We expect gross margin declines over the year
The recent raw materials price gains exert clear negative pressure on Suominen’s gross margin for their part, but on the other hand the company should still be able to defend its own nonwovens pricing to some extent. The pricing dynamics will also register with a certain lag. We leave our operative estimates unchanged ahead of the Q1 report. We continue to expect gradual decrease in gross margin throughout the year. We estimate Q1’21 gross margin at 14.5% and arrive at EUR 15.3m EBITDA with our revenue and operative cost assumptions. Suominen recently announced the sale of its minority stake in Amerplast, a plastic packaging business, and the transaction will have a positive EUR 3.7m impact on financial items. The sale is not all that meaningful in the big picture given the fact that Suominen divested the majority share already in 2014 to focus on nonwovens. It will however further strengthen the already strong balance sheet.
Cautious earnings multiples following the record year
Suominen remains valued at modest multiples of around 6x EV/EBITDA and 10x EV/EBIT on our estimates for this year. We continue to see upside on these levels as Suominen’s earnings are stabilizing and cash flow generation is strong. We retain our EUR 6.5 TP and BUY rating.
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