Embellence Group: Rolling up for uncertain times - ABG

Q2 sales in-line, adj. EBITA below (-16% vs ABGSCe) Adj. EBITA estimates down 17-7% ’22-‘24e Value range lowered to SEK 31-42 (33-44) per share Q2: volumes holding up, SG&A hurting margins
Embellence entered Q2 facing tough comps alongside decreasing demand due to surging inflation and macroeconomic worries. Management highlighted that e-commerce customers are displaying low volumes and high inventory levels, but that the re-opening of physical retailers is compensating to some extent. The consumer-centric brands Pappelina and Artscape are said to have been the most exposed to the negative consumer sentiment. On a positive note, the Boråstapeter, Cole & Son and Wall & Decó brands held up relatively well due to their exposure towards hotels, restaurants and public spaces with pent-up demand following the pandemic. All in all, sales came in at SEK 190m in Q2 (+19% y-o-y, -4% org.). Adj. EBITA came in at SEK 24m, yielding an adj. EBITA margin of ~13% (-2.3pp. vs ABGSCe). The lower margin stems from: 1) a negative product mix in the Nordics, 2) increased input costs and 3) larger investments into sales and marketing.