Lower variable volumes continued to weigh on Coor's growth and profitability in Q3. Denmark was hit particularly hard, with lower volumes from public customers, resulting in segment EBITA -15% y-o-y (-18% vs. Infront consensus, -12% vs. ABGSCe). As Coor does not expect these volumes to come back soon, the company is downsizing its Denmark organisation. This is a disappointment, as we have seen Denmark as a growth market for Coor. Sweden continued to perform well, however, with 1% organic growth and 5% EBITA growth y-o-y. But management commented that it sees lower variable volumes in Sweden as well. This has led us to cut Denmark's EBITA by 4%, Sweden's EBITA by 2% and 1% and group EBITA by 4% and 3% for '25e and '26e.
Organic sales flat despite some cyclical headwinds
The market reacted strongly on the report (share -15% on the day), and the although near-term outlook is softer, we want to stress that it is related to variable volumes (the more cyclical part of Coor's business) while contract retention has remained good and management is talking about a good pipeline of new contracts. And even with the negative pressure in Q3, organic growth was flat (vs. ABGSCe 1%). Moreover, even with the soft outlook, we expect that cost savings, which will start to have an effect from Q4, will support slightly better earnings growth in Q4 despite lower variable volumes.
12% earnings growth and 8% div. yield 2025e
We forecast 3% organic growth and 12% adj. EBITA growth in 2025 (margin increasing from 4.8% to 5.3%, vs. target of 5.5%), implying a valuation of 8x EBITA and a 12% FCF yield (8% div. yield). In 2026e, we argue that Coor has the financial capability to resume M&A or increase its dividend (14% FCF yield).
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