Translation: Original published in Finnish on 2/17/2025 at 9:25 am EET.

Koskisen's Q4 results released this morning were, as expected, significantly better than the comparison period, but fell short of our and consensus forecasts for the final quarter. The dividend cut was also stronger than expected. The most important part of the report, however, was the guidance for the current year, which indicated an increase in revenue and a more or less stable profitability trend at the midpoint of the range. The consensus expected a heavy margin improvement from Koskisen, and our own forecast was for a clear margin improvement. As a result, our earnings forecasts for the current year are under pressure, which we expect to be reflected in Koskinen's share price today.

Profitability improved more slowly than expected in Q4

In Q4, Koskisen's revenue grew by 6% from a weak comparison figure to 73 MEUR, below consensus and especially below our forecast. The growth was purely driven by higher volumes and prices in Sawn Timber Industry, while Panel Industry's revenue, due to the stable development of volume and price components, remained at the level of the weak comparison period. Overall, the sluggish top line development continues to reflect the overall picture of the European economy and in particular the construction industry, which remained very subdued towards the end of the year.  

Koskisen's adjusted EBITDA increased by 4% to 5.7 MEUR in the fourth quarter. The operating result was around 10% below our and consensus forecasts. Adjusted EBITDA in Sawn Timber Industry more than tripled to 3.3 MEUR (Q4: adj. EBITDA-% 8.6%), driven by revenue growth, a strong energy wood market, and the increase in capacity utilization of the new Järvelä sawmill. The performance of the unit clearly exceeded our forecasts. The Q4 earnings disappointment was caused by Panel industry, where adjusted EBITDA almost halved to 2.5 MEUR (Q4: adj. EBITDA 7.6%) due to the increase in the price of birch logs, the ramp-up of the Kore business, and write-downs of spare parts inventory and trade receivables. There were no surprises in the results of the 'Other' unit. Further down the P&L, Koskisen recorded marginal one-off expenses for Q4, while financing expenses landed above and taxes below our forecast. As a result, EPS fell to EUR 0.07, below our and consensus forecasts, in line with the operating result. Cash flow also looks weak on a preliminary basis, as earnings were modest and the typical Q4 working capital release was also modest.      

Earnings trend should remain up, but the rate is likely to be slow

Koskisen gave guidance for the current year, according to which revenue will grow from last year (2024: 282 MEUR revenue) and the adjusted EBITDA margin will be 7-11%. Prior to the report, we and the consensus were forecasting double-digit revenue growth for Koskisen this year. For the adjusted EBITDA margin, we were forecasting an improvement of just under 1.5 percentage points to 10.0%, mainly due to growth and the benefits of the investments in the Järvelä sawmill, while the consensus was more than one percentage point above our forecast. As a result, the forecasts are at the high end of the range, particularly for profitability, and we expect the consensus margin forecast for this year in particular to come down with the guidance.

Overall, Koskisen's market outlook seems likely to remain subdued, at least until H2, due to delayed construction and the slow recovery of the European economy. The benefits (including increased capacity and efficiency) of the investments in Sawn Timber Industry will allow for improved results. In Panel Industry, similar self-boost is not available so far, and the improvement in performance seems, according to our preliminary estimate, to be more dependent on the pull of the market.