Suominen - Waiting for steeper recovery
Suominen reports Q4 results on Mar 5. We believe the environment is slightly more favorable this year, while earnings clearly should continue to improve from the lows.
Comparison figures remained quite low
Suominen’s earnings improved last year even if at a slower pace than might have been expected earlier. The softness was attributable to H2’24, when there’s more volume potential due to seasonality. Earlier last year it seemed wipes demand would increase meaningfully over the year, however brands like P&G, Clorox and Kimberly-Clark didn’t in the end see that significant volume growth. Suominen’s H1’24 EBITDA improved by EUR 4m y/y, but we estimate H2’24 earnings to have remained flat due to Q3 as there were operational challenges which had an adverse impact of EUR 3m. We estimate Suominen Q4 revenue to have grown 6% y/y, driven by Americas as the area had relatively soft volume development earlier in the year. We expect Q4 EBITDA to have gained around EUR 2m y/y to EUR 7.5m.
Earnings recovery rate should gather pace this year
Raw materials prices declined by ca. 5% q/q in Q4; Suominen should have been positioned to see further gross margin recovery especially if volumes also continued to recover. The relevant segments of wiping brands saw somewhat mixed volume trends in Q4 as there were y/y gains of 4% but also marked declines. We expect Suominen to be cautiously positive in its comments on volume outlook for this year as the comparison figures are still not high. Sales margins could have more upside going forward if there’s room to improve mix, but nonwovens prices may see headwinds from now on. We thus believe Suominen FY’25 revenue doesn’t grow a lot, but earnings should continue to recover from the low comparison period.
Multiples reflect continued earnings recovery
We estimate Suominen to have hit EUR 20m EBITDA last year and expect the figure to gain another EUR 16m this year. Suominen is valued 10x EV/EBIT on that basis; earnings should have more potential next year too, when the multiple would be 7x. This level isn’t very high, but in our view upside seems limited for now unless Q4 results already show steeper improvement pace. Our new TP is EUR 2.1 (2.2) as our new rating is REDUCE (SELL) according to the updated rating methodology (see p. 3).