Earnings call transcript: Borusta Q4 2024 sees profit rebound, stock dips

Borusta (BORSA) reported its financial results for the fourth quarter of 2024, showcasing a significant turnaround in profitability. According to InvestingPro analysis, the company maintains a GREAT financial health score of 3.01, indicating robust operational performance. Despite this, the company’s stock experienced a slight decline. The earnings per share (EPS) of 0.3 fell short of the forecasted 2.9, while revenue slightly exceeded expectations, coming in at 237 million USD against the forecast of 236 million USD. The stock price reacted by dropping 3.58% during the open market, closing at 18 USD from a previous 18.668 USD.

Key Takeaways

• Borusta’s full-year profit before tax rose to 82.3 million USD, a stark improvement from a loss of 37.3 million USD in 2023.
• The company announced its first dividend since 2011, at 0.8 NOK per share.
• Revenue increased by 7.1% in Q4 and by 2.45% for the full year.
• Cost-cutting measures and operational efficiencies contributed to improved margins.

Company Performance

Borusta’s performance in 2024 marked a significant recovery, driven by strategic cost-cutting and operational improvements. The company’s adjusted EBITDA saw a substantial increase, reflecting enhanced efficiency and profitability in its core segments. The refractory business, in particular, improved its EBIT margin from 1.4% to 2%, while the Agorabitom segment also reported a rise in EBITDA from 37.1 million to 41.3 million USD.

Financial Highlights

• Revenue: 237 million USD, up 7.1% in Q4 and 2.45% year-over-year.
• Earnings per share: 0.3 USD, missing the forecast of 2.9 USD.
• Net cash flow for 2024: 67.8 million NOK.
• Available liquidity at year-end: 276 million NOK.

Earnings vs. Forecast

Borusta’s EPS of 0.3 fell significantly short of the anticipated 2.9, resulting in a negative surprise. However, revenue slightly surpassed expectations, achieving 237 million USD against a forecast of 236 million USD. This mixed performance reflects ongoing challenges despite operational improvements.

Market Reaction

Following the earnings announcement, Borusta’s stock fell by 3.58%, closing at 18 USD. This decline reflects investor disappointment over the EPS miss, despite positive revenue growth and improved profitability metrics. The stock remains within its 52-week range, with a high of 20.4 USD and a low of 11.2 USD. Despite the recent decline, InvestingPro data shows an impressive year-to-date return of 153.38%, with the stock currently trading at a P/E ratio of -67.4. Based on InvestingPro’s Fair Value analysis, the stock appears to be slightly overvalued at current levels.

Outlook & Guidance

Looking ahead, Borusta aims to achieve a mid-term EBIT target of 10% for its refractory business. The company is exploring potential mergers and acquisitions to bolster its market position and is considering divesting its Agorabitom asset when market conditions are favorable. For deeper insights into Borusta’s valuation and growth potential, InvestingPro subscribers have access to 8 additional ProTips and comprehensive financial metrics, including detailed analysis of the company’s growth trajectory and market position.

Executive Commentary

CEO Paul Larsen described 2024 as a "transformational year" for Borusta, highlighting the company’s active ownership strategy. Benedik Amerssen, Head of M&A and IR, emphasized the company’s role in closely supporting its holdings. Larsen also noted the strategic timing for potential divestments.

Risks and Challenges

• Potential impact from US trade tensions, although currently minimal.
• Dependence on successful completion of the sale-leaseback transaction.
• Market conditions affecting the timing of Agorabitom’s divestment.
• Macroeconomic factors such as inflation and GDP growth in key markets.

Borusta’s earnings call provided insights into the company’s strategic direction and financial health, underscoring both achievements and areas needing attention. Analysts’ questions focused on the implications of trade tensions and the company’s strategic moves to enhance profitability.

Full transcript - Borgestad A (BOR) Q4 2024:

Moderator/Host, Borusta: Good afternoon and welcome to Bodie Giesel’s Q4 presentation. With me today, I have Paul Larsen, CEO, and Benedik Amerssen, Head of M and A and IR. Please use the Q and A function in the chat if you would like to ask any questions. So with that, I will hand it over to you, Paul.

Paul Larsen, CEO, Borusta: Thank you, Jetha. It’s a pleasure to be here and especially since we are reporting good figures and also introducing or reporting a proposal of dividend. 2024 was a transformational year for Borusta. After several years of structured work across both business segments, the results have materialized. And we end the year with a good momentum, where we have a good possible start into 2025.

