We foresee Duni contract at full run-rate in Q4e
Q3’22 expectations
We expect OrganoClick to deliver Q3 sales of SEK 27m, up 18% y-o-y, alongside a gross profit of SEK 5m. We expect a gross margin of 19.7% (9.0%), with the y-o-y increase driven by growth in high-margin Non-woven & Technical Textiles (NWT) and Organotex sales. We expect increased deliveries to Duni in NWT, but still not at the full run-rate of SEK 7.5m per quarter. We estimate soft growth in Green Coating & Maintenance (GCM), especially for Biokleen, while Organotex sales should hold up better. In Functional Wood (FW), we see that a decline in DIY activity should affect the B2C business (we estimate B2C is ~20% of FW). We expect EBIT of SEK -5m (-8m). We estimate a reversal of the recent NWC build-up, although inventory levels should still be somewhat elevated, and we see a positive cash effect of ~SEK 10m from NWC in Q3.
Near-term headwinds, long-term potential
We lower our sales estimates by 6% for ’22e, followed by 10-8% for ’23e-’24e, as we expect the company to face some challenges due to poor consumer sentiment and lower construction activity. As a result, we estimate lower B2C sales in FW (~20% B2C) and GCM (100% B2C) in the near term. Moreover, lower activity on newbuilds should affect FW’s B2B sales by ’23, as Organoclick’s B2B sales tend to lag construction starts by 6-12 months. We continue to see NWT as the main long-term sales driver, reaching sales of SEK 105m (46% of group) by ’24e, supported by underlying demand for a shift towards less plastic usage.
Final thoughts
We expect OrganoClick to deliver full volumes to Duni in Q4, worth ~SEK 7.5m, taking our Q4 estimates to SEK 9m when we also account for a ramp-up in sales to Ahlstrom-Munksjö. Management says it is in late-stage discussions for new NWT contracts, but our estimates do not include sales from any newly signed contracts in ‘22e. Läs mer på ABG Sundal Collier
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