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Orthex is a Finnish manufacturer and supplier of household products. The company offers products such as plastic storage boxes, cutting boards, pots, bowls and other kitchen accessories. The majority of the range is accessed digitally via the company's e-commerce platform, and the products are also offered through licensed retailers. The largest operations are found in the Nordic market.
Orthex's Q3 report dispelled concerns about its ability to defend its margin amid severe cost inflation, as higher raw material prices were reflected in the company's figures in full for the first time.
The current decade has been anything but easy for Orthex. Inflation, interest rates, and rising raw material and energy prices have all thrown a wrench in Orthex's gears.
Although Orthex's valuation appears moderate based on normalized earnings, prolonged inflationary pressures on plastic raw materials have weakened the short-term outlook and the stock's expected return within a 12-month period.
Orthex's Q2 figures were operationally slightly stronger than our expectations, although one-off costs related to strategic projects weighed on the reported result, bringing it below our estimate. During the review period, the revitalized sales in the Nordic countries and resilient gross margins demonstrated the company's ability to pass increased production costs into its prices.
With the increase in oil prices following the conflict in Iran, we estimate that Q2 has been a balancing act between growth and profitability for the company.
