Ferronordic reported Q4 sales of SEK 1,694m (+4% vs. ABGSCe 1,636m, +5% vs. Infront consensus at 1,614m), up 43% y-o-y. Equipment sales continues to struggle due to supply chain constraints (sales -9% vs. ABGSCe), yet we find it reassuring that this was offset by high aftermarket sales (+11% vs. ABGSCe). The newer Contracting Services (CS) segment saw some negative seasonality effects due to the harsh winter conditions in Siberia, which should affect Q1’22e to a similar extent. EBIT was SEK 112m (-19% vs. ABGSCe 139m, -10% vs. cons. 124m) for a margin of 6.6% (ABGSCe 8.5%, cons. 7.7%), up from 5.5% in Q4’20. While up y-o-y, the margin was lower than expected, in part due to the lower utilisation of machines in the CS segment.
Still no effect on estimates from geopolitical tensions
All in all, we make fairly minor estimate changes, raising ’22e-’23e adj. EBIT by 2%. In CS, we lower near-term sales to account for the continued negative seasonality effects in Q1’22e. We raise our equipment sales estimates, however, since we have seen lower volumes in recent quarters be somewhat offset by a higher average price from a changing product mix, which is a trend we believe will continue. We note that the tense geopolitical situation has not yet had any direct effect on Ferronordic’s operations, and we therefore do not factor in any effects of this in our estimates.
Escalating rhetoric during the weekend increases risk
In the past few days, we have noted more aggressive rhetoric from several world leaders, as well as diplomatic actions such as recalled embassy staff. As such, we see the risk of targeted sanctions against Russia from the West as increasingly likely, which could adversely affect Ferronordic. To account for the increased risk, we lower our fair value range to SEK 200-290 (23 ...
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