Bergs Timber - Price increases and solid demand
Q1 clean EBITDA above, Q2 likely better Ready to grow organically and via M&A Starting to deliver on its new growth targets Q1 beat, Q2 likely better Clean Q1 EBITDA of SEK 65m was above our SEK 55m estimate, mainly driven by higher sales and margins in the Wood protection segment. Bergs has seen price increases in most of its segments, which helped the q-o-q figures, while lower volumes for sawn goods more than offset the positives q-o-q (sale of stock level from the Swedish sawmills in Q4). Q2 will likely be better than Q1 (we have Q2 EBITDA of SEK 75m) due to seasonally higher volumes and higher prices. Note that raw material costs could rise into H2’21, but Bergs expects to offset these with higher prices.
The increased demand for DIY products (COVID-19) will likely continue in Q2 and Q3’21, and we raise ‘21e EBITDA by 12% to reflect the better results and higher prices. Targets to grow 10% p. a.
organically and 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 should 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 ‘21e EV/EBITDA of 9x We expect the “new Bergs” to generate EBITDA of ~SEK 245m in 2021, i. e.
it is trading at a ’21e EV/EBITDA of ~9x. Bergs has almost no debt, which should enable further growth both.
