Despite external headwinds, such as inflation, which muted activity among customers in the quarter, Q1 sales grew 12% y-o-y (+1.6% organically), in line with our expectations. Own product sales grew by 12% (28% of total sales), which left the gross margin unchanged y-o-y despite FX headwinds and high freight rates. The lower EBIT (-33% y-o-y and -26% vs. ABGSC) is explained by higher cost related to its large inventory and costs for the expansion of its own brands. Moreover, the day after the report, DistIT announced information about the restructuring of Aurora Deltaco to realise costs synergies. The company expects the restructuring program will lead to annual cost savings of SEK 22m in total with related one-off costs of SEK 9m, evenly split between Q2 and Q3 2022.
Adding the NRI’s to the costs
Since the lower profitability in Q1 is related to the large inventory and the expansion of its own brands, things that we expect will last at least into Q2, we only raise 2022e adj. EBIT slightly for the cost savings in the restructuring program. Our adjustments, together with the Q1 figures, result in an adj. EBIT cut of 1% for FY 2022e. We do not make major adjustments for the profitability in 2023e-24e since we already expect an adj. EBIT margin improvement from 3.5% in 2021 to 6.1% in 2024e.
We expect margin improvements over the next three years
On our new estimates, the share is trading at a ’22e-’23e EV/EBIT of 9x-6x, which is in line with the 5Y historical average of 8.5x NTM. We expect sales and EBIT growth CAGRs of 12% and 35% for 2021-24e.
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