Borisa Group as a whole report our full year 2024 profit before tax of 82,300,000.0, up from negative 37,300,000.0 in 2023. Our refractor business, Holzburgsta, is increasing, its EBIT margin, up to 2% from 1.4% in the same quarter 2023. And we, also take into consideration that this is fourth quarter, this solid performance, given the seasonal slowdown, in end of the year. Our shopping center, Agora Butum, is also maintained its positive momentum, give, posting an EBITDA of 10,800,000.0 in fourth quarter twenty four, an improvement from 8.9 same quarter 2023. In light of these results, the board of directors directors will propose a dividend to the annual general assembly in May of zero point eight NUC per share.

And this is, of course, subject to approval of the general assembly. This will be the first dividend distributed since 2011 for Bogista ASSA. So this is positive news. Overall, 2024 marks a turning point for Bogista. We have built a better foundation for the future and we are well positioned to continue delivering value creation for our shareholders.

Benedik Amerssen, Head of M&A and IR, Borusta: Before going further into details, we will start with a brief introduction to Borgistal, to those of you who are not that familiar with, who we are and and what we do. Borgistal is a company with a lot of history, primarily from shipping and industrials, and, dating back to the early nineteen hundreds. Over the years, we have now evolved into becoming an industrial investment company, currently invested in commercial real estate and the refractory industry. Our current main priority is to improve and maximize the value of existing holdings. But looking ahead, we aim to, take positions in niche segments where we see that we can make a difference.

We operate as active owners, meaning that we work closely with and support our our holding companies to drive operational improvements. A key part of our strategy is also to leverage the knowledge and expertise of our board of directors and to identify and capitalize on new opportunities. In addition to profitability, capital efficiency is always a priority, ensuring resources are deployed effectively. We take a data driven approach, meaning that we measure everything we do. Additionally, M and A has been and will continue to serve as an important tool for us in strengthening the competitive position of our holding companies.

Our current portfolio consists of two key assets, Agurabito, a fully owned shopping center, and the refractory supplier, Erganger and Sborigista, in which we hold a 69.7% holding stake. Agoda Bytom is a modern shopping shopping center located in the city center of Bytom in Poland. The center features 52,000 square meters of gross area and approximately 34,000 square meters of lettable area. And with almost 5,000,000 annual visitors, Agoribitom holds a leading position in its primary catchment area. For reference, especially for our Norwegian followers, Storozantrin Oslo is rather comparable to Agora Bithom both in terms of area and annual visitors.

Perugansta Bergsta is a manufacturer and supplier of high quality refractory products and installation services, serving industries that rely on high temperature processes such as steel, cement, pulp and paper and alloy. With a strong presence in both Finland, Sweden and Norway, Georges Bergissa is the market leader in the Nordic refractory markets.

Paul Larsen, CEO, Borusta: Yes. Thank you. Going into Agorobutum and a bit more details. Agorobutum continued positive trend with margin improvements driven by revenue growth and cost cutting. As a result, we are seeing, reviewing that cost cutting measures implemented in first half of twenty four is giving effect in end of the year as communicated.

And it’s resulting in an increased EBITDA for the fourth quarter. And EBITDA increased from 37,100,000.0 for full year 2023 to 41.3 for full year 2024. We can expect for cost cutting measures implemented in 2024 are expected to have positive impact also for coming 2025. As of December 31, the debt stands at €29,400,000,000, which is at the loan to value ratio of approximately 47%. This is estimated to be a sustainable level, both for agorabeatum and the Borgistat.

And just to remind you, the depth here has a due date in December 31. So we have still a long term there. As previously communicated, we do not see Borgistah as a long term term owner of Agora Bitum, and we will seek to divest our position when time is right. We’re actively monitoring the transaction market in Poland, and following other shopping centers in that area. The transaction market in Poland is showing signs of recovery, after several years with slow period.

In that terms, it’s worth mentioning that in end of twenty four, it was two transactions, major prime transactions completed in Poland. That was those were completed in October and December 2024. It’s marking probably the start of a reopening of the transaction market in Poland for shopping centers. Tenant turnover in Atagorobutum increased by 3.9% in fourth quarter twenty four compared to same period ’23. We have a slight decline in visitors, down from five to 4,900,000.

