Hanza Q4 2023: Slightly Softer than Expected – Raised Financial Targets
Research Note
2024-02-13
08:17
Redeye sees a Q4 report coming in slightly short of our expectations and a somewhat softer outlook from management regarding the short term. On the other hand, the raised financial targets for 2025 suggest some upside potential to our unrevised forecasts.
Fredrik Nilsson
- Underlying FX adjusted sales increased by 4% y/y to SEK1 056m (1 001), slightly below our forecast of SEK1 114m. While Other Markets roughly matched our forecast, Main Markets had slower growth than we anticipated.
- Management sees a mixed demand situation at the start of 2024. Some customers are seeing reduced demand while others continue to grow. However, management believes its position and strategy enable Hanza to grow organically despite softer economic conditions.
- EBITA (adjusted for SEK13m in M&A-costs and a revaluation of an earn-out) came in 7% short of our expectations. While Other Markets beat our forecast somewhat, thanks to a better-than-expected margin, Main Markets was 8% below due to lower sales, as the margin roughly matched our expectations. Management points out that the recently acquired Orbit One has margins below the segment average, which, along with lower demand from some customers, will lower margins in the short term. At the same time, Hanza has already started its integration and synergies initiatives – which should be smoother than usual as Orbit and Hanza use the same ERP system – and expects it to positively impact margins in 2024.
- In conjunction with the report, Hanza increases its financial targets. Hanza now targets SEK6.5bn in sales in 2025 and a full-year EBIT margin of at least 8%. The previous target was SEK5bn and at least 8% by the end of 2025. Following the acquisition of Orbit One, a raised sales target was expected. However, SEK6.5bn is above our unrevised sales forecast for 2025 of SEK6.15m, which does not include any future M&A. Regarding EBIT margin, we forecast 8.4% for 2025.
- Following the slightly lower outcome than expected and the softer market outlook compared to previous statements, we will likely somewhat lower our short-term forecasts. However, we will likely leave our mid- and long-term estimates roughly unchanged.
Disclosures and disclaimers