Too much overhead, needs to use SEK 681m net cash position
Ferronordic reported solid EBIT in both operating segments, and it is worth noting that the German business has now reached positive earnings. However, having now divested the Russian business and becoming a much smaller company, the overhead cost base that Ferronordic carries is too big for the current operations, which resulted in group-level EBIT of -14m. We see two possible paths forward: 1) use the large net cash position of SEK 681m aggressively for M&A and grow into its cost base, or 2) scale down overhead costs significantly. The company clearly states that it is evaluating the first option, and we argue an acquisition needs to happen sooner rather than later, as the road to good profitability with the current smaller operations and large cost base looks difficult. In sum, it's time to go shopping.
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