Raute - Waiting for higher order intake
Raute reports Q2 results on Aug 12. This year will set another earnings record, while the focus now turns to new orders.
Some further cost measures taken
Raute’s Q1 EBITDA may have been so strong, due to Wood Processing, that it might not be topped for a while as order book likely continued to decline in Q2 since market recovery was further postponed by the trade war. Raute also recently decided to close its Chinese production facility as even its least-advanced product category wasn’t cheap enough for the market. The Chinese market thus doesn’t seem to hold much potential for Raute in the foreseeable future, but the company still has at least a few interesting markets in the APAC region. The decision will save Raute some EUR 2m in annual fixed costs. We expect Raute to have booked new orders for more than EUR 30m in Q2, which would be an improvement compared to recent pace but still rather modest. Q2 faces high comparison figures in terms of revenue while earnings remained relatively low last year, reflecting the recent developments of Wood Processing. We estimate Raute’s Q2 revenue to have declined 6% y/y but expect adj. EBITDA to have gained EUR 1.3m y/y to EUR 6.7m.
Very high Wood Processing comparison figures for next year
Currently Raute has enough order book so that its FY’25 revenue should hit EUR 200m with an EBITDA margin of about 12%. FY’26 top line could however fall at a double-digit rate unless new orders pick up soon. We estimate FY’26 revenue to fall by 10%, as Wood Processing could decline even faster than that, while we see EBITDA margin down about 100bps. Raute is set to post record-high H1’25 earnings, while H2 is already likely to decline from this record by some EUR 2m. It will not be easy to turn Wood Processing back to growth in the short-term since the comparison figures are so high, but Services should remain stable or growing while Analyzers has rather low comparison figures and more long-term potential.
New orders could surprise and drive upside towards FY’26
Raute upgraded guidance twice last year; we believe there will not be another revision this year, but earnings are to remain very high. The focus is thus mostly on the level of new orders, and a positive surprise would act as a catalyst since Raute’s earnings multiples have remained very modest for a while. Raute is valued below 4x EV/EBIT on our FY’25 estimates and still below 5x next year. We retain our EUR 19.0 TP and BUY rating.