Koskisen - Wood Processing Company to the Helsinki Stock Exchange

The FCC (Kilpailu- ja kuluttajavirasto) had approved Koskinen’s acquisition of Iisvesi forest yesterday (linkki). Of course, I never doubted for a moment that the FCC would object, considering the industry structure. The arrangement is likely to be implemented soon.

Koskisen is also connecting its district heating network in Järvelä (linkki). The investment is being made by the district heating operator Loimua. The project improves energy efficiency in the area and will eventually enable the new sawmill’s capacity to be increased from the current level of approximately 0.4 million cubic meters to half a million cubic meters.

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Here are Antti’s preliminary comments as Koskisen reports its results on Friday. :slight_smile:

Market expectations are for better numbers than the strike-affected comparison period. Koskisen is likely to reiterate its guidance for the current year regarding revenue growth and an adjusted EBITDA margin of 7-11%. We do not identify a clear pricing error in Koskisen’s stock in either direction before the Q1 report.

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Here are Viljakainen’s comments on the Q1 results published this morning. :slight_smile:

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Viljakainen also had time to interview Koskinen’s CEO Jukka Pahta :slight_smile:

Topics:

00:00 Start
00:10 Main drivers behind the good result
01:17 Drivers of volume growth
02:49 Sawmill investments
08:15 Impacts of the trade policy situation
09:32 Impacts of Germany’s stimulus package
10:40 Acquisition of Iisveden Metsä’s business
12:54 Expected synergies from the acquisition
13:39 Guidance

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Viljakainen has published a recent company report on Koskinen. :slight_smile:

We raise our recommendation for Koskinen to Add (previously Reduce) and our target price to 8.25 euros (previously 7.50 €), reflecting a moderate increase in forecasts and a slight decrease in the required rate of return. Koskinen’s Q1 report was clearly better than our expectations, especially due to the excellent volume growth in Sawmilling. We did not make huge forecast changes for the near future on the lower lines of the income statement, but a strong performance already at this stage of the construction cycle lowered the stock’s risk level in our papers. Consequently, we believe the stock’s return expectation has turned positive, as the stock’s valuation is also moderate.

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After a promising Q1, Koskisen also launched a new product on the market, a fully bio-based zero-thin veneer plywood. The link to the press release is here. The market has not been easy for premium products like zero in recent years, and its commercial potential can only be truly measured in a slightly better operating environment.

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According to the Finnish Sawmills Association, Q1 2025 saw +21% in production and +22% in exports compared to Q1 2024, which had been quiet.
Export prices +13%.

Exports in the sawmill industry account for 80% to approximately 70 countries.

A clear warning echoes from the sawmill industry Sahateollisuudesta kajahtaa selkeä varoitus | Kauppalehti

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A new initiative from Koskisen and Kesko in the particleboard segment (link here)). This alone is unlikely to significantly boost the figures, but it is, however, a concrete step in terms of sustainability efforts.

Koskisen also finalized the acquisition of Iisveden Metsä on June 1st. This was fully expected, and we had already included the arrangement in our forecasts in connection with the previous update, effective from that date.

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Here are Kaisa’s comments on Koskinen’s pre-quiet period analyst call. :slight_smile:

Koskinen held a pre-Q2 quiet period call with analysts yesterday and published the main themes of the Q&A in a press release. According to the company, the development of the business environment was somewhat stable when adjusted for normal seasonal variations, and no significant surprises emerged in the discussion relative to the company’s expectations.

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Here are Viljakainen’s preview comments as Koskisen publishes its Q2 results on Monday. :slight_smile:

Market expectations are for results roughly in line with the comparison figures, but we are slightly more positive in our forecasts, as we expect the performance of the Sawmill Industry to have continued to improve, similar to Q1. Koskisen is likely to reiterate its current year guidance for revenue growth and an adjusted operating margin of 7-11% at this stage of the year.

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SalkunRakentaja has written about Finland’s sawmill industry. I thought it might be of interest in this thread.

