Eltel Q1’25 preview: Profitability improvements are expected to continue

Eltel is set to release its Q1 earnings report on Wednesday, April 30, at 08:00 am CET.  Last year's divestment of the company’s Polish business is expected to weigh on reported revenue growth, but the adjusted EBITA is expected to improve from the comparison period. In addition to the figures, we are interested in comments on the market outlook and overall strategy execution. 

A mixed performance among country units is anticipated

We forecast Eltel’s Q1 reported revenue to be 171MEUR (Q1’24: 176 MEUR), reflecting a 3% year-on-year decline. The main driver behind the negative development is the divestment of High Voltage Poland (Q2’24). On a country-unit level, performance is expected to be quite mixed. Norway and Sweden are both estimated to decline (~-5% y/y), while Finland and Denmark are expected to contribute positively to growth (9% and 1%, respectively). The challenge in Norway is nothing new, whereas the softness in Sweden is seen as temporary and mainly due to the delayed impact of early project closures in Q3. While these effects were mitigated in Q4 through successful resource reallocation, we now expect the residual impact to weigh on Q1. The strong growth in Finland is expected to be driven by continued robust demand in the FTTH segment, but also increased activity in Power, supported by the large solar power plant order received during the quarter.

Seasonally weak quarter, but increased cost efficiency and divestiture to improve profitability

Q1 is typically Eltel’s weakest quarter, and we estimate adjusted EBITA at -2.6 MEUR (Q1’24: -4.0 MEUR), reflecting continued year-on-year improvement. This is expected to be supported by incremental gains across country units, driven by earlier restructuring efforts, but largely due to the divestment of the unprofitable high-voltage business in Poland. In Norway, despite restructuring and cost-reduction initiatives, we do not anticipate material improvement this quarter due to transition-related effects. However, we believe the full benefit of these measures should become visible from late Q2 into Q3. FX impacts are expected to be neutral overall (Sweden slight tailwind, Norway slight headwind). At the bottom of the P&L, we forecast financial expenses to be at the normal level (incl. interest payments on hybrid bond) and taxes to be at a modest level. Reflecting this overall picture, we expect the reported EPS to be at EUR -0.04.

Focus on comments about the market outlook

As Eltel does not provide numerical Group guidance, we focus on more qualitative insights into the market outlook across its country units. Finland is expected to lead growth in 2025, supported by the significant solar power park order. We anticipate further growth from continued progress in e.g. public infrastructure sector, solid demand within Power, and further expansion within new and adjacent markets. These factors, along with improved operational efficiency, are expected to drive 2025 revenue to 869 MEUR (+5% y/y) and EBITA to 22 MEUR (2.6% margin). While Norway continues to pose a risk due to persistent underperformance, we anticipate gradual improvement throughout the year as cost measures take full effect.

We believe Eltel is largely insulated from current global trade turmoil due to its Nordic focus (Nordic share of revenue, FY24: 93%) and given that a majority of tier 1 suppliers are located in Europe. However, extended macroeconomic uncertainty could delay customer decision-making and project rollouts overall in the short term, especially if it would lead to tighter fiscal policy or a strong resurgence in inflation rates. However, in the medium to longer term, structural drivers like electrification and digitalization will require substantial infrastructure investments, factors we view as supportive of Eltel’s growth trajectory.