Studsvik: Challenging Q3 for F&MT - ABG

- Technical production disruptions in the hot cell
- Scandpower showing positive signs
- We lower '25e EBIT by 10%, mainly from F&MT

Q3: Sales +3% y-o-y, adj. EBIT margin 4.8% (9.2%)
Studsvik reported Q3 sales of SEK 201m (195m), with FX-adjusted sales up 5% y-o-y. Adj. EBIT was SEK 9.6m (17.9m) as Fuel and Material Technologies (F&MT) had a challenging quarter with production disruptions in the hot cell facility. This led the business area's EBIT to drop to SEK -7.3m (11.9m) and explains the lower group EBIT in full. Scandpower on the other hand saw a clear improvement in adj. EBIT (SEK 13.7m vs 0.1m) y-o-y from an increase in sales of the GARDEL software and this offset some of the weakness in F&MT. The production disruptions were not something we expected, and group adj. EBIT was 67% below ABGSCe.

Increased uncertainty on mid-term outlook for F&MT
We make larger revisions on the back of the Q3 report, as we think the mid-term outlook for F&MT is more uncertain now than prior to the report, both in terms of sales growth and especially for profitability. On the contrary, we think Scandpower showed positive signs of increasing profitability, although we still think one should be cautious to extrapolate certain quarters long-term, as the business is still driven by its licence agreement to a large extent. In total, we cut '25e EBIT by 10%.

Scandpower to benefit from US nuclear build-out
The more positive view on nuclear energy can be exemplified by recent developments in the US where prominent companies such as Microsoft, Amazon and Google are making investments to either restart older nuclear power plants our build new SMRs to power their data centres. This will create business opportunities for Scandpower in the years to come and similar developments can now be expected in most parts of the world as well. Remember though that the lead times are long and Studsvik mainly starts to benefit once a plant is operational.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/studsvik/Equity-research/2024/10/studsvik---challenging-q3-for-fmt/