Boreo: Profitability holding despite top line softness – strong cash flow in Q3 - Nordea

Boreo reported Q3 adjusted EBIT ex-PPA of EUR 2.9m, 3% above our estimate and 16% above Refinitiv consensus. Net sales of EUR 41m declined 5% y/y (-11% on organic basis) and came 6% below our estimate and 8% below consensus. Reported EBIT was EUR 2m, 11% below our estimate. Net sales and adjusted EBIT ex-PPA increased in Technical Trade and declined in Electronics. In Technical Trade, Machinery’s construction business was impacted by weak construction environment, while Power business, Pronius, J-Matic and Filterit continued good performance. In Electronics, challenges in SSN continued while other businesses performed well during Q3. In Heavy machines, the company has taken measure to strengthen FNB’s operations. Operational cash flow was strong at EUR 4.9m in Q3 (EUR 0.8m a year ago, including discontinued operations), supported by EUR 2.7m working capital release. EPS of EUR 0.22 came below our expectation of EUR 0.38. In line with its guidance policy, the company does not provide short-term financial guidance. The company notes challenging business environment and increases its focus on costs. In addition, Boreo aims to deleverage its balance sheet towards low end of its target of 2-3x net debt/EBITDA (2.4x in Q3). Return on trade working capital continued to improve (30.1% in Q3 after 29% in Q2) driven by lower NWC. Despite adjusted EBIT beat, we expect consensus to trim slightly its estimates for 2023E-25E owing to weaker top line development.

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