Organoclick: Production bottlenecks & raw mats a drag - ABG

Functional Wood the big explainer
OrganoClicks Q2 report came in below our expectations. Sales came in 11 % below our expectations (SEK 40m vs. ABGSCe 45m). On a segment level the biggest explainer to the miss is the Functional Wood segment, which came in 14% below our expectations at sales of SEK 25m vs. ABGSCe 29m. The global timber prices have meant hurt volumes for OrganoClick. The input prices have also meant that the company has shifted volumes to Q3 where the company has been able to hike prices, which should support financials during H2’21.

Issues in Green Coatings & Maintenance seems to fade
During the quarter, we understand that the company has been forced to temporarily increase its production staff by some 70% in the wait of its already planned automation of the production process. With the company seeing production bottlenecks in Q2, we believe GCM sales could have been SEK 1-3m more in during the quarter without these issues. Furthermore, the temporary increase in man hours have been hurting group margins but is an issue that seems to be solved in Q3 with automation and production equipment in place.

Functional Wood will decrease in importance over time
ORGC has seen troubles during Q2 with production bottlenecks and rising raw mat prices. However, we note that the biggest explainer to the miss is Functional Wood, which will decrease in importance over time with lower margins and lower growth than the other three segments.

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