Bergs Timber: ABGSC’s Investor Days feedback - ABG

We hosted a presentation with CFO Marklund yesterday

Some questions answered, others remain

More tangible roadmap to be communicated in 2023

Structural demand growth for wood products
Yesterday, we hosted Bergs’ CFO, Anders Marklund, at ABGSC’s Investor Days, talking about its current business momentum, recent market development and roadmap ahead. Marklund spoke about the structural demand increase for wood products, pointing to increased interest from architects, construction companies and end-users, wood’s long life cycles, sustainability benefits and quality features. This should benefit Bergs’ as a group, and especially its two further processed segments, Wood Protection and Joinery as their margins are the highest.

Further details on upside potential to near-term guidance
In the near future, Marklund foresees weaker volumes in the Wood Protection segment following a cooling economy, and price decreases of wood, which will hurt Sawn Wood. However, some price decreases may be mitigated by reduced supply thanks to current production cuts (Central Europe, Canada, Sweden) and import cuts (Russia and Belarus). Further mitigating factors are a good orderbook in the Joinery segment (through Doors and Windows) for Bergs and tailwinds for the pellets segment thanks to high energy prices.

Prefers acquisitions above share buybacks
One of the financial targets for the group is an EBITDA margin of 9% over a business cycle. While we would appreciate more granularity on how it expects its segments to contribute to this, the CFO responded that internal discussions are currently ongoing and that a more tangible roadmap should be communicated next year. With a P/BV of merely 0.8x and solid financials (net debt/EBITDA of 0.5x), we also asked how the company views the prospect for share buybacks. The board has not granted management mandate, and Bergs currently prefers acquisitions above buybacks, although current market uncertainties probably need to stabilize before any deal is complete ...
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