Orthex Q3'24 preview: Growth depends on the rest of Europe

Translation: Original published in Finnish on 12/11/2024 at 07:22 am EET

Orthex will publish its Q3 report on Friday at 9:00 am EET. We expect modest revenue growth despite the weak sales development of Nordic retailers. Orthex does not provide short-term guidance. We expect the company's revenue to grow by 3% this year, a bit more moderately than the targeted 5% revenue growth, while our EBIT margin forecast of 12.4% falls clearly short of the company’s ambitious adjusted EBITA target of over 18%. We will review the interim report on Wednesday in our earnings live (in Finnish) starting at 8.55 am EET.

Nordic retailers' sales was still weak in Q3

Based on retail sales figures, Orthex’s business environment has remained subdued in Q3, especially in the key Nordic markets. We expect Orthex's Q3 revenue to increase by 1% to 22.1 MEUR, which is below the consensus forecast. We expect Orthex's revenue growth to have slowed down from the beginning of the year as Nordic sales temporarily benefited from slightly larger purchases by retailers to increase inventory levels. In our forecasts, Orthex’s invoiced sales in the Nordic countries remains at the level of the comparison period, but in other European markets, we expect 8% growth driven by an expanded distribution network and increased shelf space. Orthex has increased its growth efforts outside the Nordic countries in the past year, so we will be watching the rest of Europe with particular interest.

Growth investments offset the earnings impact of increased revenue

In terms of profitability, Q3 is seasonally Orthex's strongest quarter due to a favorable sales mix and a lighter cost structure compared to other quarters. We expect a slight improvement in the company’s gross margin driven by moderate revenue growth, but the increased sales and marketing investments offset this impact at EBIT level in our forecasts. We believe Orthex’s raw material costs have been roughly in line with the comparison period during the quarter, so the company no longer received significant tailwind from lower material costs as it did earlier in the year. In our forecasts, the company’s Q3 EBIT remains at the level of the comparison period at 3.5 MEUR.