Koskisen

Koskinen’s Q3 report was weaker than we expected in terms of earnings. Some of this, however, is due to the maintenance shutdowns in July that were clearly longer than we expected, although the market situation has not recently developed positively either.

The Q3 result published by Koskisen this morning was loss-making in the lower lines and, well below our expectations across the board, especially due to volume and cost (raw wood) reasons. Koskisen repeated its guidance for the current year, but due to the weak Q3 and the seemingly weak market situation, the prerequisites for a positive earnings revision that we expected were largely lost.

Koskisen will report its Q3 result on Friday. Koskinen's market situation has remained twofold by business area, but we expect the strong pricing situation in the Panel Industry to have pushed Koskisen to a relatively good profitability level in Q3.

We have reviewed UPM’s, Stora Enso’s and Metsä Board’s post-Q2 consensus forecasts and their changes. Forest companies’ consensus forecasts for 2023 started to decline last fall, when the slowdown in economic growth began to affect the demand outlook (incl. a drop in inventories), global supply improved as COVID bottlenecks eased, and inflation continued.

The replacement investment increases the pressing capacity of thin plywood in Hirvensalmi and improves the energy efficiency of production. We estimate that the investment only increases Koskinen’s total capacity slightly, and the news does not affect our view of the share.

Koskisen’s Q2 report was better than we expected and we raised our estimates clearly for the near future, as the Panel Industry continues to perform strongly and the Sawn Timber Industry has repeatedly achieved better results than the competitors. In the current situation, the share cannot be priced at particularly high multiples, but Koskisen’s valuation is very moderate, especially on EV basis.

Koskisen's Q2 results published this morning were better than our expectations, with both operating divisions exceeding our estimates despite the mixed market conditions. Koskisen reiterated its guidance for the current year, as we expected, although after a good H1 the guidance is starting to look very cautious.

Koskisen's market situation has remained very mixed by business lines, but we expect the strong pricing situation in Panel Industry to have pushed Koskisen to a still quite good profitability level in Q2. For the current year, we expect Koskisen to reiterate its guidance reflecting the high uncertainties prevailing at this stage of the year, but our current profitability estimates are right at the top end of the company's guidance range following a strong Q1.

We believe that the investment is a natural part of the development of the Järvelä unit and we estimate that the company will be able to achieve productivity improvements by simplifying its log logistics through the investment. We will include the impact of the investment in our estimates for Koskisen in the Q2 update, but our preliminary estimate is that the changes will not be significant given the size of the company and the assumptions included in our previous forecasts.

We have not made changes to our cautious estimates, but based on the Q2 reports of Koskisen’s peers we feel the surprise element for the near term is turning to the positive. Even though the accepted valuation level of the share is low in the prevailing conditions, we feel that based on Koskisen’s very moderate EV and balance sheet based current valuation, the share’s risk/return ratio encourages to bear the risk.

In our estimates, we expected the new unit to start ramping up sawn timber production at the beginning of H2, so this news does not cause immediate pressure to change our estimates. In the longer term, there could be upside in our estimates for Koskinen’s Sawn Timber industry supported by the major strategic investment if the medium-term market situation in the sawn timber segment would materialize more positively than we currently expect.