Sales fell sort of our expectations and declined 6% y-o-y in Q2, which was mainly due to the NW&FT segment where sales declined by 19% due to a significant weakening in the restaurant and hotel end-markets. The weak consumer market also meant that sales development among new customers was slower than expected. Despite this, adj. EBIT held up fairly well with a break-even figure. This was possible due to the continued strong performance in the higher-margin GC&MP segment, as well as lower raw material prices in the FW segment, which led to an improved gross margin. On the sales level, however, the FW segment is still being held back by the weak construction market.
Near-term market weakness leads to estimate reductions
Management remains confident in the long-term demand for the company's products, and highlights developments such as new resellers of GC&MP products, excellent test results for its new FW product OrganoNowa, which it expects will drive sales, and new NW&FT product launches planned for this year. While we agree that the long-term picture remains promising, the continued near-term weakness in the restaurant, consumer and construction markets, as well as the sales decline in NW&FT, lead us to reduce '24e-'26e sales by ~9%, as we expect growth to take a bit longer due to this. This in turn affects '25e-'26e EBIT negatively by 21-14%.
Long-term picture unchanged, keep fair value at 2.0-4.0
The share is up 20% L3M (vs. peers -3%, Swedish small cap +10%), and is currently trading at 3.0-2.6x '24e-'26e EV/Sales vs. the peer median of 3.1-2.0x. As our long-term view remains largely unchanged, we reiterate our fair value range of SEK 2.0-4.0.
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