lower parts of the income statement showed only minor deviations, especially on a net basis, so Koskisen's EPS of EUR 0.21 per share was also in line with forecasts. In terms of cash flow, we think the report looks quite good given the circumstances, with working capital committed in Q1 due to strikes and seasonality being released in Q2.

Guidance unchanged, as expected at this stage of the year

Koskisen reiterated its guidance for 2024 according to which revenue will grow from last year (2023: 271 MEUR revenue) and the adjusted EBITDA margin will be 8-12%. In our view, the reiteration of guidance was well expected, and we believe the company will be able to achieve this broad guidance without any problems. Market commentary was largely in line with peers. In the Sawn Timber Industry, the delayed recovery in construction and the upward trend in raw material prices indicate that the lean times will continue in the near future, which should of course be offset by the progress of the new line in Järvelä and the gradual realization of the benefits of the investment. In the birch plywood segment, which forms the backbone of the Panel Industry, demand is good and market dynamics are tense due to the supply constraint caused by Russia's military aggression and the new EU measures restricting the circulation of sanctions. For birch logs, the raw material situation may not be quite as difficult as we had feared. Thus, the Panel Industry should continue to lead Koskisen to satisfactory results in the near future, but achieving good results as a group would probably also require help from the Sawn Timber Industry.