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Reversing paper and related market excesses of 2021-22 remains an unchanged reality, which was also evident in Holmen’s Q3 results. Profitability (despite some moderation) nonetheless smashed the street’s expectations. Forest continued to be a solid support and was well-complemented by Paper plus Energy. While there were sustained challenges in Paperboard and Wood, these are not lasting concerns. Overall, with better preservation of profitability in challenging markets and growth being well-aligned with customer needs, Holmen remains an attractive and somewhat defensive sector bet.
Holmen Ab-B Shares
Like its peers, Holmen reported weak Q2 results. Profitability was however well ahead of the street’s expectations. Valuable support came from Forest, which had been expected, but the bigger surprise came from Paper, which remained extremely-healthy. Although business challenges are likely to persist for the next couple of quarters, Holmen by virtue of its focus areas remains an attractive sector bet and, hence, could be the first to recover (vs. most peers) in terms of both operations and the share price dynamic.
While Holmen also witnessed a Q1 performance normalisation, unlike its peers (ex. SCA) its results materially-exceeded the street’s expectations. Barring Wood Products, there were positive takeaways from all the other divisions (despite their performance erosion (risks)). Overall, given the Q1 surprise and the sell-off in recent months, we believe that the upside on Holmen is worth capitalising on. Also, it remains our preferred bet vs. SCA.
2022 ended on an impressive note – with another quarterly beat. While the wood markets’ reversal of fortunes and Paperboard’s maintenance shutdown were some bottlenecks, sizeable tailwinds in other areas pushed the full-year results to record-highs, facilitated further leveraging and, hence, resulted in even higher rewards. Even though we remain wary of another round of forest revaluation gains and, in general, expected medium-term margin normalisation, one can re-consider the firm’s investment once we are past the peak of the interest rate cycle.
In Q3, while Paperboard, Energy and Forest continued to do well, euphoria is Paper was (again) at an extreme – especially on the back of very-tight markets. However, a sharp reversal of fortunes in Wood was evident. Moreover, with brewing (weather-induced) limitations/risks for Energy and material forest revaluation gains too most-likely nearing an end, sell-off in recent months wasn’t surprising. While there’s a window of opportunity – considering the firm’s ‘relatively’ favourable business mix – a better entry point is still probable.
On the back of sizeable and broad-based price tailwinds, Holmen reported impressive Q2 results – with profitability materially-ahead of street expectations. While the good performance in stronghold divisions was largely expected, the massive uptick in Paper came as a big surprise. Nevertheless, given the high/growing vulnerability of the current market dynamics for the firm’s most profitable divisions – already evident to some extent in wood – our cautious stock recommendation should be maintained. Any material sell-off could however open-up an entry/accumulation opportunity.
2022 began on an impressive note, with Holmen reporting ‘record’ quarterly results. The biggest surprise was the turnaround in Paper, and healthy support emanating from Wood and Energy. However, the performance in Forest and Paperboard (traditional strongholds) was somewhat disappointing. While the prospect of various pricing excesses reversing in the coming quarters still remains high, GDP growth and inflation risks (in Europe) are added concerns and hence, our cautious stock recommendation is reiterated.
Even Holmen reported healthy results on the back of forest and wood market (valuation) euphoria, and buzzing energy markets. These improvements materialised despite below-par packaging results. While we expect forest and wood market tailwinds to reverse – somewhat also evident in the Q4 sector results, Holmen remains well-positioned to limit EPS erosion via promising dynamics in other divisions, and ‘somewhat’ lower downside risk for forest and wood divisions. Also, given the revaluation gains, our DCF and NAV estimates should reset higher.
On the back of ‘record’ results in Wood Products and resilience in Forest, Holmen reported strong Q3 results. While these natural resources-centric divisions are set for normalisation in the medium term, the firm is well-positioned to leverage favourable dynamics in other areas, i.e. Paperboard, Paper and Energy. Overall, as we expect group-level margin normalisation to be controlled, profitability/cash flow resilience and, hence, balance sheet flexibility should be maintained, thereby still supporting the case for occasional extraordinary shareholder rewards.
Strong Q2 results were a function of wood market euphoria. The wood-related gains were such that (temporary) headwinds in forest and paperboard were completely overshadowed. While the prospect of a normalising forest and wood performance is on the rise, Holmen has ample cushion from other divisions to sustain earnings growth. Even after the ytd share price run-up, the stock remains attractive, but with limited upside potential.
2021 began on an extraordinary note for Holmen. Q1 results were driven by healthy gains / stability across key / high-margin divisions, which helped dwarf the weakness in Paper. With intact business fundamentals, the current momentum should gradually reflect in better margins and, hence, cash generation capabilities. Our positive recommendation should be maintained.
Despite a challenging macro environment, Holmen reported healthy Q4 and FY results. As expected, high-margin Forest and Paperboard divisions continued to do well, with apt (surprising) support being rendered by other divisions (ex. Paper). With sorted business fundamentals and, hence, varying growth investments across divisions, Holmen remains in a sweet spot, wherein the sustainability-quotient of its offerings are well-aligned with the markets’ dash for greener stories. This business optimism is also reflected in the group’s 2020 dividend generosity.
