Ferronordic - Impressive organic growth of 34% in Q4’20
Q4’20 adj. EBIT SEK 65m, -29% vs. our expectations Adj. EBIT margin of 5.
5%, worse than ABGSCe at 8. 0% Trading at 4x EV/EBIT ‘22e, 11-16% FCF yields ’21e-‘23e Q4’20 results Ferronordic delivered Q4 group sales of SEK 1,185m (3% above our expectations at SEK 1,150 and -1% vs. Infront consensus).
Sales grew 23% y-o-y, organic growth of 34% (vs. ABGSCe at +17%) but offset by a weaker ruble. Group adj.
EBIT came in at SEK 65m (-29% vs ABGSCe at SEK 92m, -23% vs. Infront consensus), for a margin of 5. 5% (vs.
ABGSCe at 8. 0%, Infront cons at 7. 1%).
Earnings during the quarter were somehow affected by lower revenue mix and ramp-up in contracting services. The German operations, which begun in Jan ’20 was affected by covid restrictions and restructuring costs, sales amounted to SEK 233m (229m in Q3’20). However, Russia/CIS demonstrated great resilience and delivered its best YTD in terms of earnings and cash flow.
As we expected, Ferronordic succeed to gain market share in Russia/CIS during the quarter. All in all, group net profit came ended up at SEK 44m, below both ABGSCe at SEK 68m and Infront consensus at SEK 69m. Finally, strong cash flows reversed SEK 83m of net debt at the end of Q3’20 to net cash of SEK 20m at the end of Q4’20.
The Board propose for a dividend of SEK 7. 5 per share. New financial targets and estimate changes Ferronordic updates its financial targets, which now includes 1) to double the 2020 revenue in its current markets by 2025, 2) operating margin should exceed 7%, and 3) ND/EBITDA should be below 3x (over a business cycle).
Besides, the board decided on a new dividend policy, according to which the target should be to pay at least 50% of net income, if ND/EBITDA is below 1x. Based on the Q4’20 numbers alone, we expect to make minor earnings downgrades for ‘21e-‘23e, likely 5-3%. Final thoughts and conference call details The share is up c.
19% L6M, on the back of good operational performance and is currently trading (pre-Q4 report) at.
