FPC will present its Q2 earnings on July 19. Our expectations for this report are presented below.
EDIT: the EBIT figure in the original text was incorrect and should be SEK -637m, not SEK -479m.
One month ago we published preliminary, new estimates following FPC's second, big restructuring program. We have not changed our Q2'18 estimates since that note. We expect FPC to report Q2 sales of SEK 255m and an operating loss (EBIT) of SEK -637m* (incl. SEK 479m in one-time, non-cash, extraordinary costs). We expect the gross margin to improve sequentially to 20 percent, which is still less than half of the competitors' gross margins though. Management's reasoning around the gross margin in the report or on the call will therefore be of specific interest to us. We would like to see a clear plan for how FPC will come back to decent gross margins.
We will make one change in our estimates compared to our June note as all of the announced savings seem to be after capitalizations. FPC capitalized development costs worth SEK 204m in 2017. The net OPEX savings is therefore a bit smaller than our initial guesses. However, this does not change our new base case of SEK 5 per share. Our new EBIT estimates for 2019 and 2020 are SEK -116m and -25m (previously SEK -2 & +38m). Thus, our current estimates do not expect FPC to turn to profit within the next two years.
We will return with an updated research report as soon as possible after FPC's Q2 report.