Flügger Q2'2025/26 - Profitable rebound intact despite export market restructuring

Flügger delivered 2.2% revenue growth in H1 2025/26 to MDKK 1,264, as strong growth in Poland (International segment (12% y/y) and Sweden (+8% y/y) offset revenue declines in Denmark and other export nations. In the Nordics, a conversion of white-label volumes to own-brand sales in Denmark lifted margins; however, Group EBIT was stable at MDKK 141 (from MDKK 140 H1 2024/25), as terminated sales to nations in Eastern Europe and other non-core export markets had a negative impact on the International segment’s EBIT result year-over-year. Despite weaker EBIT expansion than projected in H1 2025/26 the structural value drivers of margin expansion in the Nordics from improved product mix and strong, higher margin growth in Poland remain unchanged. We still see a favourable risk-reward as Flügger executes its profitable rebound, despite possible sanctions-related risks, and reiterate our “Accumulate” recommendation and slightly lower price target of DKK 360 per share.

Nordic coatings group with international growth engine

Flügger is a family-controlled decorative paints group with strong Nordic market positions and a growing Central European footprint. The group operates through three segments: Nordics, International, and Partnerships. While Nordic housing and renovation activity remains subdued, profitability is improving as demand from professional painters shows early signs of recovery and as Flügger continues to exit low-margin private-label volumes. The International segment, led by Poland, remains the key growth engine, delivering double-digit local-currency growth supported by new store openings. Partnerships (Unicell and Eskaro) provide stable earnings, with longer-term optionality linked to a rebuilding of Ukraine.

Modest top-line growth, and expanding margins to support rising EPS and shareholder returns

H1 2025/26 revenue grew by 2.2% to MDKK 1,264, held back by the deliberate phase-out of private-label products, particularly in Denmark, but supported by strong growth in Poland and Sweden. The improved product and customer mix drove gross margin expansion to 56.5% (from 54.9% H1 24/25), underpinning stable EBIT despite higher operating costs and investments. Strong cash generation enabled further deleveraging, with total bank debt reduced to MDKK 118 (from MDKK 153), and enabled payment of the second half of the dividend of DKK 20 per share announced in the annual report, reinforcing Flügger’s capacity for attractive shareholder returns despite modest volume growth.

Absolute and relative valuation support a favorable total return profile

Our DCF-based model value of DKK 374 per share highlights the value to be unlocked from a sustained profitable rebound. Improving demand among core professional painters indicates the rebound is intact, despite the restructuring of export market sales. The DCF value implies value creation potential even after a risk-weighted adjustment relating to the ongoing sanctions case. The estimated strong cash flow outlook also supports an attractive dividend profile with a sustained yield of >7%, while downside risk is reduced following deleveraging, and trading multiples are reasonably priced compared to peers. We believe that Flügger’s expected return exceeds the required rate of return over the next year and medium term, and we restate our “Accumulate” recommendation with a revised price target of DKK 360 per share.

Disclaimer: HC Andersen Capital receives payment from Flügger for a Digital IR and research agreement. / Philip Coombes 08:25 15/12/2025, updated 11:13 16/12-2025