Purmo Q1 next Wednesday: Further decline expected, improvement for the year as a whole

Translation: Original comment published in Finnish on 4/17/2024 at 7:43 am EEST.

Purmo will report its Q1 results next Wednesday at around 8.15 am EEST. Purmo's Q1'23 was relatively strong and we expect a significant decline in revenue in comparison. However, the progress of the efficiency program supports the result, where we also predict an absolute decline, but an improvement in the margin. We expect Purmo to reiterate its guidance of 2024 adjusted EBITDA at the same level or higher compared to 2023.

Revenue still expected to decline significantly year-on-year

Purmo's revenue declined already in Q1'23 compared to a very strong comparison period, but demand weakened further last spring and has been flat since Q2-Q4'23. We expect revenue to be roughly in line with the previous quarters, but down 16% year-on-year. We predict a decline of 17% in the larger Climate Products & Systems segment and a decline of 13% in the Climate Solutions segment.

The efficiency program still progressing well

The drop in revenue and its negative leverage effect has a negative impact on earnings development. However, the company's efficiency program has made good progress and is supporting Purmo's results. The impact of the efficiency program was already 30 MEUR by the end of 2023, and Purmo estimates it to be 50 MEUR by the end of 2024. The average adjusted EBITDA for Q2-Q4'23 was around 22 MEUR, whereas our expectation for Q1'24 is 23.5 MEUR. We expect the adjusted EBITDA in Climate Products & Systems to be down from the comparison period, but with a margin improvement due to efficiency measures. We expect the reported result to continue to be negatively impacted by one-time costs related to the efficiency program, which should, however, be significantly lower this year than last year.

Broad guidance to remain in place at this stage of the year

Purmo's guidance is for 2024 adjusted EBITDA to be at the same or higher level compared to 2023 (92 MEUR). At the same level means +/- 5% and above means more than 5% improvement. This means that the estimate range is quite wide. Our estimate is 96 MEUR, i.e. an improvement of 4%. Purmo reports that retailer inventory levels have leveled off and the above-mentioned efficiency program is supporting the result this year, as expected. On the other hand, the guidance takes into account the impact of a weak market and potentially declining price levels. We expect Purmo to repeat the guidance at this early stage of the year, although we believe that the rather broad guidance will allow for refinement at a later stage. The company will host a webcast on the results day at 10 am EEST, which can be streamed here.