Savosolar Q1 on Monday: Favorable sea freight market supports earnings level

Translation: Original comment published in Finnish on 5/3/2023 at 6:00 am.

Savosolar will publish its Q1 interim results on Monday, May 8. We expect a strong performance from Marine Logistics, supported by a favorable market situation, which should lead to a clearly positive group-level result. We forecast that Renewable Energy's revenue will remain small and its operating result will be loss-making.

Revenue reaches a new level as a result of the merger

Q1’2023 is the first full quarter since Savosolar and Meriaura merged through a share exchange at the end of November 2022. Revenue has increased strongly as a result of the merger. We forecast Q1 revenue of EUR 18.1 million (Q1'22: 1.4 MEUR), of which EUR 0.9 million would come from Renewable Energy and EUR 17.2 million from Marine Logistics. We forecast Renewable Energy’s revenue to decline organically, as the company's order book was only EUR 0.3 million at the end of 2022 (0.4 MEUR at the end of 2021) and no new orders of significant size have been announced during 2023. In Marine Logistics, we expect revenue to develop fairly steadily, driven by slightly lower marine fuel prices than in the comparison period (lowers revenue) on the one hand, and strong demand for special cargo services due to investments in the energy sector, among other things (increases revenue) on the other. Quarterly comparison figures for Marine Logistics are not known, but for H1 as a whole, our forecast for Marine Logistics' revenue growth is -2%.

Marine Logistics performance benefits from favorable market environment

We expect Savosolar's results to turn clearly positive in Q1 thanks to the good performance of Marine Logistics. Our estimate for Q1 EBITDA is EUR 2.3 million and operating profit EUR 1.0 million (Q1'22: -1.2 MEUR). In Renewable Energy, we still forecast a loss-making operating result of EUR -1.1 million, as a turnaround in the segment's profitability would require a significant increase in the scale of revenue. For Marine Logistics, we forecast an operating profit of EUR 2.1 million (12.4% of revenue). We estimate the profitability of Marine Logistics to be above long-term levels, as sea freight rates rose to high levels in 2021-2022, which will support the company further in 2023. Savosolar commented in its 2022 financial statement bulletin that the outlook for 2023 is good for both bulk and special cargo transport. For H1 as a whole, our operating result estimate for Marine Logistics (4.1 MEUR) is at the same level as in the comparison period, which assumes a slight decrease in spot market freight rates and increased utilization rates for the two open-deck carriers, both of which were in the yard for one month in the comparison period as planned.

We have forecast the pricing environment to weaken towards the end of the year

Savosolar has not provided numerical guidance on its 2023 revenue or EBIT, but our estimate for the group's 2023 revenue is EUR 72 million (pro forma 2022: 73 MEUR) and EBIT EUR 3.2 million (pro forma 2022: 5.2 MEUR). In our view, the performance of the current year will depend in particular on the development of the sea freight market, and the decline in freight prices that we forecast may yet prove to be too pessimistic, in which case the result could surprise on the upside. Savosolar has so far given relatively little concrete information on its post-merger strategy, but on April 18 the company announced changes in its management, which may also foreshadow new strategic directions. We estimate that a strategic update, including financial targets, could take place in the second half of 2023 or during 2024.