Meriaura Group Q3 on Monday: Weakening business cycle depresses the result

Translation: Original comment published in Finnish on 10/31/2023 at 7:10 am EET

Meriaura Group will publish its Q3 business review on Monday November 6. We expect the earnings level of Marine Logistics to decline from the comparison period as market demand weakens. In Renewable Energy, on the other hand, we expect revenue to grow and losses to decrease thanks to a significant project delivery starting.

Cycle weakened in Marine Logistics, Renewable Energy expected to grow thanks to the major project

We expect Q3 revenue to be EUR 17.7 million. Naturally, the growth is sharp compared to the comparison period, when the business only consisted of Savosolar, i.e. the current Renewable Energy business. In Q3, we estimate the revenue of Marine Logistics to be EUR 14.7 million and the revenue of Renewable Energy to be EUR 3.0 million (Q3’22: 0.8 MEUR). The revenue of Marine Logistics decreases in our forecasts (H2’23e: -14% y-o-y), as both fuel prices invoiced from customers and market prices of sea freight have decreased. Q3 is seasonally weaker as the holiday season reduces transport demand. In Renewable Energy, the company received a large supply contract of EUR 9 million to Bad Rappenau, Germany, which was originally conditional on obtaining a building permit. The building permit has been delayed, but the parties decided to start deliveries in the fall, which was announced in October. We consider it likely that revenue from the project has already been recorded in Q3, but there is still significant uncertainty in the timing by quarter, which is not, however, materially relevant to the value of the share.

Profitability is likely to be around zero at EBIT level

We predict Meriaura Group’s EBIT to be EUR 0.1 million in Q3, of which EUR 0.7 million from Marine Logistics and EUR -0.6 million from Renewable Energy. The Group’s EBITDA is likely to be clearly positive, EUR 1.4 million being our forecast. We believe the performance of Marine Logistics has weakened compared to the strong comparison period, as demand in the sea freight market declines with economic cycles. The performance of Renewable Energy improves clearly from the comparison period (Q3’22 EBIT: -1.1 MEUR) if our expectations on the recognition of the Bad Rappenau project are correct. However, we believe achieving a neutral or positive EBIT in Renewable Energy requires even higher delivery volumes. After the forecasted EUR 0.3 million net financial expenses the net result would be EUR-0.2 million.

Earnings report can give a direction for Marine Logistics' earnings development

Meriaura Group does not provide numerical guidance on near-term performance. However, the company expects the demand for Marine Logistics to remain at a reasonably good level toward the end of the year due to the strong contract base. In the big picture, we do not expect the Q3 report to bring major changes to the company’s outlook. The key takeaways will probably be the direction of Marine Logistics' revenue and earnings in particular which currently seems to be negative after the 2022 cycle peak. In Renewable Energy, development is dependent on new orders of significant size, which are typically announced separately. We expect the Group’s EBIT for 2023 to be EUR 1.2 million and to improve to EUR 2.1 million in 2024 as both business units improve their results. However, the weakening economic situation has increased uncertainty, especially concerning the forecasts for Marine Logistics. The revenue outlook is also uncertain in Renewable Energy and depends on winning individual projects.