Bergs Timber: Strong Q2, lower prices into H2 - ABG

Q2 EBITDA was SEK 173m Outlook weaker: lower sawn wood prices Trading at EV/EBITDA of ~5-6x for ’22-‘23e Q2 very strong, Q3 likely weaker q-o-q (lower prices)

Q2 EBITDA of SEK 173m was above ABGSCe at SEK 139m. The Sawn wood segment and Pellets beat our expectations (higher prices). Realised prices for Sawn wood were up ~20% q-o-q. Bergs had strong earnings in Q2 (17% EBITDA margin), but we see a weaker outlook into H2. Bergs sees declining prices for sawn wood (wood protection usually follows) and peers have announced 25-30% lower prices in Q3. This points to EBITDA being down q-o-q in Q3 (Q2 was likely the peak). For Q3, we expect lower sawn wood/wood protection prices, higher raw materials costs for wood protection (due to lag), lower volumes (summer stop) and some tailwinds from lower saw log prices and higher pellets prices. Note that the Joinery segment is more stable over the cycle and Bergs sees continued good market here. Our estimates are largely unchanged, with the strong report offset by a weaker H2 outlook.

Targeting growth of 10% both organically and through M&A 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). Value-added wood products are now 60-70% of its EBITDA. Bergs’ remaining assets are modern and well-invested, so cash flow generation should be strong. We see room to grow, both organically and inorganically. Bergs targets growth of 10% p.a. and has identified organic growth investments of ~SEK 500m for ’21-’23. Furthermore, it has strengthened its position within windows/doors recently, acquiring three companies and investing for organic growth. After the recent acquisition of Pinus, it now expects sales from windows/doors to double vs. ’21. Margins for this segment are more stable over the cycle and the expansion of the segment could contribute to reduce the cyclicality of Bergs’ earnings

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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/bergs-timber/Equity-research/2022/7/bergs-timber---strong-q2-lower-prices-into-h2/