Ferronordic: Sales mix-driven margin beat - ABG

Gross margin up 5.2pp, mostly on Russia sales mix
We increase adj. EBIT by 13-12% for ’22e-’24e
We expect SEK 321m VCE payment to be reinvested


Sales mix effects drive significant gross margin expansion

Ferronordic reported Q3 sales of SEK 1,479m (+15% vs. ABGSCe 1,287m), down 11% y-o-y (-36% org, +23% FX, +2% M&A). Although Russia/CIS equipment sales saw a notable q-o-q decline, it was not as dramatic as we had expected. Meanwhile, contracting services sales came in much better than expected, which together with aftermarket sales holding up well (as expected) led to an impressive gross margin of 24.7% (ABGSCe 21.1%), up 5.2pp y-o-y. This, in turn, drove a 65% beat on adj. EBIT (SEK 130m vs. ABGSCe 79m), which also included a positive NRI of SEK 321m tied to a payment from Volvo CE (VCE) due to the termination of Ferronordic’s Russian dealership agreement. As such, reported EBIT was SEK 451m (+13% vs. ABGSCe 400m).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ferronordic/Equity-research/2022/11/ferronordic---sales-mix-driven-margin-beat/