After the first quarter of the year, the three largest export countries for sawn timber and planed timber, measured in cubic meters, are Egypt (+37 percent), Estonia (+30 percent), and Great Britain (+18 percent).

Among the ten largest export countries, five were from Europe.

Estonia has risen among Finland’s most important sawn timber markets since the start of Russia’s war of aggression. Sawn timber was previously imported from Russia to Europe, but due to sanctions, this is no longer possible. However, Russia can operate freely in many other export markets important to Finland’s sawmill industry, such as China, Japan, and North Africa.

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It started to interest me that when it is said that the price of export timber has only risen by x%, and the price of log timber has risen by as much as y%, how much does sawn timber actually cost as a finished product.

Edit;
Updated based on the next message.

Some retailers kindly provide the price per meter, which makes calculations easier. In retail, then
22x100, or ‘one-by-four’ spruce, costs 1.09 eur/m, which is 0.87 eur/m excl. VAT.
Approximately 455 meters of those pieces go into a cubic meter, so approx. 396 eur/m excl. VAT.
If these could be sold even planed, or tongue and grooved, let alone painted, more money could be made.

In export
If one checks back
if a spruce sawn product costs 250 eur/m3, having risen by 40%
→ a cubic meter of sawn timber cost 178 eur/m3 15 years ago
=> Increase of 72 eur/m3
if a cubic meter of wood now costs 85 eur/m3, and has risen by 78%
→ a cubic meter of spruce cost 48 eur 15 years ago
=> Increase of 37 eur/m3

At least by my own math, it seems that the sawmill industry has certainly gotten significantly more euros/m3 for its end product than the forest owner, also for pine.

Well, I guess that’s the idea, especially since waste is generated in the sawmill industry. Otherwise, you’d be stuck between a rock and a hard place… and on the other hand, pressures in wages, raw materials, etc. force you to innovate and improve productivity, reduce waste, and utilize side streams.

In 15 years, the real value of money has changed by approx. 29%, which I guess reflects both inflation and the development of income levels between these coincidentally (?) chosen years of 2010 and 2025.

Export prices of sawn timber rose by nine percent compared to the corresponding period of the previous year. Over 15 years, the export price has risen by 40 percent for spruce and 23 percent for pine, while at the same time, log timber prices have risen by 78 percent.

22x100 ST – Hattulan Puu 22x100 ST – Hattulan Puu

Value of Money Converter | Statistics Finland Rahanarvonmuunnin | Tilastokeskus

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Sawmills are not currently getting anywhere near prices of 300-400 €/m3 for sawn timber. For a short while, prices did reach those levels a few years ago.

image
Source: STATISTICS | Sawmill Industry

Recently, the price has seemed to climb above 250 €/m3.

image
Source CN – Verti (Commodity classification 4407)

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Here are Viljakainen’s quick comments on Koskinen’s morning results. :slight_smile:

Koskinen’s Q2 results, published this morning, were slightly better than consensus forecasts, but the figures did not quite meet our own expectations. Regarding the market situation, there are no clear signs of improvement in sight; instead, weak demand and uncertainty are likely to weigh on at least the rest of the year. However, the company reiterated its guidance as expected, and Koskinen is well on track to achieve its guidance after H1.


Here is the company’s release on the results:

Koskinen’s Revenue Grew – Sawmill Industry Development Continued Positively

This release is a summary of Koskisen Oyj’s January-June 2025 half-year report. The complete half-year report is attached to this release and available on the company’s website at Sijoittajille - Koskisen.

April-June 2025 in brief
· Revenue grew and was EUR 89.7 (77.8) million.
· EBITDA grew and was EUR 10.5 (9.4) million.
· EBITDA margin was 11.7 (12.0) percent.
· Adjusted EBITDA was EUR 10.3 (9.3) million.
· Adjusted EBITDA margin was 11.5 (12.0) percent.
· Operating profit was EUR 7.0 (6.9) million and was 7.8 (8.9) percent of revenue.
· Profit for the period was EUR 5.0 (4.9) million.
· Undiluted earnings per share were EUR 0.21 (0.21).

