Ferronordic: Key takeaways from the CMD - Nordea

Yesterday (2 October), Ferronordic hosted its 2024 CMD. At the event, the company detailed its growth ambitions, particularly in the US, as well as its plan to reach healthy profitability in Germany. Furthermore, the company provided more details on its updated financial targets, which include doubling revenue from 2024 (measured as the current H1 2024 run-rate pace) by 2029, i.e. sales of SEK ~9bn for 2029, alongside maintaining an operating margin (EBIT) in excess of 6%. Measured by our 2024 and 2025 adjusted EBIT estimates, this would imply 35.2% and 25.8% adjusted EBIT CAGRs, respectively, given a successful doubling of sales and a 6% adjusted EBIT margin. The company also aims to maintain an across-the-cycle net debt/EBITDA ratio below 3x. Lastly, the target is to pay out more than 50% of net profit when the net debt/EBITDA ratio is below 1x and more than 25% when the ratio is above 1x. While the market continues to be challenging, particularly in Germany, we view the company as positioned for: 1) further growth in the United States, mainly organic, but also via M&A, over time; 2) being able to capitalise on the market recovery in Germany, which should continue to be muted throughout 2024, but which we expect to improve in 2025, as the effects of the rate-cutting cycle become more evident: and 3) showing healthy operational leverage, once the organic volume component in the market improves (we expect a 170bp adjusted EBIT margin expansion y/y for 2025). We provide more details below.