Suominen has increased its mechanism pricing exposure
The pandemic led to a wipes demand bump on both sides of the Atlantic; although the US is ahead of Europe in vaccination rates the higher demand shows very little signs of abatement. The raw materials inflation picture also looks similar on both continents. Suominen increased its share of mechanism pricing clauses already last year to protect itself against raw materials price inflation. These measures, coupled with strong wiping demand and improved sales mix, enhance our confidence regarding H2’21 gross margin, which we now expect to settle around 13-14%. Suominen expects to complete the three announced investments in H2’21. Two of these will add capabilities to existing lines while one restarts and modernizes an idle line and so adds capacity.
We expect gross margin to settle around 13-14% in H2’21
Suominen is set to reach EUR 60m EBITDA this year even when raw materials inflation begins to erode margins. This year is also proving extraordinary in its own way as the raw material and logistics markets have been outright chaotic. In our view H2’21 results should show stable gross margin levels. We estimate ca. 14% GM for H2’21 that translates to some 12% EBITDA and 7.5% EBIT margins. We expect Suominen to reach such figures in FY ’22. Suominen is valued below 6x EV/EBITDA on our FY ’21-22 estimates. We retain our EUR 6.5 TP as well as our BUY rating.
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