Meriaura Group Q2 on Monday: Result is likely to be positive even though freight prices are falling

Translation: Original comment published in Finnish on 8/23/2023 at 6:00 am EEST.

Meriaura Group will report its Q2 interim results on Monday August 28. We expect the result to be clearly positive, even though prices in the maritime freight market are showing signs of a decline towards long-term normal levels. The large order received by Renewable Energy at the end of June probably did not yet have time to affect Q2 revenue, so Renewable Energy's losses will eat into part of Marine Logistics’ result.

Q2 revenue to be generated almost entirely by Marine Logistics

Meriaura and Savosolar merged through a share exchange at the end of November 2022, as a result of which the revenue of the listed group has increased several times compared to the former Savosolar. We forecast the group's Q2 revenue to reach EUR 19.4 million (Q2'22: 0.7 MEUR), of which EUR 19.2 million would be generated by Marine Logistics and EUR 0.2 million by Renewable Energy. In Marine Logistics, we expect the development of revenue to be fairly stable. Revenue is affected on the one hand by slightly lower marine fuel prices and lower spot prices for sea freight than in the comparison period (reducing revenue) and on the other hand by strong demand and higher utilization rates for special cargo (increasing revenue). The quarterly comparison figures for Marine Logistics are not known, but for H1 as a whole, our forecast for Marine Logistics' revenue growth is 6%. We forecast Renewable Energy’s revenue to decline organically, as the company did not receive any new orders during Q1. However, at the end of Q2, the business line received a significant order of around EUR 9 million from the German company Bauer Holzenergie. The order supports the growth prospects for 2023-2024 in the Renewable Energy business area, although it is unlikely to be reflected in Q2 revenue yet.

Good result expected from Marine Logistics, weak one from Renewable Energy

We forecast Meriaura Group's Q2 earnings to be clearly positive thanks to the good performance of Marine Logistics. Our estimate for Q2 EBITDA is EUR 3.0 million and operating profit EUR 1.7 million (Q2'22: -1.2 MEUR). For Marine Logistics, we forecast an operating profit of EUR 2.7 million. We estimate that profitability in Marine Logistics is still slightly above long-term levels, as sea freight rates rose to high levels in 2021-2022, which will continue to support the company in 2023 through existing contracts. However, spot transport prices (just under a third of dry bulk transport) are already likely to have fallen closer to their long-term normal levels. For H1 as a whole, our EBIT estimate for Maritime Logistics (3.9 MEUR) is almost at the same level as in the comparison period (4.1 MEUR). In Renewable Energy, we still forecast a loss-making operating result of EUR -1.1 million, as the segment's profitability turnaround requires significant revenue growth, which will not materialize yet in Q2.

Renewable Energy outlook buoyant, price level falling in Marine Logistics

Meriaura Group has not provided guidance for 2023. The company's outlook in the near term includes both positive and negative drivers. In Renewable Energy, the large order of EUR 9 million, a significant part of which will be booked in H2 revenue, supports growth prospects and improved profitability. In Marine Logistics, the rebalancing of supply and demand in the market will bring transport price levels down towards normal long-term levels, which means that the strong performance of recent years may not be sustained in H2. Our full-year revenue estimate for 2023 is EUR 73.2 million (2022: 8.6 MEUR) and our EBIT estimate is EUR 3.3 million (2022: -3.8 MEUR).