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On Wednesday, UBS analysts downgraded SIG Combibloc Group (SIX:SIGNC) AG (SIGN:SW) (OTC: SCBGF) stock from Buy to Neutral and reduced the price target from CHF22.50 to CHF19.00. The revision was prompted by several factors, including an anticipated increase in interest costs and depreciation & amortization expenses, which led to a roughly 5% cut in earnings per share (EPS) estimates.
The analysts noted that while SIG Combibloc expects its 2025 earnings to be stronger in the latter half of the year, the current market conditions provide limited visibility for a recovery in the second half of 2025. They mentioned that although SIG could benefit from new filler placements and continued market share gains, these factors may only provide partial support.
The downgrade also took into account the challenges faced by SIG in the Chinese market, which represents about 10% of the group’s business. The analysts highlighted that SIG is grappling with overcapacity issues in China.
Additionally, UBS analysts referenced legal action initiated by Clean Holding, associated with a major shareholder of SIG, Laurens Last. This legal dispute is related to earn-out payments, and the analysts are awaiting further details. Despite these concerns, the analysts acknowledged SIG’s core business of aseptic carton packaging, which accounts for approximately 75% of group sales, is expected to continue its strong performance and market share expansion. However, they emphasized that the overall uncertainties surrounding the stock have increased.
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