Midsona: Fire in Spain plant weighs on estimates - ABG
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'25e-'27e adj. EBIT down 8-2%
Incident in Spain weighs on near-term momentum
Trading at NTM EV/EBITA of ~8x
What to expect in Q2'25
We anticipate 2.5% y-o-y organic growth in Q2'25, implying sales of SEK 908m and EBIT of SEK 21m, for a margin of 2.3%. The organic growth is partly due to light comps (3% in Q2'24), but also due to a late Easter, which carries a slightly negative impact for Midsona because of the positioning of its offering (health & organic foods).
Estimate changes
We cut '25-'27e sales by ~1% and adj. EBIT by 8-2%, respectively. The primary driver behind the estimate revisions in the near term is the fire at Midsona's production plant in Spain, which contributes ~SEK 75m in annual revenues. In our updated estimates, we assume that this incident will adversely impact sales by SEK 18-19m per quarter for three quarters. However, given that Division Europe South carries a lower gross margin, we assume a somewhat better mix. Nevertheless, this is clearly negative for '25e-'26e earnings. We continue to believe that selective M&A is more likely than buybacks because the industry is fragmented and ripe for consolidation. With respect to timing, a realistic option for a return to M&A is likely when the leverage ratio reaches the range of 1-1.5x (net debt/EBTDA), which we expect to be achieved in late '25e or early '26e.
Implied valuation
Based on our revised estimates, the company is trading at ~8x NTM EV/EBITA, which is 25% below current peer multiples. We note that peers, in turn, are trading ~25% below the 10-year historical median of ~14x NTM EV/EBITA.
Incident in Spain weighs on near-term momentum
Trading at NTM EV/EBITA of ~8x
What to expect in Q2'25
We anticipate 2.5% y-o-y organic growth in Q2'25, implying sales of SEK 908m and EBIT of SEK 21m, for a margin of 2.3%. The organic growth is partly due to light comps (3% in Q2'24), but also due to a late Easter, which carries a slightly negative impact for Midsona because of the positioning of its offering (health & organic foods).
Estimate changes
We cut '25-'27e sales by ~1% and adj. EBIT by 8-2%, respectively. The primary driver behind the estimate revisions in the near term is the fire at Midsona's production plant in Spain, which contributes ~SEK 75m in annual revenues. In our updated estimates, we assume that this incident will adversely impact sales by SEK 18-19m per quarter for three quarters. However, given that Division Europe South carries a lower gross margin, we assume a somewhat better mix. Nevertheless, this is clearly negative for '25e-'26e earnings. We continue to believe that selective M&A is more likely than buybacks because the industry is fragmented and ripe for consolidation. With respect to timing, a realistic option for a return to M&A is likely when the leverage ratio reaches the range of 1-1.5x (net debt/EBTDA), which we expect to be achieved in late '25e or early '26e.
Implied valuation
Based on our revised estimates, the company is trading at ~8x NTM EV/EBITA, which is 25% below current peer multiples. We note that peers, in turn, are trading ~25% below the 10-year historical median of ~14x NTM EV/EBITA.