Translation: Original published in Finnish on 2/12/2025 at 7:05 am EET.

Koskisen will announce its Q4 results on Monday at 8:30 am EET. The operating result is expected to be slightly better than in the previous year, despite the still sluggish market situation. Koskinen expects to slightly reduce the dividend in 2024, reflecting declining earnings and continued (but quieter than in recent years) investment needs. Guidance for the current year also plays a key role in the report. We estimate that Koskisen will guide for revenue growth this year, driven by Sawmill Industry, and an adjusted EBITDA margin of 8-12%. Our profitability forecasts are well below consensus, so we believe there is some risk of disappointment on guidance. We do not see a clear pricing error in Koskisen's stock in either direction ahead of the Q4 report. 

Revenue has increased considerably

We forecast Koskinen's revenue to grow by 14% to 78 MEUR in Q4, driven by both businesses. This would represent a 2% increase in full-year revenue, while the company's unchanged full-year guidance calls for revenue to increase in 2024 versus 2023. Our forecast is above consensus. In Sawmill Industry, growth was driven by both higher volumes due to the progress of the new sawmill line in Järvelkä and slightly higher sales prices for sawn timber. We also expect volume-driven growth in Panel Industry, despite weak comparables, as we do not believe that the late fall order flow has led to layoffs in birch plywood production and/or longer Christmas shutdowns than in the comparison period. 

Operational result up, bottom lines down

We expect Koskisen's adjusted EBITDA to improve by just under 20% to 6.2 MEUR in the fourth quarter from a weak comparison level. Our forecast corresponds to an adjusted EBITDA margin of 8.6% for the full year, which is at the lower end of the company's 2024 guidance range (cf. 2024 guidance of 8-12% adjusted EBITDA%). Our estimate is slightly below consensus. We expect Sawmill Industry to have improved profitability, mainly due to volume growth and efficiency gains from the progress of the Järvelkä investment ramp-up. However, the margin in Sawmill Industry remains weak in our forecast, as log prices are high and the Järvelkä sawmill is far from full capacity. The earnings growth we have projected for Panel Industry is revenue driven. However, based on UPM Plywood's and Metsä Wood's Q4 reports, we see some negative surprise risk to Panel Industry’s Q4 forecasts. Taking into account the small loss of the Other unit, the significantly increased depreciation due to the introduction of the new sawmill, low financial expenses and taxes, we expect Koskisen's EPS to fall to EUR 0.09 in Q4 despite the improvement in operating profit. Our bottom-line forecast is also below consensus. 

Consensus margin expectations are challenging

Koskisen has typically provided guidance on revenue in verbal terms and adjusted EBITDA margin in numerical terms. We and the consensus expect Koskisen's revenue to grow at a double-digit rate this year, driven by increasing volumes as the new sawmill in Järvelkä becomes operational and the construction cycle picks up towards the end of the year. For the adjusted EBITDA margin, we expect an improvement of just under 1.5 percentage points to 10.0%, driven by growth, while the consensus is more than a percentage point above us. We believe the consensus is optimistic as growth in 2025 will be concentrated in the lower-margin Sawmill Industry. Thus, we expect the company to guide, exactly as for 2024, for revenue growth compared to 2023 and an adjusted EBITDA margin of 8-12% for the current year. However, this may not be enough for the market given the higher-than-consensus margin improvement forecast, although the stock's valuation is not particularly demanding (2024e: P/B 1.1x).