Suominen - More patience required
Suominen faced another setback on its earnings recovery path as US volumes were missing big time. There are still drivers for higher H2 EBITDA, but more patience is required.
Another big volume headwind hit earnings in Q2
Suominen’s Q2 revenue declined by 16% y/y to EUR 99.8m, significantly below the EUR 119.0m/118.3m Evli/cons. estimates. EMEA was a bit soft relative to our estimates, but the disappointingly low figure was mainly due to the US where the trade war caused nonwovens customers to stock their inventories with Chinese supplies ahead of the announced tariffs. Suominen’s volumes suffered further as a result, meaning gross profit fell EUR 3m short of our estimate while the EUR 3.2m comparable EBITDA had no chance to reach the EUR 5.8m/4.8m Evli/cons. estimates. On the positive side sales margins seemed to improve well (and in our view gross profit and EBITDA were relatively strong given the volume headwind), which would be a strong earnings driver should the trend persist and volumes also finally gain in H2.
H2 continues to have many positive earnings drivers
The additional challenges seen in Q2 will raise the risk of negative guidance revision later this year, however without any further setbacks H2’25 EBITDA could in our view gain by some EUR 6-7m as the cost savings program should already yield results of at least EUR 2m while sales margins and especially volumes have more room to gain. This would leave Suominen’s FY’25 EBITDA about EUR 4m higher y/y, still a very modest figure. We expect the US inventory situation to gradually normalize over H2 as some improvement was already seen towards the end of Q2. Suominen also has on-going investments in Spain and the US, which would also support earnings should volumes recover.
Earnings multiples demand additional patience
FY’25 earnings were already seen to remain quite low, albeit significantly improving, before the report. The soft H1’25 earnings mean Suominen’s FY’25 EV/EBIT multiple remains very elevated, some 50x on our estimates, but the expected H2 earnings gains imply meaningfully lower multiples going forward. Suominen is now valued about 9x EV/EBIT on our FY’26 estimates, which wouldn’t still be a very low multiple but already somewhat acceptable assuming wiping end-market demand at last begins to improve after a period lacking growth. Our new TP is EUR 1.8 (1.9) as we retain REDUCE rating.