Midsona - Soft Q2 puts a damper on 2025e - ABG

Q2'25 report
The Q2 report was below expectations on both sales and adj. EBIT. Sales decreased a bit y-o-y (-2% org. growth y-o-y, vs. ABGSCe 2.5%) and amounted to SEK 865m (-5% vs. ABGSCe). The sales weakness was due to continued terminations of distribution agreements. Adj. EBIT came in at SEK 4m (-81% vs. ABGSCe). The adj. gross margin of 28.1% was ~1pp below our estimate due to a shift in mix geared toward contract manufacturing. Cash flow from operations was SEK 5m (vs. ABGSCe 41m) as Midsona's earnings were lower than expected and as the company tied up somewhat more working capital than expected.

Thoughts and outlook
As Midsona continues its operational turn-around, some quarterly variations outside of the regular seasonal patterns should be expected. This quarter is one such example, as Midsona has terminated some distribution agreements for licenced brands in the Nordics, aside from the ongoing change from direct to central distribution. That said, the demand situation has not improved significantly, and that still weighs on the return to a maintainable organic growth. On a positive note, both North and South Europe are performing relatively well and growing. Unfortunately, Midsona's Spanish operations have been adversely impacted by a fire incident at a facility, and will likely hamper the positive operating momentum in the near term.

Somewhat negative consensus EBIT estimate revisions
The share, which is up ~12% YTD (incl. dividends), is trading at ~9x '25e EV/EBITA on our unrevised estimates. Our initial understanding of the report as well as a mechanical calculation suggest that consensus' EBIT estimates for '25e-'26e could come down by mid-to-high single-digits. The company will host a presentation of the Q2 report at CET 11.00 (link).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/midsona/Equity-research/2025/7/midsona---soft-q2-puts-a-damper-on-2025e/