Ferronordic: Positive cash effect of SEK 22 per share - ABG

Volvo CE terminates dealer agreement in Russia

Ferronordic to receive SEK 321m payment from VCE

Added cash effect would take fair value to SEK 50-69

VCE terminates dealership agreement in Russia
Volco CE terminates its dealership agreement with Ferronordic in Russia. We do not have any further deliveries of VCE machines or spare parts in our estimates, meaning that the termination does not affect our outlook. However, as part of the termination, VCE will pay Ferronordic SEK 321m in Q3 for incurred and potential costs and losses related to the termination, which is not included in our estimates or consensus.

All else equal a positive cash effect of SEK 22 per share
The payment above should be taken as a one-off, not affecting adj. EBIT but, all else equal, raising ’22e reported EBIT SEK 639 (+99% vs. current estimate SEK 318m). Moreover, the cash effect would also take our ’22e FCF to SEK 260m (current estimate SEK -61m), for a positive cash effect of SEK 22 per share.

Payment would take fair value to SEK 50-69 per share
The cash effect per share would raise our value range to SEK 50-69 (current range SEK 28-47) as ’22e net debt per share decreases to SEK 3 (down from SEK 25). However, we note that Ferronordic expects additional provisions and impairments to be taken, both in Q3 and beyond, meaning that the net effect will likely not be as large as stated above. Moreover, this does not affect the outlook beyond ’22, where we have estimated a significant earnings decline.
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