Componenta Q1 morning result: Wobbling

Translation: Original comment published in Finnish on 5/7/2024 at 9:11 am EEST.

Componenta's Q1 figures were below expectations across the board. However, there was nothing surprising about the reasons for the poor profitability. As expected, the company maintained its guidance for 2024, which is not very demanding. Due to weaker-than-expected Q1 profitability, we believe the share price will be under pressure today.   

Q1 volumes disappointing

Q1 turnover was quite close to our expectations, but down -23% year-on-year. According to Componenta, volume and order intake growth were well below expectations due to continued low demand. The company cited interest rates and inflationary trends that have weakened demand for its customers' end products. We interpret this as referring to products such as AGCO/Valtra tractors. Componenta had stated in its Q4’23 report that its order book had started to strengthen since the end of Q3 23. Apparently, the growth in Q1 did not meet expectations, although the order book at the end of the quarter (15.8 MEUR) was 9% higher than at the end of Q4'23. Componenta only records binding deliveries for the next two months in its order book.

No surprises in the causes of poor profitability

The Q1 result was weak and EBITDA was -0.2 MEUR (margin -0.6%). According to Componenta, half of the year-on-year decline in EBITDA (Q1'23 EBITDA 2.8 MEUR) was due to lower volumes, while the other half was due to the increasing loss of efficiency and quality caused by new volume products being upscaled for serial production, strikes at the beginning of the year, and index developments for electricity and main raw materials. Otherwise, the factors weighing on profitability are as expected in our preliminary comments, but the role of electricity and raw material price developments needs further clarification.

Componenta's financial expenses increased by approximately 0.1 MEUR year-on-year as a result of the working capital loan drawn and the credit line used. Taxes were practically zero.   

2024 guidance maintained with a little extra pressure

Outlook comments for 2024 were unchanged. “While there are differences in order books between customers and sectors, the outlook for 2024 as a whole remains generally positive.  With the start of serial production of new volume product lines from the second quarter onwards, and thanks to Componenta’s growing market shares, we expect our total production volumes to develop favorably during 2024." Componenta still expects 2024 revenue and EBITDA to improve compared to the previous year (101.8 MEUR and 5.3 MEUR). As per previously commented, the improvement is expected to be concentrated in H2'24. The lower end of the guidance assumes around 10% year-on-year revenue growth in Q2-Q4'24 and an EBITDA margin of around 7% in the same period (Q2-Q4'23 act. 3.5%). We still do not see this as a very demanding target, but of course the weak numbers in Q1'24 put additional pressure on it.

Pressure on the share price today

Overall, the Q1 report was disappointing in terms of figures, even though the underlying factors were known. We would like to know more about the development of volumes and prospects in the different customer sectors. At the same time, we want to hear an update on the assumptions behind the performance guidance. Maintaining the 2024 guidance was positive in light of the Q1 miss, but we still believe the stock is under pressure today.