Nordic Waterproofing: Adj. EBIT 113% above our expectations - ABG

19% organic growth vs. ABGSCe at 10%
Adj. EBIT 113% better than ABGSCe
Adj. EBIT margin up 3 pp y-o-y

Q1 results – A strong start to FY’22
NWG delivered a strong Q1 report with sales of SEK 912m, up 30% y-o-y whereof 19% organic (13% price and 6% volume). This was 7% better than our expectations and the deviation was mainly driven by the Products & Solutions segment which was overall strong with the bitumen-based business showing double-digit growth in all four Nordic markets. Adj. EBIT was SEK 56m (113% vs. ABGSCe 26m), corresponding to a margin of 6.1% (ABGSCe 3.1%). The positive development of EBIT is explained by Products & Solutions increasing profitability due to a good volume development and a pro-active approach to price management while Installation Services maintained profit on same level as first quarter last year. Lastly, OCF improved y-o-y to SEK -15m (-88m). The main explanation to the improved cash flow is the improved operating result and a lower reduction in accounts payable compared to previous year.

Cons EBIT estimates should come up ~10%
Cons. estimates should come up ~10% on the strong estimate beat and slighly higher margin expectations. The availability of input material has not yet been affected by the Russian invasion of Ukraine. It cannot be ruled out that NWG will see a negative impact from additional input cost inflation, as well as potential shortage of input materials creating direct or indirect disturbances of its supply chain, according to management. However, we believe NWG should be able to manage the situation going ahead as well.

Final thoughts
The share is down 24% YTD trades at 10.9x F12m adj. EV/EBIT, down from peak 15.3x in October ’21. More details expected at conference call at 10:00 CET. Dial in: SE +46 8 505 583 54, UK +44 33 33 00 90 32
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