Norrhydro Group: Customer order development continued to trend upward

Translation: Original published in Finnish on 9/4/2025 at 7:38 am EEST.

We reviewed the order development of key customers in Q2, and overall, we note that demand has developed favorably for Norrhydro. The data points support our projections that Norrhydro Group's revenue growth will accelerate in the second half of 2025. This development of demand significantly impacts the company and its share price developments, as the operational leverage of production is greater than before with the new plant and the debt leverage on the balance sheet also amplifies the impact of earnings developments on the share price.

Data points send a positive message

Norrhydro's target market continued its upward trend in Q2 based on data reported by several customer companies. Many of the company's customers reported fairly high double-digit growth figures for equipment orders. However, Ponsse, which we estimate to be Norrhydro's most significant customer, reported slightly weaker order figures in Q2 compared to the beginning of the year (Q1), though there was still moderate growth. Our focus is specifically on orders received by the customers themselves, which we believe will be reflected in Norrhydro Group's subcontracting volumes with a delay.

• Orders for Volvo's construction-related machinery grew by 24% year-on-year in Q2, driven by Europe and Asia. Although the European market is not particularly strong, the trend is still upward, and order volumes are growing compared to low comparison levels.
• Ponsse's orders grew by 3% year-on-year in Q2, which was slower than in Q1 (13%). According to the company, demand in the forest machinery market was moderate, albeit slower than normal due to factors such as continued uncertainty surrounding tariff policies. However, the underlying trend in the European and US markets appeared to remain positive.
• Kalmar reported strong order growth (+20% y/y) for Q2, which also clearly exceeded consensus expectations. From Norrhydro's perspective, we consider it significant that Kalmar's order growth was particularly driven by equipment (+28%). Growth was especially robust in Europe and the Americas. However, the company estimates that demand prospects for the remainder of the year may be weaker than in the beginning of the year due to general economic uncertainty.
• Sandvik reported record orders for its Mining segment in Q2, driven by equipment sales. Orders grew organically by 18%, but the negative currency impact resulted in a 5% year-on-year increase in total order intake. Order growth was boosted by a few large orders from North America, for example.
• Kongsberg reported strong order growth of 23% in its Maritime segment in Q2, driven in particular by new shipbuilding.

Volumes are needed to reduce the debt burden 

Norrhydro Group already reported a 14% increase in revenue for H1. We estimate that the positive order development of the company's customers will be reflected in Norrhydro's demand with a slight delay, so we expect the rest of the year to also show an upward trend (forecasted revenue growth of 17%). The industry has been exceptionally gloomy in the last few years, especially in Europe, so we expect growth to continue into 2026 (with predicted growth of 11%). The majority of the predicted growth will continue to come from traditional hydraulic cylinders, while NorrDigi products, which offer higher added value, will still account for a smaller percentage. The plant, built in 2021-22, has increased the company's fixed costs, but it enables higher volumes to be produced more efficiently than before. This increases the impact of volume growth on profitability and earnings. Based on our current forecasts, the company will be able to achieve an EBITDA of 2.3-3.1 MEUR in 2025-26. According to our estimates, the 2025 result will not yet be sufficient to significantly reduce the high debt burden, but if the 2026 earnings growth materializes, the debt trend would start to decline, according to our estimates.

Revenue and profitability development

Source: Inderes’ estimate