Translation: Original comment published in Finnish on 3/16/2023 at 9:21 am.
Koskisen’s Q4 result, published this morning, was better than we expected and the full-year result was the best in the company's history. Koskisen repeated the guidance given in the prospectus, based on which it expects that its 2023 revenue will not exceed the 2022 level, and its adjusted EBITDA margin is 12-14%. The Board of Directors reiterated its intention to propose to the Annual General Meeting that a dividend of EUR 0.43 per share would be distributed in 2023.
Revenue exceeded expectations for both business segments
The Group's revenue decreased from a very strong comparison period in Q4 by 16% to EUR 77.4 million (estimate: 68 MEUR) as the prices of sawn timber and processed timber had been on a record level in the comparison period. Revenue exceeded our estimate quite clearly, thanks to stronger revenue accumulation than expected in both business segments. By segment, the Sawn Timber industry generated EUR 35.5 million in revenue (estimate: 32 MEUR) and revenue decreased from the comparison period by the expected amount as sales prices had been on a record level in the comparison period and volumes shrunk from the comparison period. In the Panel industry, revenue grew by 32.5% from the comparison period, driven by good demand and high average prices, and amounted to EUR 41.9 million (estimate: 36 MEUR), which clearly exceeded our estimate. The demand for birch plywood products, in particular, continued to be strong also in the last quarter of the year. In chipboard, demand was slightly lower than in the comparison period.
Thanks to better-than-expected revenue, profitability exceeded expectations
Koskisen's adjusted EBITDA was EUR 10.7 million in Q4 (estimate: 9.2 MEUR). The earnings level corresponds to a rather good EBITDA margin of 13.8%. The absolute decrease in EBITDA from the comparison period was expected as the Sawn Timber industry achieved a very strong result in Q4'21 with record high sales prices for sawn timber. However, the earnings level exceeded our estimates with higher-than-expected revenue accumulation, but in relative terms the profitability level was at the expected level. Despite the increase in costs, the profitability of the Sawn Timber industry held its own better than we expected. Correspondingly, the profitability of the Panel industry (EBITDA %: 22.4%) also exceeded our expectations as the average product prices and customer demand improved. As expected, the reported result was affected by non-recurring costs of approximately EUR 1.2 million related to the IPO.
Considering the lower depreciation than expected and better operating result, the Q4 adjusted EBIT was EUR 8.7 million (estimate: 6.2 MEUR) corresponding to a good margin of 11%. Considering normal financial expenses and higher taxes than expected due to the better operating result, Koskisen’s EPS was EUR 0.26 which exceeded our expectations.
No changes to 2023 outlook
Koskisen repeated the guidance given in the prospectus for 2023, based on which it expects that its 2023 revenue will not exceed the 2022 level, and its adjusted EBITDA margin is 12-14% (2022: 21%). Considering the result, we estimate that the company's business conditions will remain relatively good, even if the outlook for the Sawn Timber industry is weak. We believe the performance level indicated by Koskisen’s guidance that will remain at a good level for the company is based on the supply disruption in the Panel industry’s birch plywood market (i.e. Russia's exit from the market through sanctions), which should keep birch plywood prices at high levels. By contrast, in the Sawn Timber industry the expectation is that the current year is more challenging in the rip current between the expected price drop and weak volume development (slower economy and construction activity) in sawn timber and processed products and cost inflation.
Preliminarily we expect that our estimates for Koskisen for the next few years will be subject to minor changes based on the Q4 report.