Q1: Breaking the 5Q long negative earnings trend
Nolato's Q1 EBITA was in line with our expectations and 4% above FactSet consensus. Medical's margin improved, as it continues to offset costs to customers, which we had expected, while Industrial outperformed our expectations on easing supply chain disruptions. Integrated still struggled with lower volumes, heavily impacting profitability for vaporiser heating products (VHP). However, we note that after five quarters of sequentially declining group EBITA, Q1 finally showed q-o-q earnings growth, which in our view adds confidence to the margin recovery story. Nolato still has a long way to go in order to get back to its 10% EBITA margin target, but we expect margin improvements throughout '23e-'24e, as several of the factors hurting profitability in '22, such as supply chain disruptions and high plastic prices, should be temporary.
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