I’m opening a thread for Fiskars. Interesting moves, let’s see if it continues to rise today.
The Q4 EBIT rally was a real surprise, I wouldn’t have believed it. Although, I could have had the foresight to buy earlier this week when no negative news came out.
Distributing Wärtsilä as a dividend is probably a compromise. Fiskars didn’t want to dump its Wärtsilä position on the market, thereby lowering the share price? Although, Fiskars’ owners will probably realize the shares they receive en masse?
The outlook is hazy. The products are good, but is there a competitive advantage? Although even if the top line stagnates, efficiency measures will surely squeeze profitability out of the machine.
Fiskars imports products from the UK and also exports products there. If the UK and the EU do not reach an agreement, what kind of impact would that have on Fiskars’ business? If an agreement is reached, will all the bad things be avoided, or are there still risks?
This reduction in revenue guidance was pretty much expected after a weak start to the year. I had already somewhat anticipated this reduction in guidance in the update made in September. Here’s an excerpt:
It certainly looks really difficult to grow revenue now, and in May, there was also a reduction in EBITA guidance, and in between, the head of the Living segment left the company. Things seem to be tough.
I’m not surprised at all if the stock ends up around yesterday’s close. H1 of this year was so weak, and forecasts have already been lowered accordingly, so the reduction in revenue guidance was probably baked into other investors’/analysts’ expectations.
Those long-term goals seem to be slipping away badly, and I’m a bit afraid that next year’s guidance will also be quite light. The internal transformation should be driven through, and at the same time, there’s external pressure from the trade war and Brexit, so the near future doesn’t look very bright. On the other hand, if we could accumulate enough problems and a couple of negative surprises for next year, we could pick up a great brand company for our portfolio at a reasonable valuation
Fiskars EPS so far (1-9/2019) €0.37, last year’s Q4 yielded €0.33, so EPS will likely remain at or slightly below €0.70 this year. P/E would then be around 17 with these calculations. The trade war should really end
Inderes moved to the “reduce” side with a target price of 12 euros. Are those peer group valuations also adjusted P/E ratios, and is it actually reasonable to use an adjusted P/E ratio due to the restructuring program, since the realization of cost savings is still uncertain, or does Fiskars’ good “track record” in previous arrangements affect this @Petri_Kajaani?
The positive drivers are certainly conspicuous by their absence, and in my opinion, turning to the reduce side was a logical solution. I’m curious to see where the balance sheet-based valuation settles before the news flow turns more positive.
There would be room for a domestic brand company in my own portfolio after the sale of Ameri, but Fiskars won’t be taking that spot yet with these prospects and current valuation.
The forecasts in Inderes’ peer group table are adjusted P/E ratios for the company we follow. In Fiskars’ case, this means around 14x for 2019 and 2020. The reported P/E ratios are higher at 19x and 17x due to the Living segment’s restructuring program. The forecasted P/E ratios for the peer group are retrieved from the Reuters database, using “Forward P/E for the current calendar year” and “Forward P/E for the next calendar year” as search terms. I have sometimes looked at them more closely myself, and most of them appear to be reported figures, but they also include figures adjusted for one-off items. Different analysts take these into account differently in their forecasts that they send to Reuters, and Reuters “just compiles them”. Sometimes even Reuters does not adjust one-off items logically, meaning there might be a mix of both figures. Quite often, current year figures mix adjusted and reported EPS, but one-off expenses are rarely forecasted for the next year, so the 2020 figures are more likely to consist mainly of reported figures. If we were to use the reported figures in Fiskars’ case, the stock would appear to be valued slightly above the peer group in terms of P/E ratio.
You are absolutely right in your observation that in Fiskars’ case, only showing adjusted figures in the peer group table might be a bit misleading for the reader, as the undervaluation compared to the peer group would turn into overvaluation depending on whether reported or adjusted EPS figures are used. However, our other valuation tables include both reported and adjusted P/E ratios, so both can be found in the reports. Of course, the reported figures could also be included in this peer group table, at least if they are significant and numerous (e.g., as in Fiskars’ current case). In Fiskars’ situation, using adjusted figures is justified because the company has quite clearly defined the level of one-off expenses for the next three years, and the sum of cost savings achieved through them has also been precisely defined. The company actually has a good track record of implementing these cost savings, which is why we believe adjusted EPS better reflects the company’s potential earnings level after the program’s implementation. However, Fiskars has a bad habit of always starting a new restructuring program as soon as the old one ends, so one could also argue against using adjusted figures in this way.
The company has had quite a pile of these restructuring programs over the last 10 years (Figure from our extensive Fiskars report 1/2019). It’s strange that tens of millions of euros of efficiency improvements can still be found in the organization, even though there hasn’t been a single day in the 2010s when the company didn’t have some kind of structural change, restructuring, or efficiency program underway. Perhaps the change process from a holding company to an integrated consumer product company just takes this much time, and in addition, changes in consumer behavior bring their own challenges.
The Living segment’s change program is ongoing from 2018-2021. Its costs are one-time expenses of EUR 40 million, and the program aims for annual savings of EUR 17 million.
Now, this new program (2019-2021) aims for annual savings of EUR 20 million by the end of 2021, and its costs will be one-time expenses of EUR 30 million in the interim. We are talking about quite large sums relative to Fiskars’ adjusted operating profit forecasts for the coming years.
Our adjusted operating profit forecasts for Fiskars before today’s announcement:
2018: EUR 101 million
2019e: EUR 81 million
2020e: EUR 88 million
2021e: EUR 98 million.
Have you looked at the number of shares bought in relation to the total number of shares? Additionally, they haven’t been cancelled, so the only thing it affects is the total dividend amount… (dividends are not paid for own shares held - correct me if I’m wrong). It seems like those will go to the management team anyway…
