Raute - Flat guidance above our expectations

While we are cautious with our estimates for the next few years, expecting declining sales and EBIT, the company guides flat sales and EBIT for 2019. Meanwhile Raute’s balance sheet is strong enough for the distribution of EUR 1.40 per share as 2018 dividends. The 5.5% dividend yield, along with other valuation metrics, reflects the company’s current cyclical positioning where further growth is not expected. Excluding a development such as a major entry into the Chinese market, we continue to estimate declining sales for the time being. Our cautious stance is supported by the fact that Raute’s order book seems to have peaked in early 2018.

Demand still buoyant, yet uncertainty is rising

Raute disclosed already in January that 2018 sales and EBIT would be higher than previously expected. Consequently, yesterday’s results presentation provided little new concrete information. Many of Raute’s pre-existing customers have already invested heavily during the past few years. While the major markets have been developing positively and Raute’s customers’ mills have been running at high utilization rates, we are waiting to see how the company’s order book will develop during the first months of 2019.

We maintain our HOLD rating and EUR 27 target price

Raute’s flat guidance for 2019 gives us pause to consider if our own estimates are too pessimistic. Yet we are not updating our projections this time. We will revise our estimates if Raute’s order intake for the beginning of 2019 comes in higher than we are currently expecting.

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