Piippo - Baling Nets and Baling Wires

Stocks
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Piippo didn’t have its own thread yet, so I started one. Piippo is analyzed by @Thomas_Westerholm. :slight_smile:

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Piippo, founded in 1942, is an international industrial company focused on the manufacture, marketing, and sale of products suitable for binding and fastening, such as baling nets, ropes, twines, and yarns. Piippo’s business is divided into three different segments based on customers: Agri, Consumer Products, and Products for the Cable Industry. The company has a global distribution network covering more than 40 countries, and its home base is in Outokumpu.

Piippo’s revenue in 2021 was 14.8 million, and its global distribution channels cover over 40 countries. Key countries for Piippo include Germany, Poland, Australia, and the USA. :slight_smile:

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Latest extensive report:
https://www.inderes.fi/fi/tehokkaamman-maatalouden-mahdollistaja

Latest company report.

Piippo’s H1 growth was strong, but relative profitability faced exceptional pressure due to increased manufacturing and logistics costs. In our view, the convincing growth and market share gains strengthen the long-term outlook of the investment story, and as a result, we view the report’s findings with slight optimism.

https://www.inderes.fi/fi/torjuntavoitto-vahvan-myynnin-ansiosta

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Alla on tuore Piipon tilinpäätöstiedote. :slight_smile: :point_down:t3:

Toimitusmäärät kasvoivat yhtiön päätuoteryhmissä paalausverkoissa, paalauslangassa sekä kaapeliteollisuuden tuotteissa. Kuluttaja- ja välitystuotteissa jäätiin jälkeen vertailukaudesta. Liikevaihto kasvoi selvästi päätuoteryhmien toimitusmäärien ja raaka-ainehintojen noususta johtuen, sillä myyntihinnat seuraavat raaka-aineiden hintakehitystä. Myös valuuttakurssien edullinen kehitys paransi liikevaihtoa edellistilikauteen verrattuna.

Tässä on Kauppalehden minuutissa luettava uutinen tuloksesta. Ei maksumuuria.

Huhti-syyskuun puolivuotiskauden liikevaihto nousi 11,2 miljoonaan euroon vertailukauden 10,3 miljoonasta eurosta.

Liiketulos nousi 0,7 miljoonaan euroon vertailukauden 0,3 miljoonasta eurosta.

Puolivuotiskauden osakekohtainen tulos parani 0,29 euroon 0,14 eurosta.

Lisään tänne vielä Thomaksen 29.11.2022 päivätyn kommentin.

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Tässä on tuore Piipon yhtiöraportti @Thomas_Westerholm:ilta. :slight_smile:

Piipon H2-raportti oli odotuksiamme parempi vakuuttavan liikevaihdon kasvun ja kannattavuutta avittaneen tehokkuusparannuksen sekä merkittävien valuuttakurssivoittojen tukemana. Hyvän operatiivisen tuloksen ohella yhtiö sai rahavaroja vapautettua käyttöpääomastaan, mikä vahvisti sen taseasemaa ja laskee nähdäksemme osakkeen riskiprofiilia.

https://www.inderes.fi/fi/kustannusinflaatiosta-selvittiin-kuivin-jaloin

EDIT:
Lisään tähän vielä kommentin, joka on kaikkien luettavissa.

Piipon H2-raportti oli odotuksiamme parempi vakuuttavan liikevaihdon kasvun ja kannattavuutta avittaneen tehokkuusparannuksen sekä merkittävien valuuttakurssivoittojen tukemana. Hyvän operatiivisen tuloksen ohella yhtiö sai rahavaroja vapautettua käyttöpääomastaan, mikä vahvisti sen taseasemaa ja laskee nähdäksemme osakkeen riskiprofiilia. Laskeneen riskiprofiilin ja vakuuttavan kasvun seurauksena nostamme suosituksemme vähennä-tasolle (aik. myy). Toistamme 3,0 euron tavoitehintamme.

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Here is @Matias_Arola’s comment on the resignation of Piippo’s CEO. :slight_smile:

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@Thomas_Westerholm has written an extensive report on Piippo. Extensive reports are always available for everyone to read.

For the Agri segment, which serves as Piippo’s core business, the current year is turning into a transition year. Due to high inventory levels and a debt-laden balance sheet, this poses short-term challenges for the company. The company must release working capital to ensure business continuity, and in the short term, the focus is purely on sales rather than production. The share’s earnings-based valuation is high, which, combined with the elevated balance sheet risk, leads to what we believe is a poor risk/reward ratio.

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EDIT:

I’m adding this interview to this post as well.

@Thomas_Westerholm and @Tomi_Valkeajarvi talked about Piippo.

Topics:

00:00 Start
00:13 Company business in a nutshell
02:19 The Agri segment’s transition year
05:35 Prerequisites for global growth
07:15 Key competitive advantages
08:26 Risks of high indebtedness
10:10 Outlook for the coming years
11:21 Share valuation level

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Indeed.

