Sitowise Q2’25 flash comment: No signs of a pickup

Source: Inderes

Sitowise reported disappointing Q2 earnings, with adjusted EBITA below our forecast, despite revenue broadly meeting expectations. The weaker profitability stemmed from challenging market conditions, intense pricing pressure, and low utilization rates. Given the continued high uncertainty in the market, Sitowise did not provide any guidance this quarter either, which we view negatively. We believe a market recovery, crucial for Sitowise's revenue and profitability to rebound, is unlikely before 2026-2027.

Revenue development in line with our expectations

Sitowise’s revenue declined by 2.1% year-on-year (organically -1.2%) to 49.8 MEUR, relatively in line with our expectations. The Swedish business continued to show weak performance, with revenue falling by 16.9% year-on-year to 7.2 MEUR, primarily due to the persistently sluggish construction market, as anticipated. Similar market conditions also affected the Buildings business, leading to overcapacity and intense price competition. Consequently, Q2 revenue in this segment declined by 9.3% to 14.1 MEUR, also roughly in line with our estimates. The Infra and Digital Solutions business areas outperformed the rest of the group and grew organically by some 8%, owing to more stable demand. Revenue in the Infra business amounted to 19.2 MEUR, and Digital Solutions revenue reached 9.4 MEUR, both relatively in line with our expectations.

At the group level, order intake was down by some 26% q/q and 19% y/y and reversed the positive trend seen in the last quarter. This was mainly due to the absence of larger project wins, particularly within the Infra business area. The Group’s order book decreased by ~9% y/y and totaled 148 MEUR.

Earnings below our estimates

Sitowise's adjusted EBITA declined to 2.5 MEUR in Q2 (Q2’24: 2.6 MEUR) and was below our estimate of 3.0 MEUR. The adjusted EBITA margin (5.1% vs. 5.0%) was, as anticipated, under pressure from the combined impact of lower revenue and a tight pricing environment. In the bottom lines of the income statement, EPS was also below our estimates due to the weaker operating profitability and slightly higher financial expenses than our expectations.

Cash flow from operating activities (7.2 MEUR) was obviously at low levels due to the weak operating result. However, it improved slightly, driven by the release of working capital. At the end of the reporting period, Sitowise’s net debt stood at 53.3 MEUR, slightly lower than the previous year. However, due to a decline in the rolling 12-month EBITDA, the net debt/EBITDA ratio rose to 5.9x (from 4.3x). We consider this level of leverage to be high, underlining the importance of improving profitability and ability to reduce the amount of net debt going forward.

We expect the recovery to be gradual

As anticipated, Sitowise again refrained from providing guidance, underscoring persistent uncertainty and no material improvement in market visibility. Management commentary offered no significant new insights, largely reiterating previous statements. While Sitowise observes early signs of a moderate recovery in the Finnish construction market, suggesting it may have bottomed out, this recovery is expected to be slow and gradual, materializing towards the end of 2025. New residential construction is still only expected to recover in 2026. The Swedish construction market outlook remains subdued, with recovery not expected until late 2025 or even 2026. This forward-looking assessment largely aligns with our own expectations.