Meriaura Group invests heavily in low-emission freight capacity
Translation: Original comment published in Finnish on 4/16/2024 at 7:43 am EEST.
The two vessels ordered by the company are designed to be low-emission, for example by using biofuel that Meriaura produces itself. The large investment of 34 MEUR will be 80% financed by debt from Finnish financiers. The investment will support Meriaura's rapid transition towards carbon neutral sea freight. The vessels will not only enable business growth, but will also partially replace the vessel capacity that is being phased out. It is currently challenging to estimate the impact of the investment on the company's revenue, as a large part of Meriaura's freight is carried out on leased capacity that can be adjusted as needed. The value creation of the investment depends, among other things, on the development of demand for zero-emission transportation and the price of raw materials for biofuels. We do not believe that the investment news creates an immediate need to change revenue or earnings forecasts, but investment forecasts are under upward pressure. We will update our forecasts in the Q1 results report at the latest.
Investment will significantly increase the dry bulk cargo capacity held by Meriaura
The Meriaura Group announced on Monday that it has ordered two biofuel-powered cargo vessels from the Dutch shipyard Royal Bodewes. The ships will be operational in 2026. With a deadweight tonnage of 6,750 tons, the vessels acquired are larger in size than Meriaura's current fleet, which consists mainly of vessels of 4,000-5,000 tons. The larger size of the vessels should also allow for growth in new segments compared to the current business, but on the other hand, new capacity will also replace old capacity, given Meriaura's low investment levels in recent years and the possible retirement of at least one owned dry bulk cargo vessel in the 2020s due to its long service life (M/S Aava). The impact of the investment on the company's revenue is challenging to estimate, as the amount of leased equipment can be adjusted as needed. However, the investment will significantly increase the capacity of Meriaura's own dry bulk cargo vessels, even if the M/S Aava is decommissioned.
Aiming for carbon neutrality in the 2030s
Meriaura is aiming for carbon neutrality in its operations on a fast track, already in the 2030s. The International Maritime Organization IMO has set the goal for carbon-neutral shipping by or around 2050. Meriaura aims to create 1.5 million tons of near carbon neutral freight capacity by 2026 (total capacity in recent years has been around 3 Mt).
In terms of investments, Meriaura has had various types of green projects on the table at the same time: in addition to biofuel-powered dry cargo vessels, the company signed a letter of intent in 2022 to acquire a special cargo vessel using renewable ammonia as fuel, but a final investment decision has not yet been made. We estimate that the investment in this special cargo vessel will partly depend on the demand for special cargo vessel capacity, where one of the variables is the progress of offshore wind projects in the Baltic Sea and the North Sea, for example.
The current decision to purchase ships that utilize bio-oil will make use of the biofuel developed by Meriaura and the certified EcoVoy concept, which can reduce emissions from maritime transport by up to 97.7%. Meriaura's own processing capacity is sufficient to meet the biofuel needs of the purchased vessels. However, the availability and price development of waste-based raw materials for biofuel production are key challenges for concept expansion in the big picture. Biofuel ships can also run on conventional fossil fuels.
Large investment financed mainly with debt
The acquisition of two new-build dry cargo vessels is a very large investment for Meriaura. The total price of the vessels is 34 MEUR, compared to the balance sheet value of the five cargo vessels on Meriaura's balance sheet, which we estimate to be around 40 MEUR at the end of 2023. The investment will be paid according to the degree of completion of the vessels. The investment will be 80% debt financed. Debt financiers from Finland – Oma Säästöpankki, LähiTapiola, and the state-owned Climate Fund – joined in on the project. Finding domestic financing for shipbuilding is not a foregone conclusion and the solution reached now can support the conditions for business development in the long term. In our last analysis report, we forecast a total investment of 22 MEUR for 2024-26, so the announced order of 34 MEUR puts a significant upward pressure on our investment assumptions.
Meriaura Group
Meriaura Group has two business areas: Maritime Logistics and Renewable Energy. Meriaura transports dry cargo and executes demanding project deliveries in Northern Europe. The company offers CO2 reducing marine transport services based on the use of recycled, in-house produced bio-oil. Meriaura Energy designs and delivers clean energy production solutions for district heating and industrial use worldwide, with Europe as the main market area.
Read more on company pageKey Estimate Figures01/03
2023 | 24e | 25e | |
---|---|---|---|
Revenue | 66.2 | 78.5 | 85.2 |
growth-% | 666.45 % | 18.56 % | 8.61 % |
EBIT (adj.) | 1.0 | 3.3 | 4.2 |
EBIT-% (adj.) | 1.58 % | 4.20 % | 4.98 % |
EPS (adj.) | -0.00 | 0.00 | 0.00 |
Dividend | 0.00 | 0.00 | 0.00 |
Dividend % | |||
P/E (adj.) | - | 23.13 | 13.79 |
EV/EBITDA | 8.98 | 6.29 | 5.52 |