Raute - Wood Processing earnings improve
Q1 earnings still a bit soft yet will trend up over the year
Raute recently added another larger EUR 20m Latvian order, which speaks for the company’s strong positioning in Europe. The Finnish political strikes seen in Q1 are likely to have affected operations at least to some extent, but we still expect Q1 revenue to have grown by 14% y/y to EUR 42m as the comparison period had only EUR 24m in Wood Processing revenue (whereas we estimate, in line with guidance, FY ’24 Wood Processing revenue to top EUR 130m). Wood Processing Q1’24 figures would still nonetheless have been relatively modest even without the strikes as we estimate Raute’s order book of some EUR 270m (of which five larger orders made up EUR 237m) takes until around H2’24 to turn in more significant amounts of the large projects’ revenue.
We estimate EUR 12.7m comparable EBITDA for the year
We estimate Q1 comparable EBITDA at EUR 2.6m, in other words slightly down from the EUR 2.8m comparison figure as development costs still limit Wood Processing earnings. Political strikes were known to happen in Finland, but their scope was a surprise and so Q1 figures are likely to have remained a bit modest. Raute issued its FY ’24 guidance before the latest Latvian order was signed; some of the project will be delivered already this year and hence could support Raute close to the upper ends of the EUR 170-195m revenue and EUR 10-14m comparable EBITDA ranges. We would in any case estimate Raute’s revenue to top EUR 200m in FY ’25, if not already this year, as Wood Processing has its order book to deliver. We estimate EBITDA to decline by some EUR 1m for both Services and Analyzers while we see Wood Processing up by EUR 5m as its revenue should gain by about EUR 40m this year.
We estimate FY ‘25 comparable EBITDA to gain some EUR 4m
Given that Raute has secured a very high order book in a market that’s still soft in Europe we expect growth to extend at least until next year as changes to small order demand are more likely to be positive than negative. We estimate FY ’25 revenue to grow by 10% and EBITDA by another EUR 4m. Raute’s below 7x EV/EBIT multiple, on our FY ’24 estimates, is thus quite modest. We retain our EUR 13.0 TP and BUY rating.