Anora Q4'24: Reasonable cash flow and dividend

Translation: Original published in Finnish on 2/13/2025 at 08:01 am EET

Anora’s Q4 result exceeded our expectations, and the guidance expects a slight improvement this year. Although we see Anora's growth potential and value creation as sluggish, we believe the cash flow generation is sufficient for an expected return that exceeds the required return. Thus, we raise our recommendation to Accumulate (was Reduce) and our target price to EUR 3.3 (was EUR 3.0).

Q4 result exceeded the comparison period and expectations

Anora’s revenue decreased by 3% in Q4, which was mainly caused by the 5% decrease in the Spirits segment due to lower volumes. The Wine segment only decreased by 1% and was slightly better than we expected, and Industrial performed as expected. Anora had guided adjusted EBITDA of 65-70 MEUR for 2024. The result for the whole year ended up at 69 MEUR, which meant 29 MEUR for Q4. This was better than both the comparison period (27 MEUR) and our expectations (26 MEUR). The positive surprise came from the Wine segment, where revenue, gross margin and fixed costs were all better than our expectations. Anora proposes to keep the dividend unchanged at EUR 0.22, which also exceeded our expectations (EUR 0.15).

The guidance anticipates slight earnings growth, but requires an improvement in volume

For this year, Anora's guidance is an adjusted EBITDA of 70-75 MEUR, while in 2022-2023 it has been 68-69 MEUR. Anora expects market volumes to remain relatively unchanged, but measured by value, the market is expected to grow slightly. In addition, Anora assumes it will perform slightly better than the market, i.e., gain market shares. Considering the market decline seen in H2’24, we view Anora’s assumptions as somewhat optimistic, especially for the beginning of the year. We raised our adjusted EBITDA forecast by only 1 MEUR for 2025 and are now at the lower end of the guidance range at 70 MEUR. We also note that Anora has had to lower its guidance in the past two years due to negative surprises in market development. We consider a guidance cut a risk also for this year. The changes to our net result forecasts remained zero for this year and turned negative for 2026 due to higher financial expenses.

Anora has potential for better, but value creation is difficult

While we believe Anora can improve its profitability in the coming years and, on the other hand, consumer demand will gradually recover, we don't see it reaching a significantly higher earnings level than currently. 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. We expect that Anora's returns on capital will remain at approximately the level of our required return in the coming years, so we do not expect the company to create value.

Cash flow provides a sufficient expected return

Anora's 2024-25 P/E ~10x is within our acceptable multiples. Although our return on capital projections are only around our required return levels even looking further into the future, Anora's expected return at current valuations is decent considering the cash flow yield. With our estimates, free cash flow is 10% or higher, of which Anora distributes a significant portion as dividends, with a dividend yield of 7-8%. Dividend plays a significant role and it almost alone reaches our required return. Our target price of EUR 3.3 is also in line with the value of our DCF model.