Elanders: Margins should improve despite softer demand - ABG

Lower demand, freight rates, and contract closures...
...drive organic sales decline in Q3e
10x adj. EBITA after -34% total return YTD


Impressive handling of sales decline

We expect Elanders to report Q3 net sales of SEK 3,744m, -6% y-o-y (-13% organic, +7% FX, 0% M&A), anticipating relatively larger organic declines in the Electronics and Industrials segments. Meanwhile, we expect the Automotive and Fashion & Lifestyle segments to hold up better. The key reasons for lower sales include generally softer demand, normalised freight rates, and the closure of contracts with low profitability. However, we find it positive that demand from certain segments appears to have bottomed out. In this context, we also highlight the company’s strong track record of dealing with lower demand, such as during COVID, when the focus swiftly shifted towards cash low and pausing expansion. For Supply Chain Solutions, we estimate an EBITA margin improvement to 6.8% (6.0%). We expect the strong momentum to continue for Print & Packing Solutions, as we estimate 2% organic growth and an EBITA margin of 6.0% (5.4%). In total, we expect an EBITA of SEK 241m (+12% y-o-y), for a margin of 6.4% (5.4%).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/elanders/Equity-research/2023/10/elanders---margins-should-improve-despite-softer-demand/