Piippo will release its H2 report on Thursday, and below are Thomas’s comments. :slight_smile:

Piippo will release its H2 report on Thursday at 1:00 PM, according to our estimate. Following the profit warning issued in early November and the preliminary data for the ended financial year, the company’s weak operational H2 figures are largely known, so our interest is focused on the company’s balance sheet position and management’s comments regarding the company’s outlook.

https://www.inderes.fi/analyst-comments/piippo-h2-torstaina-nakymat-raportin-keskiossa

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Thomas has published a new company report on Piippo. :gem:

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https://www.inderes.fi/research/uusia-myynnin-tukijalkoja-loydettava

EDIT:

Adding the comments on the results as well.

https://www.inderes.fi/analyst-comments/piippo-h2-uusia-myynnin-tukijalkoja-loydettava

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Here are Thomas’s comments on Piippo’s somewhat unsurprising decision to discontinue twine production. :slight_smile:

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Here is Thomas’s preview comment as Piippo releases its H1 results on Thursday.

Piippo will publish its H1 report on Thursday at an estimated 1:00 PM. Due to Piippo’s home-market-based manufacturing and international sales, the political strikes in Finland hit the company particularly hard, which we expect delayed deliveries right at the start of the agricultural season from the first half of the financial year to the second. For the current year, Piippo expects revenue and operating profit to grow from the levels of the weak comparison period, but to remain below 2022 levels. Our forecasts are in line with the guidance, but due to external challenges, we expect the guidance to rely heavily on improved performance in the second half of the financial year.

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Here is a fresh company report on Piippo, by Thomas Westerholm. :slight_smile: :gem:

Piippo’s H1 figures fell short of our expectations, driven by lower-than-anticipated revenue. The port strikes in Finland hit the company particularly hard due to its export-reliant business model, and according to the company, deliveries were shifted to the second half of the current financial year. Despite the forecast miss, the guidance for the current year was reiterated, which predicts a significantly stronger second half. In our view, the current share price level does not price in the risks associated with the leveraged balance sheet and weak earnings performance, resulting in us reiterating our sell recommendation. We maintain our target price at EUR 1.0.

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From Thomas, a new company report on Piippo, which isn’t doing particularly well.

Piippo’s updated guidance predicts lower revenue than previously, but the underlying factors appear to be timing-related, and the operating profit level is still expected to improve from the comparison period. We made negative forecast revisions in conjunction with the report, but these were focused on the current year. In our view, the current share price does not price in the risks associated with the indebted balance sheet and weak earnings performance; consequently, we reiterate our sell recommendation. We maintain our target price at EUR 1.0.

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Here are Thomas’s preliminary comments as Piippo releases its results on Thursday afternoon. :slight_smile:

Piippo is expected to publish its H2 report on Thursday at 1 PM. Due to the profit warning issued in September and the H2 preliminary data, the main outlines of the upcoming report regarding the figures are already known. As a result, our attention will focus on the guidance for the current financial year (note: Piippo follows a financial year that deviates from the calendar year), the balance sheet position, and the progress made in outsourcing yarn production.

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Here is a new company report on Piippo from Thomas. :slight_smile:

Piippo’s weak H2 figures were largely already known with the profit warning issued in September. During the review period, the outsourcing of yarn production, internal efficiency measures, and the write-down of the Russian subsidiary weighed on the company’s earnings level, but the projects improved the company’s prerequisites for achieving an earnings turnaround.

Quoted from the report:

In recent years, Piippo has significantly streamlined its cost structure, which should create good conditions for profitability to recover with sales growth. However, it is critical for the company that an earnings turnaround is achieved as soon as possible to mitigate the financial risk caused by the indebted balance sheet.

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Inderes concludes its coverage of Piippo after the company terminated our company coverage agreement.

At the core of Piippo’s investment story for the coming years is successfully completing the turnaround to mitigate the risks caused by its indebted balance sheet. In our opinion, the company has made the right decisions to improve its business during 2024, but realizing the benefits from these will take time.

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Few investors have even heard of the company, despite Inderes’ coverage and analysis, so it’s not surprising that the coverage was discontinued. The company shouldn’t even be listed on the stock exchange; it should be taken private and seek tightly controlled management-driven financing for growth, or alternatively, be sold to a larger player, as nothing seems to be coming of it now. Good luck to the Piippo team in the future :saluting_face:

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Right after Eka’s announcement, here is Piippo’s announcement, quite conveniently.

Piippo Oyj Concludes Change Negotiations

28.1.2025 13:30:00 EET | Piippo Oyj | Company Announcement

Piippo Oyj has concluded the change negotiations concerning the company’s baling net production, maintenance, warehouse operations, and production supervisors. A total of 42 individuals were covered by the change negotiations.

The company has decided to adjust the capacity of its baling net production and to lay off a portion of the personnel in baling net production. The layoffs will be implemented in phases and will affect a total of 39 individuals.

