Aspo - Market softness to cut results short

Name: Evli
Price range: $

Aspo abandoned its former guidance for the rest of this year as ESL’s cargo volumes will be soft due to low steel industry demand. Telko’s profitability development will remain muted especially in the Western markets. We cut our estimates, our TP is now EUR 8.75 (9.25), rating HOLD.

In our view ESL’s long-term case remains intact

As was known previously, SSAB will temporarily shut one of its two furnaces in Raahe. The seizure is expected to last some 4-6 weeks, and the furnace should be firing up again early next year. ESL had of course made allowances in its budgeting for such an event, nevertheless the shipments materialized lower than expected. We note the Baltic Dry Index has declined steeply during the last couple of months, however ESL says its Supramaxes haven’t been materially affected so far. As the new LNG-powered vessels and AtoB@C are now performing according to expectations, it follows that the lowered near-term outlook is entirely due to low steel industry shipping volumes. With regards to Telko, Aspo says the Eastern market is developing basically as before, however the Western market has proved more challenging than expected.

We cut our Q4 estimates, see higher uncertainty for Telko

We trim our Q4 estimates. We previously expected ESL to achieve EUR 5.5m in Q4 EBIT; our new estimate stands at EUR 4.3m. Our previous Q4 EBIT estimate for Telko was EUR 2.7m, and the reduced expectation amounts to EUR 2.3m. We leave our estimates for Leipurin intact. This means we estimate Aspo to post EUR 6.4m Q4 EBIT, which can be compared to the EUR 6.7m figure recorded in the previous quarter, and the adjusted EBIT of EUR 7.4m in Q4’18. We thus see Aspo reaching EUR 22.1m in FY ’19 EBIT (EUR 20.6m in ’18, or EUR 25.4m when adjusted for the Kauko write-off). Aspo now guides FY ’19 EBIT to be higher than in ’18. Aspo previously expected the figure to be in the EUR 24- 30m range. We also cut our next year estimates for Telko.

Improvement steepness is uncertain due to macro softness

Our updated TP is EUR 8.75 (9.25), rating remaining HOLD. In our view both ESL and Telko continue to hold significant improvement potential, however caution is in order considering the softness of certain key Aspo markets.

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