Bergs Timber: Q2 beat – prices on the rise - ABG

Q2 EBITDA was SEK 146m, higher prices and volumes
Q2 was a very strong quarter for Bergs Timber. Q2 EBITDA was SEK 146m, above our SEK 88m. One-off costs were SEK 5m related to the acquisition of PTPG. The strong results were driven by higher prices and margins in the Wood Protection and Sawmilling segments. Bergs’ sawmilling volumes improved in the quarter (12% q-o-q). EBITDA was up above 100% q-o-q and the EBITDA margin was 18% vs. 11.0% in Q1’21. Q3 EBITDA will likely remain at the same level q-o-q. Q3 will likely see higher prices, but also lower volumes (production stop during Q3) and higher raw material costs. EBITDA will also be positively impacted by the PTPG acquisition q-o-q. The strong demand for DIY products will likely continue in Q3 and Bergs expects the market to remain favourable for the rest of the year. Our ‘21 estimates are up significantly to reflect the strong beat and expectations of a continued good market in Q3.

Targets to grow 10% organically and through M&A
Following the divestment of its Swedish sawmills, Bergs is now a more downstream-focused company with less cyclicality in its earnings and exposure to structurally growing end-markets (building with wood is more environmentally friendly). Its remaining assets are modern and well-invested, so cash flow generation will be strong. We see plenty of room to grow, both organically and inorganically. Bergs Timber has announced its new strategic focus and increased its growth target from 5-10% p.a. to 10% (both organically and via M&A); it has also identified organic growth investments of ~SEK 500m for 2021-2023. Bergs has already started to deliver on its new growth target and has announced several new investments since the strategic update in March including: i) organic growth investment in its wood protection segment, ii) the acquisition of PTPG and iii) organic growth investment in its Joinery segment in Latvia.

Trading at ‘21e EV/EBITDA of 5x and 8x for ‘22e/‘23e
We expect Bergs to generate EBITDA of ~SEK 400m in ‘21, i.e. it is trading at a ‘21e EV/EBITDA of 5x, and EV/EBITDA of 8x for ‘22e/’23e.

https://www.introduce.se/foretag/bergs-timber/Equity-research/2021/7/bergs-timber---q2-beat--prices-on-the-rise/