Translation: Original comment published in Finnish on 2/9/2023 at 8:59 am.
Purmo reported its Q4 result this morning. The adjusted EBITDA decreased as expected from the comparison period, but was slightly better than we expected. The company proposes dividend distribution in line with last year as we estimated. Purmo’s guidance of adjusted EBITDA in 2023 being on a similar level (+/- 5%) to 2022 (92.9 MEUR) was better than expected. Thus, there is clear upward pressure in estimates and the share deserves a slight positive price reaction today.
Q4 net sales fell as expected, driven by radiators
The net sales of Purmo's Radiator segment decreased by 25% due to a strong volume decrease caused by both a drop in construction activity and distributors’ destocking. This was expected and had been communicated clearly by the company beforehand. Our expectation for the drop was 22%. Net sales of the ICS division increased by 25% from the comparison period, which was better than our estimate (20%). This was supported especially by the Italian market. Overall Purmo's net sales decreased by 7%, fully in line with our expectations.
Earnings fell clearly from the comparison period, but slightly less than we expected
The decline in net sales/volumes in Radiators also depressed earnings and margins as expected. The adjusted EBITDA of Radiators was EUR 8 million, i.e. nearly halved from EUR 15 million in the comparison period but was still a smidgen above our estimate (7 MEUR). ICS was able to improve on the comparison period and its EBITDA was over EUR 11 million while the comparison figure was EUR 9.7 million and our estimate EUR 9.2 million. At Group level, adjusted EBITDA was EUR 16 million, compared to our EUR 14 million estimate. The adjusted EBITDA for 2022 was EUR 93 million, which was well in line with the company's guidance from November (88-96 MEUR). Reported figures are depressed mainly by non-recurring items related to the efficiency program. The company's net debt/EBITDA was 3.0x at the end of the year, when the target is to be below it. Therefore, there is currently limited room in the balance sheet for acquisitions with debt. However, a solid earnings outlook means that the indicator should no longer weaken clearly.
Despite market challenges, Purmo’s guidance indicates a stable performance
Both Purmo and its peers have already reported that the radiator market will continue as difficult also in 2023 and negative volume development is expected for the whole year. Demand is also expected to decline in indoor climate solutions in 2023 due to the decrease in greenfield construction activity. However, the company does not directly comment on the demand/net sales outlook in its Q4 report. We expect a drop of around 4% in Purmo’s net sales this year. However, the company’s guidance is that 2023 adjusted EBITDA will be at the same level as in 2022, i.e. around EUR 93 million. Purmo says this means a +/- 5% change, or about EUR 88-97.5 million. Our estimate is EUR 87 million, so the guidance brings slight upward pressure to our estimates. Earnings development is supported by, e.g., the efficiency program Purmo launched in the fall.
Purmo Group
Purmo Group develops solutions for indoor climate. The company provides heating and cooling solutions for residential buildings and premises, including radiators, towel warmers, underfloor heating, convectors, valves, and controls. The business is divided into a number of business areas and the solutions are used in industry and the real estate industry. Customers are found on a global level with the largest concentration in Europe. The products are aimed at corporate and private customers.
Read more on company pageKey Estimate Figures2022-12-09
2021 | 22e | 23e | |
---|---|---|---|
Revenue | 843.6 | 904.0 | 872.4 |
growth-% | 25.68 % | 7.16 % | -3.50 % |
EBIT (adj.) | 73.7 | 58.4 | 54.6 |
EBIT-% (adj.) | 8.73 % | 6.46 % | 6.26 % |
EPS (adj.) | 1.78 | 0.79 | 0.77 |
Dividend | 0.36 | 0.35 | 0.35 |
Dividend % | 2.54 % | 4.85 % | 4.85 % |
P/E (adj.) | 7.96 | 9.13 | 9.35 |
EV/EBITDA | 24.30 | 7.06 | 9.75 |