Translation: Original comment published in Finnish on 2/16/2024 at 9:21 am EET

The Q4 result published by Koskisen this morning was broadly in line with our expectations and the dividend proposal exceeded our forecast slightly. However, due to the continuing difficult market situation, the company’s guidance range, especially for profitability, is subdued and our forecasts are at the top of the range. According to our preliminary estimate, our 2024 Koskisen forecasts may be subject to slight downward pressure, but in the longer term, the report is unlikely to create significant pressure on the forecasts.

Performance deteriorated clearly, but was broadly in line with our expectations

Koskisen’s revenue decreased 11% in Q4 to 69 MEUR which was quite clearly above our estimate. In the Sawn Timber industry, the company reached the production volumes and prices of the comparison period, which was the driver of the revenue overshoot. In the Panel industry, on the other hand, the sharp drop in volumes (probably especially in chipboard) pushed revenue into a steeper decline than we expected in Q4. On the other hand, the average price of birch plywood appears to have remained strong in a supply-constrained market.

Koskisen's adjusted EBITDA was 5.5 MEUR in Q4. The operating result roughly halved from the strong comparison level, but Koskisen slightly exceeded our Q4 forecast that we updated in our pre-comment. Despite a very difficult market, the Sawn Timber industry pushed above many competitors and our estimate expecting a zero result with its Q4 adjusted EBITDA of 1 MEUR although the ramp-up of the new sawmill line in Järvelä was slightly delayed from the original plan during the quarter. The operating result of the Panel industry decreased clearly from the comparison period but corresponded to our forecasts thanks to slightly better profitability than our estimate. The result of other operations was slightly negative, while we expected a small plus through allowance sales. Depreciation and taxes were lower than we expected in the bottom lines, which is why Koskinen’s Q4 EPS exceeded our forecast slightly. Also in terms of cash flow, the report seems reasonable in our opinion, although the cash flow from operating activities clearly fell from the comparison period with the result.

The guidance range for profitability is wide and our margin forecasts are at the top end

Koskisen issued a guidance for 2024 according to which revenue will grow from last year and the adjusted EBITDA margin will be 8-12%. Last year, Koskisen generated an adjusted EBITDA of 12.2% with a 271 MEUR revenue. Before the report, we expected the company to grow by about 12% and an EBITDA margin of 11%. Thus, the guidance as such is in line with our forecasts, but in terms of profitability we are at the top of the company’s range and the guidance also leaves the door open for a quite clear earnings drop. We believe, the broad guidance range for profitability is explained by the difficult market situation everywhere, especially in construction, which is likely to slow down demand and pricing especially for sawn timber and chipboard at least in H1. In terms of growth, we feel Koskisen’s outlook is clearer due to the new capacity of the Järvelä sawmill line.