Suominen - Recovery already largely priced in
Suominen’s challenges continue at least in the short-term, but the company is now taking more significant measures.
Many measures are needed to regain adequate profitability
Suominen’s Q4 was still impacted by the incidents at its two US plants, which led certain customers to take their volumes elsewhere, while European volumes also remained soft. The EUR 95m Q4 revenue thus fell below the EUR 108m/108m Evli/cons. estimates and the EUR 1.9m comparable EBITDA was lower than the EUR 4.6m/3.9m Evli/cons. estimates. Q1’26 is yet unlikely to see any big volume recovery, but the outlook should improve by April and we expect growth from there onwards. We estimate FY’26 EBITDA at EUR 28m, which would already be a significant improvement on last year.
Some wipes segments clearly more attractive than others
In our view Suominen’s EBITDA margin could improve to at least around 5% this year, compared to the 3% levels seen in recent years. Higher single-digit margins should be possible towards next year if volumes begin to recover significantly, but this could take more time than that considering Suominen sees the need for more extensive operational updates. The measures taken in recent years don’t seem to have been enough, and Suominen now needs to regain competitiveness in many ways. Suominen plans to use EUR 20m over the next few years to upgrade lines mostly in the US as the market remains more attractive than Europe considering the high single-digit demand growth seen for moist toilet tissue; European demand grows at a low single-digit rate, which doesn’t yet make it very attractive in the light of recent capacity increases. We estimate mid single-digit top line growth for the next two years; Suominen could possibly see even higher growth over the period if it manages to regain customer wallet share, but before that it needs to pull off an operational turnaround.
High single-digit EBITDA margin would justify valuation
We estimate meaningful improvement already for this year, but even on that basis Suominen’s 15x EV/EBIT multiple is not yet very cheap. The 8% EBITDA margin we estimate for FY’27 implies EV/EBIT of about 10x, while on our 10% margin estimate for FY’28 the multiple would be 7x; this level would be attractive, but it’s far away even if the roadmap there is realistic. Our new TP is EUR 1.5 (1.6); we retain REDUCE rating.