Relais Q3 on Thursday: Our earnings expectation is on par with the comparison period

Translation: Original comment published in Finnish on 10/31/2023 at 7:04 am EET

Relais will publish its Q3 report next Thursday at around 9.00 am EET. We expect the company’s net sales to remain growing due to acquisitions, but EBITA to remain roughly at the level of the comparison period due to increased costs and exchange rate changes. Relais has not provided numerical guidance for this year, so our attention in connection with Q3 is focused on management comments on the sustainability of the recent decent demand picture in the future.

Acquisitions support net sales development

We expect Relais' Q3 net sales to have increased by close on 9% from the comparison period to EUR 70.4 million. The main driver of net sales growth are the SET, Adita and AutoMateriell acquisitions. We expect organic net sales growth to have been moderate at 1%. In Q3, we expect the demand situation of the service business (good 30% of net sales) to remain good and net sales to grow slightly organically, while organic net sales of the technical wholesale and product business (nearly 70% of net sales) is expected to decrease reflecting a slight drop in volumes. SEK that has weakened by more than 10% from the comparison period (Sweden’s share of net sales just over 40%) also brings headwind to reported figures.

SEK and cost pressure limit earnings growth

We expect Relais Q3’s EBIT excluding PPA depreciation (EBITA) to be approximately at the level of the comparison period at EUR 7.6 million, which corresponds to a more modest EBITA margin of 10.8% than in the comparison period. The expected weakening in the relative profitability is due to the unfavorable development of SEK, cost inflation, the sales distribution developed through acquisitions (higher share of net sales from technical wholesale and product business) and the increased the cost mass. The company is expected to recognize accounting foreign exchange losses that have no cash flow effect in financial costs. We expect the EPS adjusted for PPA depreciation to be around EUR 0.26, although our forecast does not include the above-mentioned non-cash-flow-affecting foreign exchange losses.

Gloomy economic development raises questions for the rest of the year

Relais has not issued a guidance for the financial year 2023, and we do not expect any guidance from the company in connection with the Q3’23 report either. In connection with the result, we will focus on updates concerning the outlook of product segments and geographical areas. Among the product segments, Q4 is seasonally important for the lighting business, and we are looking for an indication of how the seasonal sales of lighting products that will continue until the beginning of next year has fared.