Fiskars Q2'24: Weak market continues to weigh

Fiskars' Q2 result was close to expectations and the full-year guidance was reiterated. However, continued sluggish demand has driven down our forecasts for next year by as much as 10%. We believe the valuation is pricing in earnings growth for the next few years, which we think is premature. We reiterate our Sell recommendation and EUR 15 target price.

Georg Jensen's earnings improvement brought result close to forecasts despite weak revenue

Fiskars' organic revenue decreased by 5% in Q2, which was more than we had forecast (2%). The Georg Jensen deal supported the growth in reported revenue, which was 5%. Fiskars’ adj. EBIT decreased to 19 MEUR from 24 MEUR in the comparison period, slightly below our forecast (20 MEUR). Excluding Georg Jensen, Fiskars' result would have decreased to almost 15 MEUR, but Georg Jensen, which typically makes a loss in the early part of the year, was turned around to a profit of almost 4 MEUR, driving the Vita segment's result slightly above our forecast. In our view, this is partly due to the faster realization of synergies than we had estimated and therefore partly a question of timing, which will reduce the support from synergies next year. However, both segments' result was down year-on-year.

Guidance of a slightly better full-year result was repeated

Fiskars’ guidance remained unchanged, meaning that the company expects comparable EBIT to be slightly above the 2023 level (110 MEUR). We believe that "slightly" means 0-10%, or around 110-120 MEUR. If you consider Georg Jensen for the full year 2023, Fiskars' pro forma adj. EBIT was 101 MEUR (as GJ's Q1-Q3'23 result was negative), compared to which the guidance requires a more defined improvement. In the absence of organic growth, this will come exclusively from efficiency measures and synergies from the Georg Jensen deal. We have slightly lowered our 2024 forecasts and now expect adjusted EBIT of 114 MEUR. In our view, this will require a small upturn in revenue in Q4'24 and if the trend remains weaker, Fiskars risks missing its guidance. We have lowered our earnings forecasts for 2025 by around 10% as we have moderated our growth expectations and while Georg Jensen synergies are already clearly visible this year, their positive impact will be less in our forecasts next year.

Organic growth and a clear margin improvement in 2025-26 forecasts

Under the current management, i.e. in the last 3-4 years, the company has clearly focused more on growth, but also on further improving profitability. However, due to weaker market demand, no growth has been achieved and the adj. EBIT level fell to the pre-COVID level of around 100 MEUR last year (including Georg Jensen for the full year) after the strong 2021-22. We see the actions and strategy of the current management as good as such, but the performance level the company is aiming for clearly requires more volume which calls for market recovery. Even Fiskars does not expect this in the current year. We also consider the adjusted EBIT margin of 15% targeted by the company challenging, especially in the target year 2025. However, we expect clear organic growth and margin improvement in 2025-26.

Even neutral valuation requires strong earnings growth from current levels

Fiskars’ 2024-25 valuation multiples are above our acceptable multiples and only within them for the 2026 forecast. Therefore, we consider the stock’s expected return as weak despite good earnings growth in the coming years. We feel the clearly weakened earnings level in 2022-23 and the partly surprising acquisition bruised the company’s investment profile and raised the risk level of the stock.