Automatic translation: Originally published in Finnish 05/10/2026, 05:34 GMT. Give feedback here.

The prolonged IT system overhaul means that sustainable earnings improvement will, in our view, only be possible in 2029, when the ERP and the Järvenpää distribution center are properly up and running. We also believe that the sale of the stake in Kronans is likely only on a 2 to 3-year horizon. In the meantime, Oriola has transformation projects involving significant operational risks that will further weaken its balance sheet. Thus, we see the risk/reward ratio as weak on a 12-month horizon, even though we recognize the company's potential for value creation in the medium term. Our estimates decreased significantly regarding one-offs and slightly on an operational level. We lower the target price to EUR 0.80 (was EUR 1.0) and the recommendation to Reduce (was Accumulate).

ERP project delayed and clearly more expensive

Oriola announced last week that its IT system overhaul will be postponed to 2028 (prev. 2027). At the same time, the estimate for the total cost of the project increased to 54 MEUR from the previous 35 MEUR. Oriola has also changed its integration partner mid-project, which partly explains the cost increase, but also indicates that the project implementation failed according to the original plans. The delay was expected, but the increase in costs was clearly greater than our expectations. The costs will be booked mainly as one-offs, and on the back of this, we decreased our reported earnings estimates by around 15 MEUR mainly for the years 2027-28. We also added 5 MEUR in one-off costs for 2028 related to the relocation of the Finnish logistics center.

Guided earnings improvement hangs by a thread

Oriola's guidance is that the full-year adjusted EBITDA will grow from the previous year (35.1 MEUR). For H1, the company's earnings were a marginal 0.1 MEUR better than the comparison period, which was weaker than the company's original plans. As a result of the increase in fuel prices experienced during September, we believe Oriola's costs will rise slightly more in the rest of the year than previously estimated. In this report, we decreased our operational earnings estimates by 2-3%. Full-year adj. EBITDA is now in our estimates practically at the level of the comparison period (35 MEUR), and we therefore see a clear risk for Oriola to lower its guidance during the rest of the year. However, a change in guidance to, e.g., "at last year's level" would be very much expected.

In our view, earnings improvement will focus on 2029

The company targets at least 5% growth and an adj. EBITDA margin of over 25% (2025: 17%) during the strategy period ending in 2029. We believe the growth target is credible, but the profitability target looks increasingly unlikely following the ERP delay. Both the ERP system and the Järvenpää distribution center will only be implemented in 2028, at which point implementation costs and potential disruptions will, in our estimate, also weigh on operational earnings. The ERP issues of 2017 serve as a reminder that major system changes involve significant operational risk. We see the efficiency benefits showing in earnings only from 2029 onwards, and we estimate profitability to remain roughly at current levels until then, excluding the weaker 2028. One-off costs also weigh on the already low equity ratio, which, according to our estimates, will drop to 10% in 2028. If earnings were to prove weaker than we expect, Oriola would, in our view, have to consider strengthening its balance sheet with, e.g., a hybrid loan.

Risks outweigh opportunities in the coming years

Our sum of the parts and DCF values are still clearly higher than the target price, but their realization requires the execution of ongoing projects and/or the sale of the Kronans ownership. The profitability of Kronans must improve before the sale, which is why we consider the sale of the stake likely only on a 2 to 3-year horizon. Until then, the balance sheet carries a significant write-down risk and a potential need for equity, which will be increased by the ERP costs. Considering the weak earnings visibility, elevated operational risks, and the time required for value realization, we believe the risk-adjusted expected return of the share is weak.