OrganoClick - Near-term weakness in FW & NWFT to linger

OrganoClick - Near-term weakness in FW & NWFT to linger - ABG

Q2 figures pre-announced
OrganoClick reported sales of SEK 30m (-23% y-o-y) and EBIT of -4.7m (-0.1m), in line with the 11 July profit warning. The miss was broad-based compared to estimates from our preview (pre-PW). NW&FT sales were -28% vs. ABGSCe, FW -19%, and GC&MP -16%. The company ended the quarter with a cash balance of SEK 2m. However, it has now secured near-term financing through a proposed rights issue of SEK 20m and a shareholder loan of SEK 10m, which will be booked in Q3.

Estimate changes
We lower '25e-'27e sales by 9-12% on the back of the PW and Q2. Our revisions mainly stem from lowered sales estimates in NW&FT, where we have cut '25e-'27e sales by 17-20% due to continued weakness in end-markets and increased price pressure from fossil-based alternatives. Moreover, we are also cautious on FW, which has recently seen a sharp drop in volumes in the Swedish market. We remain optimistic on GC&MP, however, which we expect will return to growth in Q3 once customer de-stocking subsides. In connection with the PW, the company announced that it is initiating a cost-cutting programme that is expected to reduce costs by SEK 3m annually from Q4. When factoring in these cost savings and the lower sales volumes, we lower EBIT by SEK 12m for '25e-'27e.

Valuation and outlook
OrganoClick is currently trading at 2.3x-1.8x '25e-'27e EV/Sales vs. peers at 4.4x-2.5x. Management states that it will prioritise the following to drive sales and profitability with the help of new financing: expanding OrganoTex and BIOkleen in key markets; advancing bio-based binder projects; and streamlining operations by licensing out timber production. Moreover, although OrganoClick has secured financing in the near-term, we continue to believe that it must demonstrate improved profitability to mitigate long-term liquidity risk.

OrganoClick - Near-term weakness in FW & NWFT to linger - ABG

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OrganoClick - Near-term weakness in FW & NWFT to linger - ABG

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