January-June 2025 in brief
· Revenue grew and was EUR 176.0 (141.5) million.
· EBITDA grew and was EUR 19.9 (14.9) million.
· EBITDA margin was 11.3 (10.5) percent.
· Adjusted EBITDA was EUR 19.8 (14.9) million.
· Adjusted EBITDA margin was 11.2 (10.5) percent.
· Operating profit was EUR 13.2 (10.0) million and was 7.5 (7.1) percent of revenue.
· Profit for the period was EUR 9.2 (7.2) million.
· Undiluted earnings per share were EUR 0.40 (0.31).

Figures in parentheses refer to the comparison period, i.e., the corresponding period a year earlier, unless otherwise stated. The business acquisition of Iisveden Metsä was completed on June 1, 2025. The business operations of Iisveden Metsä are included in the figures of this half-year report starting from June 1, 2025.

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Interview with the company’s CEO Jukka Pahda:

Topics:
00:00 Introduction
00:06 Q2 pros and cons
01:49 Sawmilling industry demand situation
03:44 Geographical differences in demand
05:37 Inventory levels in the sawmilling industry
07:30 Panel industry demand situation
08:51 Effects of the customs agreement
10:08 Canadian operators’ orientation towards Europe
12:35 Timber market price situation
14:25 New product launches

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Viljakainen has made a new company report after Koskisen Q2. :slight_smile:

We raise our target price for Koskisen to 9.00 euros (previously 8.25 €) reflecting a slight decrease in the required rate of return. However, in our opinion, the increase in the share price (+30% this year) has already eroded the best edge of the short-term return expectation, so we lower our recommendation for the company to “reduce” (previously “add”). Koskisen’s Q2 report was, in our opinion, quite neutral overall. We did not make significant forecast changes for the near future, but H1’s good performance has, in our opinion, slightly lowered the stock’s risk level.

Quoted from the report:

The balance sheet is in good condition even after the acquisition

Koskisen’s net gearing ratio was a reasonable 24% at the end of Q2 (Q2’24: net gearing ratio 8%). Thus, in our opinion, the company’s balance sheet is in good condition, even though significant capital has been allocated to implementing the growth strategy in recent years due to the acquisition of Iisveden Metsä and investments in the Sawmill Industry. Investments will also continue, especially in the Panel Industry and the drying capacity of Järvelä’s new sawmill, but investment levels are expected to remain mostly lower than in recent years, and the balance sheet can well bear them.

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UPM’s Plywood manager got annoyed by this, but I’ll still put it here. Apparently, Koskisen has gotten under their skin with good results :laughing:.

The difference in the panel industry is reportedly explained by UPM’s factory strikes in Q2 and the fact that UPM has a lot of softwood plywood.

IMG_9279

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Here are Antti’s comments from the call preceding the quiet period. :slight_smile:

On Friday, Koskisen held a call for analysts regarding the quiet period before the Q3 earnings release. Koskisen published the main themes of the Q&A yesterday in a press release, which can be read here. The overall picture of the company’s comments for Q3 remained slightly weaker than our expectations due to the delay in the Panel Industry’s investment program, but in the big picture, no major fluctuations have occurred in the company’s market situation, and a slight relief in wood costs is also in sight in the coming quarters.

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A week from now, Jukka Pahta of Koskinen will be on ROAST :fire:.

Tricky, difficult, and challenging audience questions are welcome!

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Viljakainen has prepared a company preview report, as Koskisen will publish its results this Friday. :slight_smile:

Market expectations are for a better result than the comparison period, driven by the Sawmill Industry, which already significantly improved in H1. However, we have slightly lowered our Q3 forecasts for Koskisen related to the Panel Industry. Koskisen’s guidance for the current year on revenue growth and an adjusted EBITDA-% of 7-11% is expected to be reiterated in its Q3 report, according to our assessment. We are not making changes to our target price of EUR 9.00 for Koskisen, which we consider neutrally priced, or to our reduce recommendation before the Q3 report (2026e: P/E 11x)

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