But the basket per visitor is increasing, and that is positive for our tenant performance. From a macroeconomic perspective, which is crucial both for Agora Biutom’s operation and the broader transaction market, Poland’s reference interest rates remained unchanged year on year, while GDP grew by 2.7% year on year as of September 24. Inflation eased at 4.7%, down from 6.2, signaling improved economical stability. Meanwhile, consumer confidence in Poland is relatively stable with a slight decrease over the course of the year. Agora Butom benefits from a diverse 10 base and a healthy weighted average unexperienced lease term in of about four years, ensuring low contract duration, risk, and high visibility for the years ahead.

Lease exploration as well as are well spread over time with the first due date, for top 10 tenants in q four twenty five. It’s worth mentioning that two of the top tenants extended their leases in fourth quarter twenty four, with respectively fifteen and five years. So we stand at a good base for the future. And, weighted average, unexpected lease term around four years is very good at shopping centers where the normal length is five years contract length.

Benedik Amerssen, Head of M&A and IR, Borusta: Turning to Hogben Hesselberger, we saw a significant increase in EBIT margin during 2024, rising from 3.1% in 2023 to July in ’24. This improvement is all thanks to outstanding efforts and the structured work in all subsidiaries in the group and the fact that we have excellent unprofitable projects, especially in the cremation segments. From from Bergustar, we are impressed by the efforts made and we look forward to keeping up the momentum in the quarters and years to come. Looking at Q4 and considering the general slowdown during winter season, performance remained solid in the quarter confirming the positive developments of the business. We will shortly provide you with an update on the previously announced sale leaseback transaction.

But first, we’ll have a look at the general seasonality of Ergangerzburg Vista and and I would also say the the Nordic refractory market as a whole. While it’s a stable and non cycle market year over year and also in the in the long run, it has somewhat it has it’s a market with somewhat seasonality with lower activity in both q four and q one, while demand generally peaks in q three, when customers in several segments perform scheduled maintenance during the holiday season. To manage these fluctuations, Erasmus Bogsta rely partly on, subcontractors and hired resources during peak season, ensuring flexibility and keeping operational costs under control. As a result of this seasonality, profitability is generally lower in q one and q four when utilization is the key focus. In q four twenty four, the group successfully increased revenue compared to previous years, which contributed to further improved profitability.

Looking at the revenue and profitability developments, we began seeing positive trends in ’23, which were further strengthened throughout 2024 across all three countries. And as we enter 2025, we, the group, has a normal order backlog, providing a good foundation for continued progress. Knowing that many larger tender processes can spend several years, including extensive product testing and qualifying, the group has a promising pipeline of opportunities for further growth also in 2026 and 2027. Going forward, further improvements across group cooperation will be a key driver in achieving our mid term EBIT target of 10%. While we have seen rapid profitability growth in the last two years, we do expect and see clear opportunities for further continued improvements in the years to come.

But we do not necessarily expect the improvements to continue at the same rate as we saw in 2024. As previously announced, Bergiza reached an agreement to sell two properties housing the majority of the group’s refractory production facilities, to Biu Municipality, with an option to lease them back for another five years. However, the a complaint made by a local citizen has delayed the process, and the complaint is currently under review by the Administrative Court in Malmo. Based on the estimated processing time of twelve to fourteen months, we do expect a decision soon. Due to these delays, the long stop date for the transaction was postponed from December to the same date ’25.

Further information on the transaction itself will be announced as soon as we have a final decision made by the court. While awaiting the final decision, the group is actively planning for future production beyond the leaseback period of up to five years. Given the significance of this transition, we are taking the necessary time to ensure the best possible production setup, making use of the leaseback period.

Paul Larsen, CEO, Borusta: And going into financials, starting the Boeschard Group as a whole and the P and L, revenue increased by 7.1% in fourth quarter and by 2.4 5% for the full year, ’24. Adjusted EBITDA, which excludes the positive effects from sale of our former headquarter in Cheyenne and arbitration court ruling in, ’23, increased by 58,000,000 from 2023 to ’24. This growth was primarily driven by improvements in our refractory business. Looking at the net financials, net net financials improved by ’28 20,800,000.0 in 2024, compared to previous year. And largely due to the decrease in heavily decrease in debt, from ’23 or end of twenty three.

