Bergs Timber - Expecting another solid quarter
Q1 is likely to be another solid quarter Debt-free, ready to grow organically and via M&A Starting to deliver on new growth strategy Q1 likely a solid quarter – strong sawmilling market We estimate Q1’21 EBITDA of SEK 55m, down from SEK 78m in Q4’20. We forecast the q-o-q shortfall due to Bergs having sold its remaining stock from the Swedish sawmills in Q4, which we do not extrapolate further. Q1 is usually a seasonally weak quarter for the value-added wood product segments, but we still expect a strong quarter for the sawmilling segment. The sawmilling market appears strong and prices have increased rapidly.
Our 2021 clean EBIT estimates are up 5% as the outlook appears solid and increased demand for DIY products due to COVID-19 will likely benefit Bergs in Q2 and Q3 (seasonally better quarters). Note that raw material prices could rise into H2’21, but Bergs expects to offset these with higher prices. Targets growth of 10% p.
a. (organic & through M&A) Following the divestment of its Swedish sawmills, Bergs is now a more downstream-focused company with less cyclicality in its earnings and exposure to structurally growing end-markets (building with wood is more environmentally friendly). Its remaining assets are modern and well-invested, so cash flow generation will be strong.
Combined with a debt-free balance sheet, we see plenty of room to grow both organically and inorganically. Bergs Timber has announced its new strategic focus and increased its growth target from 5-10% p. a.
to 10% (both organically and via M&A); it has also identified organic growth investments of ~SEK 500m for 2021-2023. Its key growth areas are within wood protection and joinery. Bergs also increased its EBITDA margin target to 9% p.
a. (7% previously) and it targets net debt below equity. Bergs is trading at a ’21e EV/EBITDA of ~10x We expect the “new Bergs” to generate EBITDA of ~SEK 220m in 2021, i.
e. it is trading at a ’21e EV/EBITDA of ~10x. Bergs has no debt, which should e.
