Flügger Q1'25/26: Poland growth continues and early Nordic rebound

Flügger delivered 3% revenue growth in Q1 2025/26 to MDKK 653, led by continued strong growth in Poland +12% y/y in local currency. Professional painter activity in the Nordics also showed signs of recovery, particularly in Sweden, from low levels. In Denmark, revenue was stable as sales growth to professional painters and retail customers offset the downscaling of private-label/low-price products. Despite stable revenue, we expect a positive margin impact from the shift in sales mix towards core customer groups. We continue to see a sustained recovery with moderate topline growth and EBIT margin expansion driving a favourable risk-reward, and reiterate our “Accumulate” recommendation and price target of DKK 370 per share.

Nordic coatings group with international growth engine

Flügger is a family-controlled decorative paints company with strong market positions in the Nordics and a growing footprint in Central Europe. The group operates through three segments: Nordics, International, and Partnerships. Nordic earnings are recovering gradually as housing and renovation activity remains subdued, while the International segment, driven primarily by Poland, has become the key growth engine, with double-digit revenue growth in recent years. The Partnerships segment (notably Unicell in Poland and Eskaro in Ukraine) adds steady revenues, with upside potential from future reconstruction of Ukraine. Under the Flügger Organic strategy (2024-2027), the company is focusing on professional painters, adding stores internationally, expanding market access through partnerships, and maintaining cost discipline.

Revenue rebound slightly slower, but with margin-accretive product mix

Flügger’s top-line recovery remains modest, with Q1 2025/26 revenue growth of 3% reflecting the strategic downscaling of low-margin private-label products in Denmark. While this weighs on reported revenue, the shift improves the overall sales mix towards higher-margin own-brand paints and professional customers. Combined with strong International growth, particularly in Poland, and higher capacity utilization following recent factory upgrades, this product and customer mix supports margin expansion even amid slower revenue momentum.

Deleveraged balance sheet to enable greater shareholder returns

We expect strong cash flow as recent factory capacity upgrades enable moderate CAPEX in the medium term. The balance sheet is deleveraged, with net bank debt/EBITDA around 1.0x at end-2024/25, and increasing cash flow from rising profitability enables a high payout ratio and estimated dividend yield around 7%.

Absolute and relative valuation support a favorable total return profile

Our DCF-based model value of DKK 385 per share highlights the value to be unlocked from a sustained recovery. Despite uncertainty remaining in the timing and pace of a continued market strengthening, the DCF value supports long-term value creation. The estimated absolute EBIT growth and resulting strong cash flow support and increasing dividend outlook, with a sustained yield of >7% while downside risk is reduced following deleveraging, and trading multiples are reasonably priced compared to peers. We believe that Flügger’s expected return exceeds the required rate of return over the next year and medium term, and we restate our “Accumulate” recommendation and price target of DKK 370 per share.

Disclaimer: HC Andersen Capital receives payment from Flügger for a research and DigitalIR subscription agreement. / Philip Coombes 08:15 30/09/2025, updated 09:48 01/10/2025