Suominen - Waiting for more results
Suominen reports Q2 results on Aug 7. We believe H1’25 earnings will remain rather flat, but H2 should at last see bigger gains as the company has lately taken more measures.
Additional cost cuts help, but more volumes are needed too
Suominen’s Q1 earnings remained soft relative to estimates due to general operating expenses; the EUR 10m cost savings program as well as the change of CEO are some of the additional measures towards recovering profitability at a faster rate than seen in the past couple of years. Additional cost cuts can be valuable, but in our view Suominen especially needs to recover nonwovens delivery volumes in the next couple of years. In this sense we look forward to hearing the incoming CEO’s views on potential new growth niches since many of the significant current categories, including baby wipes as well as more value-added products, remain well supplied. Other strategy updates might include finding some ways to improve Suominen’s value-chain positioning. We estimate Suominen’s Q2 revenue to have remained flat at EUR 119m and expect adj. EBITDA at EUR 5.8m.
H1 earnings flattish y/y, yet H2 should at last see gains
We expect an earnings gain of EUR 10m for FY’25; we estimate H1 EBITDA to increase only modestly y/y, but H2 has low comparison figures while raw materials prices declined by more than 5% q/q in Q2. This should support sales margins towards the autumn, while gross margin could get more boost from higher utilization if this autumn season sees improving volumes. We thus estimate this year’s earnings recovery to happen mostly in H2. Recent wipes brand earnings releases, such as that of Essity, also hint volume growth remained modest in Q2.
Earnings multiples neutralize towards next year
Suominen’s FY’25 earnings are likely to remain quite modest even if they should pick up more significantly compared to the previous couple of years. FY’26 would then have room to improve more as especially H1’25 still shows pretty low figures. For next year we would expect earnings to gain by some EUR 15m more, however even in that case EBITDA margin would remain below 9%. Suominen is valued close to 19x EV/EBIT on our FY’25 estimates as earnings recovery still hasn’t started in any big way, but on our FY’26 estimates the multiple is already below 8x. From this perspective valuation isn’t very expensive but continues to demand patience. Our new TP is EUR 1.9 (2.0) as we retain REDUCE rating.