Koskisen Q4 Thursday: Record year comes to an end with demand outlook covered in sawdust

Translation: Original comment published in Finnish on 3/14/2023 at 6:04 am.

Koskisen, the wood processing company listed at the end of 2022, will report its first financial statements release as a listed company next Thursday. We estimate that Koskinen’s profitability will still be at a rather excellent level for the company in Q4, especially driven by good demand and high sales prices in the Panel industry. We expect the company to distribute a dividend of EUR 0.43 per share in accordance with the Board's estimate in connection with the IPO. The recently published initiation of coverage report on Koskisen is available here .

We expect revenue to still be at a good level driven by prices

Koskisen has not published comparison figures from Q4’21. We estimate that Koskisen’s Q4'22 revenue is around EUR 68 million. By segment, we expect the Sawn Timber industry to reach EUR 32 million in revenue, driven by market prices that are higher than the longer-term averages, even though volume levels have been falling with cooling construction markets and slowing economy. For the Panel industry, we expect revenue to be EUR 36 million driven by still high plywood and chipboard prices. We expect the Panel industry’s volume to remain healthy despite the slowdown in the economy, as we expect the gap left by the previous supply from Russia in the European birch plywood market to help the demand for plywood in Koskisen’s Panel industry.

EBITDA probably still at a good level, driven by the Panel industry

In Q4'22, we expect Koskisen's EBITDA to be EUR 9.2 million (reported EBITDA: 7.7 MEUR), corresponding to an adjusted EBITDA margin of around 13%. Thus, we expect the adjusted EBITDA margin (64.7 MEUR) for the full year 2022 to be at the bottom end of the guidance range (adjusted EBITDA %: 21-23%) at 21%. We estimate that Koskisen’s Group level profitability in Q4 remained good. We expect the fall in volume and market prices of sawn timber and processed timber and cost inflation to have depressed he profitability in the Sawn Timber industry close to zero. However, the situation is compensated by the Panel industry, whose strong revenue development has kept the cost pressure at bay (e.g. availability problems of birch logs and thus high prices). Therefore, we expect the relative profitability of the Panel industry to remain at an excellent level (EBITDA: 21%) as in the previous quarter (Q3’22 EBITDA %: 18%). In addition, the reported result is weakened by non-recurring costs related to the IPO. Considering slightly increasing depreciation, normal financial expenses and taxes, we expect the company's adjusted EPS to be EUR 0.20 in Q4.

Guidance known - Panel industry will carry the result in 2023

In the prospectus Koskisen issued a guidance for 2023, based on which it expects that its 2023 revenue will not exceed the 2022 level, and its adjusted EBITDA margin is 12-14%. We estimate that revenue will decrease by 13% to EUR 268 million in 2023 and adjusted EBITDA to be around EUR 31 million. The earnings level corresponds to a 11.6% adjusted EBITDA margin that is near the bottom end of the guidance range. We, therefore, expect the company to repeat its guidance at this stage. In our estimates, 2023 is much like Q4. This is based on the supply disruption in the birch plywood market in the Panel industry (i.e. Russia's exit from the market through sanctions), which should keep birch plywood prices at high levels. By contrast, we expect this year to be difficult for the Sawn Timber industry in the rip current between the expected price and volume drop in sawn timber and processed products and cost inflation. In addition to the economic situation, we are interested in the demand outlook for Koskisen’s Panel industry and management comments concerning wood availability and cost pressure management.