The layoffs will begin on February 17, 2025, and will be valid for a maximum of 90 days. The company justifies the decisions made based on the change negotiations with economic and production-related reasons, as well as market uncertainty, which ultimately led to employee layoffs.

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They clearly listened :smiley:

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Inderesin kahvihuone (Osa 9)
Kurssien ja niiden muutosten kyselyt, kauhistelut ja hehkuttelut (Osa 3)
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Interesting case, too bad analyst coverage no longer opens-
So 6 million euros comes from machines, spare parts, brand.
With this, according to its announcement, the company becomes net debt-free

Remaining for shareholders (1.293 million pcs)
-Manilla Oy, which with a turnover of 1.8 million euros makes a zero profit
-finished product inventory / net working capital 4.2 million euros
-premises in Outokumpu and Lempäälä. Buildings and structures on the balance sheet 1.4 million euros
-shell for those considering listing
? what has happened since 30.9.2024, and what will happen before customer commitments are delivered? Clearance sale of finished product inventories? On the other hand, customer commitments are said to be fulfilled
-administrative costs, shutdown costs ?
-interest expenses ?

Perhaps someone could estimate the remaining value, it would seem crazy for example
-Manilla Oy: 0.0 million euros (not making money)
-net working capital 4.2 million euros -30% discount and write-down = 3.0 million euros
-buildings 1.4 million euros -30% discount and write-down: 1.0 million euros
-shell company: +1.0 million euros
-shutdown costs, administration -1.0 million euros
-interest -0.5 million euros
=> 0+3.0+1.0+1.0-1.0-0.5 = 3.5 million euros

3.5 million euros / 1.293 million shares = 2.71 eur/share

The above calculation is thus based on estimates, please calculate it properly, someone who knows how!

The funds received from the planned Transaction would significantly improve the Company’s financial position, and the Company estimates that with the funds received from the Transaction, the Company will be able to pay its debts to the Company’s main financiers, so that the Company would be net debt-free after the Transaction is completed.

Effects on the Company’s Business

If the planned Transaction is completed, the Company’s agri-product, i.e., baling net, production would be discontinued in Outokumpu. According to the preliminary plan, the Company would continue its production until the end of the year, and the Company is committed to fulfilling all current production needs and orders agreed with its customers for at least the financial year 2025 and partly for the financial year 2026. If the preliminary plan is implemented, the Company would ensure that any potential shutdown of production would be carried out in accordance with these commitments, and that any potential transfer of the Transaction’s subject to Portugal would be carried out thoughtfully, so that the Company could ensure the delivery of high-quality products expected by its customers.

Piippo’s subsidiary Manilla Oy will continue the Company’s consumer business as normal. Established in 2019, Manilla Oy imports and distributes consumer products related to tying, fastening, and lifting in Finland and neighboring areas. Manilla’s turnover for the financial year 2024 was 1.8 million euros and operating profit was 6 thousand euros. Manilla Oy employs 3 people and purchases its necessary warehousing, administrative, and premises services from the Company. In addition, the Company’s balance sheet will retain the current finished product inventory, the Company’s owned premises in Outokumpu, and the property located in Lempäälä, which the Company’s board is evaluating in its study.

As a result of the potential arrangement, Piippo’s board will begin a study on the future of the remaining parent company and Manilla Oy, and it intends to decide on the future strategy by the time the second phase of the Transaction is implemented. The board is evaluating the possibility of continuing business operations, as well as, among other things, the possibility of selling the remaining business or the Company’s entire share capital to a Company planning a so-called reverse listing.

The Company’s net working capital on 30.9.2024 was 4,155 thousand euros.

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https://www.piippo.fi/fi/meista/ajankohtaista/sisapiiritieto-piippo-oyj-on-allekirjoittanut-aiesopimuksen-yhtion-paalausverkko-ja-lankakoneiden-seka-tiettyjen-tavaramerkkien-myymisesta-cotesi-s-a-lle/

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@Thomas_Westerholm this was still on your radar just a moment ago, perhaps you could refresh your memory and assess what this news of the day would mean if it came true?

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If it materializes, I believe this would be a very good thing for Piipo and the company’s shareholders. With significant debt, broken covenants, and a tightened competitive environment, turning the business around on its own would have been extremely challenging. Now, the balance sheet will become net debt-free, while retaining certain assets and the Manila business. In addition, there will also be an opportunity to sell the remaining business.

At a quick glance, this outline seems quite reasonable to me. With good luck, a buyer for Manilla could be found, and the Outokumpu buildings could be sold for a better price. On the other hand, there is a risk that strategic projects will take longer than expected, causing costs (listed company costs would fall solely on Manilla) and lost time value. However, AktiiviOmistajat may not immediately have a new company to list. I am in favor of the deal, but as an investor, I will not play the special situation (my own experience is that I usually approach the sum of parts breakdown too optimistically).

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