Suominen Oyj

Suominen's Q2 earnings fell slightly short of Vara consensus expectations, which leaves some uncertainty over the recovery pace heading into important H2. Volume development was positive, with an improving sale mix, but sales prices declined. New products continue to support the mix, and the company announced a EUR 20m investment into a new production line at the Alicante site. The company expected a stable market development, while lower pulp prices could support earnings going into 2025, we believe. Our DCF- and multiples-based fair value range is EUR 1.7-2.4 (1.8-2.5). Marketing material commissioned by Suominen Oyj.

Suominen’s results continued gradual improvement from Q1, while fell short of Vara Research consensus expectations. The company expects its target market to remains stable in the short term although some uncertainties related to global economic sentiment remain. Sales volumes increased y/y in Q2, while sale prices were down due to lower raw material prices. Americas sales were stronger than we had anticipated while EMEA fell short of our expectations. Guidance of improving comparable EBITDA was maintained intact, while consensus has modelled EUR 26.3m in 2024E after EUR 15.8m in 2023. Initially, we anticipate consensus to take down 2024 estimates to the tune of mid- to high-single digits.

We maintain our estimates intact ahead of Suominen’s Q2 report, due on 9 August. We expect sales to turn on a growth mode in Q2, supported by improving volumes and prices. High pulp prices have persisted during Q2, while we note recent market implications for lower prices. However, owing to lag effect, we believe lower variable costs to become visible only in Q4 and in 2025. Top line development is likely to be supported in H2 by high input costs. In May, Suominen announced restructuring programme that is expected to generate EUR 1.5m annual costs savings from September 2024 onwards. Suominen expects EUR 2m one-off costs related to restructuring. We believe the company is taking right steps with its new operating model, while high pulp costs are likely to overshadow improvement in short-term. Our DCF- and multiples-based fair value range for Suominen is EUR 1.8-2.5.

Suominen has today announced a restructuring programme that is expected to generate EUR 1.5m annual costs savings from September 2024 onwards. Suominen expects EUR 2m one-off costs related to restructuring. Restructuring is expected to result in a termination of up to 10 positions in the headquarters and global support functions. Suominen announced new operating model end of last year and we view restructuring as a logical next step to align the structure of the company accordingly. Vara Research consensus is modelling EUR 36.7m adjusted EBITDA in 2025E, after EUR 26.5m in 2024E. Hence, mathematically, restructuring could give some low-single digit to consensus estimates. However, we note continued increase in pulp prices, which could mitigate the impact of the restructuring programme, at least in short-term. For Q2E, we are 2% ahead of consensus on top-line and 11% (EUR 0.7m) below on adjusted EBITDA.

Suominen's Q1 2024 adjusted EBITDA fell short of Vara Research consensus. The company has seen improving volumes and noted positive signs of demand in the market. We expect a gradual margin recovery, while high pulp prices create uncertainty. We trim our estimates due to expected higher raw material costs and derive a slightly lower DCF- and multiples-based fair value range of EUR 1.8-2.5 (2.0-2.7). Marketing material commissioned by Suominen Oyj.

Suominen’s result were down slightly from Q4 and fell short of Vara Research consensus expectations. Despite challenging business environment, the management notes positive signals of demand recovery in the market. Sales volumes increased y/y in Q1 (especially in EMEA), while sale prices were down. Guidance of improving comparable EBITDA was maintained intact, while consensus has modelled EUR 30.3m in 2024E after EUR 15.8m in 2023. Initially, we anticipate consensus to revise down 2024 estimates to the tune of mid- to high-single digits.

Ahead of Suominen’s Q1 report, due on 7 May, we maintain our estimates intact. The company announced on 2 May that it will make EUR 10m investment in strengthening its capabilities in sustainable products in Bethune, USA. Investment will be completed in H1 2025. We have modelled EUR 10-11m annual capex for 2024E-25E. Initially, we see some upside to our capex estimates for 2024E-25E. For Q1E, we are 6% ahead of Vara consensus on sales and 7% below on adjusted EBITDA. We model Americas sales up 1% y/y while we expect Europe sales to be up 4% y/y. The focus in the report will be on management comments on market recovery and price levels going forward. Pulp prices have continued to increase which could put some margin pressure on Suominen, we believe. Suominen guides for improving comparable EBITDA in 2024 (from EUR 15.8m in 2023), which we view somewhat cautious given the low starting point. We model EUR 26m adjusted EBITDA in 2024E, a 66% increase y/y, leaving us 15% below consensus at EUR 31m. Depending of progress of self-help measures, there is possibility that the company could give additional color on its guidance in conjunction with its Q1 report.

Suominen's Q4 comparable EBITDA remained virtually intact q/q, but fell short of Vara Research consensus expectations. Volumes improved slightly y/y, while the top line was burdened by lower sales prices. Management continues to see positive signs in the market, despite challenges in the macro environment. Suominen guides for improving comparable EBITDA for 2024, although from a low level of EUR 15.8m in 2023. We cut 2024E EBITDA by 9%, but expect sequentially improving comparable EBITDA for H1, due to a normalising market environment. We derive a slightly lower DCF- and multiples-based fair value range of EUR 2.0-2.7 (2.1-2.9). Marketing material commissioned by Suominen Oyj.

Suominen’s result were largely in line with Q3 and fell short of Vara Research consensus expectations. Management continues to see positive signals in its business environment, despite the weak global economy. Dividend proposal stands at EUR 0.10, slightly above consensus at EUR 0.08. We anticipate consensus to revise down 2024 estimates to the tune of 10%, while we note solid cash flow and slightly higher-than-anticipated DPS proposal.

We expect Suominen to continue improving its profitability in Q4, driven by lower raw material prices and self-help measures. However, the recent uptick in pulp prices could cause some pressure in 2024 despite a possibly improving operating environment. We make only marginal revisions to our 2023 estimates, while we trim 2024E adjusted EBITDA by 6% due to higher pulp prices and FX. We derive a fair value range of EUR 2.1-2.9 (2.4-3.1), based on DCF- and multiples-based valuation approaches. Marketing material commissioned by Suominen Oyj.