Anora: No support from the market

Translation: Original published in Finnish on 1/15/2025 at 7:57 am EET.

Among Anora's main markets, at least Finland and Norway continued their negative development in Q4'24 and we do not expect a turnaround this year. We have lowered our forecasts for the next few years by 5-10% due to the still sluggish market development and outlook. With the decline in forecasts, our target price fell to EUR 3.0 (was EUR 3.4). We reiterate our Reduce recommendation. 

Last year's earnings forecast lowered to bottom end of guidance range

Anora has guided for EBITDA of 65-70 MEUR in 2024. Following weak volumes in Q4 and especially in December in Norway and Finland, we have slightly lowered our forecasts and our adjusted EBITDA forecast is now at the lower end of the guidance range.

For Q4, this means adjusted EBITDA of 25.5 MEUR, slightly below the 27 MEUR in the comparison period. We expect a significant improvement in the Industrial segment (2 MEUR), which means that the beverages segments (both Wines and Spirits) will deteriorate significantly year-on-year. This is due to a decrease in volume and an increase in fixed costs.

Forecasts cut also for 2025-2026

As consumer demand and the alcohol market remain weak in early 2025, we have lowered our forecasts for this year and next. We expect Anora's revenue to be flat this year and earnings to improve slightly. Along with cut top-line forecasts, our earnings forecasts for 2025-2026 have also been lowered. We also slashed our dividend forecast for last year and now expect the dividend to fall from EUR 0.22 to EUR 0.15. Anora's earnings are sluggish and debt levels remain high, which we believe justifies the dividend cut. We also lowered our dividend forecast for 2025 but expect an increase from 2024 levels. The payout ratio for the coming years is expected to be around 60%, in line with the company's target of 50-70%.

Anora has potential for better, but the performance has failed expectations for a long time

Although we believe that profitability, especially in the Wine segment, will improve in the coming years and that consumer demand will gradually recover, we do not see Anora achieving significantly higher margins. This is partly due to the sluggish growth outlook for the alcohol market (and the risk of even further market decline) and, in our view, the company's limited ability to significantly reduce its costs. At least in wines, the main competitor Viva Wine Group has been systematically capturing market share for years, while Anora has fared less well. The company is in the midst of a management transition as the current CEO has announced his retirement, but no new CEO has been announced.

Weak fundamentals and valuation fail to attract despite earnings improvement potential

Anora's P/E of 12x in 2024 is at the upper end of our acceptable range, but 9x in 2025 is already a neutral level. Even this year's multiple is not particularly attractive in our view, given weak growth potential and returns on capital that are close to or below the required return. We forecast a dividend yield of 5% for last year. We also note that the company has missed both its own guidance and our forecasts in recent years and its performance is sensitive to, among other things, volume developments and changes in raw material prices. The usefulness of EV ratios is weakened by lease liabilities and off-balance sheet sales of receivables.