Nexam Chemical: Cautious optimism for H2 - ABG

• Adj. EBITDA SEK -5m vs. ABGSCe SEK 1m
• Cash of SEK 20m and an unused credit facility of SEK 20m
• Slow but gradual improvement in H2e

Q2 results
Nexam had Q2 net sales of SEK 42m (ABGSCe SEK 56m), -25% y-o-y. Performance Chemicals had sales of SEK 15m, -31% y-o-y, well below our forecast of SEK 22m, mainly due to weak sales to its wind power customers. Performance Masterbatch had sales of SEK 26m, -21% y-oy, also below our forecast of SEK 33m due to lower volumes per order. Adj. EBITDA was SEK -5m compare to our forecast at SEK 1m. Moreover, Nexam now has a cash position of SEK 20m (SEK 28m in Q1'23). The company also has an unused credit facility of SEK 20m.

We lower '23-'25e sales by 14-10%
We take a more conservative approach on the recovery for its PET foam additive sales and therefore lower 23-25e sales by 14-10%. Management expects Q3 to be better than Q2 and assesses that the destocking phase for its customers is mainly done. We expect a soft, yet gradual improvement in H2'23 for Performance Chemicals and now estimate -10% sales growth y-o-y in Q3 (-31% in Q2) and -5% y-o-y growth in Q4. Moreover, as its customers' inventory levels should normalise in the coming quarters, we expect we will see support for sales improvements in Performance Chemicals in H2 compared to the weak Q2.

We lower our fair value range to SEK 4-9 per share
The share is currently trading at ~1.3x EV/sales and ~42x EV/EBITDA on '24e. We lower our fair value range to SEK 4-9 (5-10) per share due to the uncertain near-term demand for its PET foam additives.

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