Componenta Q3'24 flash comment: Missing volumes

Translation: Original published in Finnish on 11/1/2024 at 9:07 am EET.

Componenta's Q3 figures were below expectations across the board, with a clear miss on revenue. However, revenue and earnings guidance for 2024 was maintained, so the rest of the year will be busy. The share price will be under pressure today due to lower-than-expected volume growth.   

Q3 volumes underperform

Revenue in Q3 was well below our expectations and the impact of volume products that were ramped up in H1 has so far been limited. Componenta said that “volume and order book development remained at a clearly lower level throughout the review

period (Q1-Q3) than was expected in the first half of the year. The main reasons for this are slow general economic recovery and particularly the exceptionally low level of demand in the agricultural machinery industry, which has continued across Europe.  Although order books and backlogs have gradually begun to pick up for some customers in the second half of the year, expectations of growth have been postponed until 2025 for the majority of customers”, On the agricultural machinery side, the comment is likely largely about AGCO/Valtra. AGCO will not publish its Q3 report until November 5. Despite the low volumes, Componenta's EBITDA was at a reasonable level of 6.0%, significantly better than the EBITDA on the same revenue level in the previous year (Q3'23: 2.0%). The Group's order book grew moderately at 3% year-on-year at the end of Q3, but due to the shortness of the order book (2 months), no major conclusions can be drawn. Financing costs were well above our expectations, and that of course was reflected in EPS. 

2024 guidance reiterated

Despite the underperformance in Q3 and weaker market comments, Componenta maintained its guidance for 2024 (revenue and EBITDA to improve from 2023). For Q4'24 this means at least 46% year-on-year revenue growth and an EBITDA margin of 6.8%. Although Componenta says that the acquisition of Fortaco on October 1 has no impact on the guidance, the inclusion of Fortaco's operations isn’t exactly a bad thing either. In any case, the guidance is credible. 

Pressure on the share price today

Overall, the Q3 report was disappointing in terms of volumes, as well as the postponement of the market recovery expected by customers to 2025. This last point is not too surprising, given the comments from companies that have released their Q3 reports so far. However, we believe the stock will be under pressure today.