Ferronordic: It's time to go shopping - ABG

Overhead costs too large for current operations
Needs an acquisition to grow into the opex base, or scale down
SEK 681m in net cash to use aggressively


Too much overhead, needs to use SEK 681m net cash position

Ferronordic reported solid EBIT in both operating segments, and it is worth noting that the German business has now reached positive earnings. However, having now divested the Russian business and becoming a much smaller company, the overhead cost base that Ferronordic carries is too big for the current operations, which resulted in group-level EBIT of -14m. We see two possible paths forward: 1) use the large net cash position of SEK 681m aggressively for M&A and grow into its cost base, or 2) scale down overhead costs significantly. The company clearly states that it is evaluating the first option, and we argue an acquisition needs to happen sooner rather than later, as the road to good profitability with the current smaller operations and large cost base looks difficult. In sum, it's time to go shopping.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ferronordic/Equity-research/2023/5/ferronordic---its-time-to-go-shopping-/