OrganoClick: Softer consumer demand in a tough market - ABG

Low demand for B2C products weighs on Q2 Baux outsourced and royalty model implemented Working capital build-up strains balance sheet

B2C weighs on Q2, but NWT starts ramping up
OrganoClick reported Q2 sales of SEK 38.5m (-14% vs. ABGSCe of SEK 45.0m), down 3% y-o-y. The gross margin declined 320bps to 17.6% (ABGSCe was 27.6%) as higher-margin B2C products struggled, while sales of B2B products were better, resulting in EBIT of SEK -6.7m (ABGSCe SEK -2.2m). Functional Wood (FW) (~80% B2B) was roughly in line with expectations for sales (-3% vs. ABGSCe), while Green Coatings & Maintenance (100% B2C) was below our expectations (-33% vs. ABGSCe). In Non-woven & Technical Textiles (NWT), sales were SEK 1.6m (ABGSCe SEK 2.0m), equivalent to ~20% of the full run-rate for the Duni contract, which the company expects will reach close to a full run-rate in Q4.

Sales revised on Q2 numbers, Baux outsourcing lowers opex We lower our sales estimates by 8-7% for ’22e-’24e on the Q2 numbers, but also scale down opex somewhat going forward. The lower opex stems from the news that OrganoClick will outsource production of Baux (50% of Biocomposites sales, 1.2% of R12m group sales) from Q3’22 onwards, taking 100% margin royalty fees for the production. The effect on sales is small, but Baux production has been capital intense and has accounted for a larger share of group costs than sales, so the margin effect should still be noticeable, but we await more concrete information from the company regarding the financial impact of this deal. Moreover, we believe this might only be the first step, and that Saga production and perhaps FW will be outsourced or divested in the future, making OrganoClick a leaner and more scalable company.

Balance sheet strained, but we do not expect a rights issue Q2 saw continued inventory build-up, however the company is confident this effect will reverse in Q3, as all new sales in FW are being taken from existing inventory in order to free up capital. With that sai ... Läs mer på ABG Sundal Collier

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