Translation: Original published in Finnish on 1/30/2026 at 8:26 am EET.

Suominen's Q4 figures were clearly weaker than our estimates. As we expected, the company announced a new multi-year and extensive efficiency program, which supports our estimated earnings growth for the coming years. However, we believe the share price already reflects a better earnings level than our estimates for the coming years. In addition, we estimate that the company may need equity financing to implement the efficiency program and support its balance sheet. We lower the target price to EUR 1.3 (from EUR 1.6) due to weakened estimates and update our recommendation to Sell (was Reduce).

The Q4 result was weak, as was the full year 2025

Suominen's Q4 revenue decreased by as much as 20% and was 11% below our estimate, as the decline in volumes was significantly greater than we expected. The company's revenue also decreased significantly in the EMEA region, which, in our view, indicates that Suominen lost volumes due to reasons other than the known production problems in the US. Adj. EBITDA in Q4 was just under 2 MEUR, whereas we had expected a result of around 4.5 MEUR. The figures for the full year 2025 were also weak. Revenue decreased by 11% as volumes clearly declined starting from Q2, and adj. EBITDA remained at 13 MEUR, which is the lowest level for the company in its current form.

New, extensive efficiency program launched

As per the CEO's previous indications, the company announced a comprehensive efficiency program in connection with its Q4 earnings release, aiming to raise the adj. EBITDA margin to 10% by 2028 (from 3-4% in recent years). In connection with this, the company is reviewing all cost items, but the focus is on improving production efficiency, utilization rates, and production reliability. In addition to improving cost efficiency, the company will invest 20 MEUR in the coming years to develop its plants, on top of normal maintenance investments. The program may also include capacity reduction if volumes do not increase from current levels. The efficiency program was highly expected by us and the market, and the organizational revision made for it, which eliminates geographical segments, seems logical to us. The targeted adj. EBITDA margin is slightly lower than the company's official financial target (12%), but very ambitious compared to our estimates (2028: ~6.5%). We do not believe the company will fully capture all the efficiency benefits, as some will be used to manage cost inflation and be passed on to customer prices. For this year, the company guided that adj. EBITDA would improve. Given the weak comparison period, we considered this expected. We lowered our estimate due to the weak Q1 outlook and now expect the 2026 adj. EBITDA to be 19 MEUR.

The balance sheet is tight and may require equity financing

Due to the weak earnings performance, the company's balance sheet position deteriorated further, with net debt/adj. EBITDA rising to well over 6x at year-end. The company stated that it is in negotiations with its financiers to avoid covenant breaches. The company has a bond maturing in June 2027, and we estimate that its refinancing will become relevant this year. In addition, the company's CEO stated in our interview that the implementation of the new efficiency program will likely require additional financing, and in our view, this could be equity-based (e.g. a hybrid loan or a share issue).

The share anticipates a clear earnings improvement, with a weak expected return

In our view, the share price is so high relative to earnings that it requires several years of earnings growth before the valuation is at a warranted level. Considering the limited competitive advantages, we do not believe that the company will be able to achieve a return on capital that is sustainably above the required return in the long term. Our DCF model's value is EUR 1.3, which is in line with our target price, even though the model assumes a significantly better long-term margin than the current one.