Koskisen's pre-silent period call indicated stable business development

Translation: Original published in Finnish on 10/16/2024 at 7:17 am EEST.

Koskisen held a call with analysts yesterday ahead of the Q3 silent period. Koskisen published the key themes of the questions and answers in a press release yesterday, which can be read here. The content of the discussion reflected a somewhat stable development of the business environment compared to Q2 and was quite in line with our expectations. Looking ahead to next year, Koskisen is forecasting a significant improvement in earnings, which will probably require a strengthening of the operating environment. There still seems to be relatively little evidence of this.

Stable overall picture compared with Q2

We did not find any major surprises in the tone of the company's messages in relation to the Q2 report and the comments made in connection with it, either in terms of the demand or pricing situation in the two businesses or in terms of the level of costs. In the construction-driven businesses (the entire Sawn Timber Industry and a significant part of the Panel Industry), there is no sign of a pick-up in demand. On the other hand, the situation is no longer deteriorating, either in terms of demand or pricing. In the birch plywood segment (the largest segment of the Panel Industry), which is driven by the logistics sector and which we estimate has recently been responsible for Koskisen's earnings, the operating environment has also remained stable, although the sluggish economic situation in Europe is holding back orders and will prevent any significant price increases towards the end of the year.

In Järvelä, the ramp-up of the new saw line seems to have gone more or less according to plan, and production volumes and efficiency have increased compared to the beginning of the year. In the wood market, the upward trend in prices has come to a halt, but this may be due to seasonal factors. In addition, the delay in the purchase and use of wood means that the wood costs are likely to rise again. Other cost components showed little pressure for change.

Uncertainty still surrounds next year's rate of earnings growth

We, together with the consensus, expect Koskisen's earnings trend to have reversed in Q3, with the company facing weak comparison figures due to very low volumes. Our preliminary assessment is that the recent comments and the recent past do not put significant pressure on us or the consensus to change Koskisen's projections for the rest of the year. On the other hand, our forecasts for a significant improvement in earnings next year are based on a gradual improvement in the market situation and the realization of efficiency gains from investments in the Sawn Timber Industry, and in the consensus forecasts the improvement in earnings is even steeper. Against this backdrop and the comatose construction sector, we believe that the forecast risks for next year remain somewhat elevated.

Koskisen will publish its Q3 report on Friday, November 15. If necessary, we will update our forecast for Koskisen in our pre-Q3 commentary, which is expected to be published in early November.