These factors all contributed to a stronger profit and loss statement for the group and a total financial situation. Looking at balance sheet, the booked value of the investment property, Agora Bitom, increased due to weaker knock against the euro. Working capital decreased to 197,000,000 from 239.3 as of December 2023, mainly due to lower trade receivables for more efficient invoicing processes. Total (EPA:TTEF) interest bearing debts stood at 447,900,000.0 at the December ’24 with net interest bearing debt at 227.5. The property in view remains classified as held as held for sale, pending soon expecting court decision as Benedic communicated.

Looking at the cash flow, the net cash flow for ’24 was positive with 67,800,000.0, reflecting the solid financial, performance performance with cash flow from operating activities of 146,000,000 for the year. At year end ’24 available liquidity stood at very solid 276,000,000 NOK, including undrawn credit check facility of 72,100,000.0. Ensuring that we have a good liquidity situation going into 2025. And, with that said, of course, that is also the situation why, reason why the board of directors will propose a ordinary dividend of 0.8, NOK per share for 2024 at annual general meeting in May 25. The dividend will be repaid as repayment of paid in capital.

And that of course is positive for private shareholders. If you look into summary, Bogista delivered strong financial results for both fourth quarter twenty twenty four and the full year 2024, driven by record high profits in Hogans Bogista and continued improvements in both revenue and cost efficiency in Agorhabitom. Cash flow remained solid with the operational cash flow of 146,000,000, contributing to the cash position of NOK 220,500,000.0, a substantial reduction in net interest bearing debt through the year. Additionally, sale sale lease by transaction in, valued at 145,000,000 is expected to be completed within ’25 and communication from the administrative court in Malmo is waited soon. And this will, of course, further decrease the net interest bearing debts for the whole group.

Looking ahead, Hollands Buysdau will remain focused on operational improvements with expectation on further gains in profitability, capital efficiency and cash flow throughout 2025. For Agora Biuton, we are expected to increase slightly

Moderator/Host, Borusta: in

Paul Larsen, CEO, Borusta: the years ahead. The EBITDA is slightly going forward with the impact of recent cost cutting implemented throughout 2024 will give a positive impact for the whole year 2025. At group level, Bogsta will continue to monitor moderating the Polish shopping center transaction market and exploring add on acquisitions to further strengthen Hogstag’s position in the Nordic Refractory market going forward. Thank

Benedik Amerssen, Head of M&A and IR, Borusta: you. Okay.

Moderator/Host, Borusta: Let us open up for questions. Just a friendly reminder that you can still use the q and a function, if you would like, like to ask questions. So we have received a couple of questions there. The first one is related to Gora Biton and the transaction market in Poland. Given the transaction market has been somewhat supportive in q four, When could we expect an liquidity event and any valuation expectations?

Paul Larsen, CEO, Borusta: To start with valuation expectations, we have presented an updated valuation in the fourth quarter report. I think that is saying everything about expectations. Coming to the liquidity event and a potential transaction. Of course, the this the signs in the transaction market is is positive with two prime transactions concluded in fourth quarter. At the same time, these are prime shopping centers.

Probably most among the most prime outside Warsaw in Poland. So I think we need to review this as a sign and the transaction market needs to further develop before we can enter with Agorhabitomo.

Moderator/Host, Borusta: Yeah. Moving on to, Gergana’s Bergistan. What will the possible US tariff or trade war affect, Bergustin?

Benedik Amerssen, Head of M&A and IR, Borusta: Well, it’s a good question. I would say for most part of the business, it’s more or less unaffected. It’s likely affected through material costs, but given that we are, or Hoeghner’s Bagusta is quite large on the installation part of the business, we don’t see that as a huge risk for the business. And also given that we are locally focused on the Nordic market with solely Nordic competitors, which are all exposed to the same factors. So yeah.

Thank you.

Moderator/Host, Borusta: Next (LON:NXT) one is also related to Hagenos Bergustad. The EBIT margin has improved significantly in ’24 versus 2023. You mentioned in your q three presentation that the first percentage points was was easier than, than the next or the second half. What is your strategy to to reach the midterm target of 10% or above in in an EBIT margin?

Paul Larsen, CEO, Borusta: Of course, as you say, the the first steps are always the easiest. But we have reviewed and and analyzed special specific, specific, possibilities to increase EBIT margin further. Of course, we don’t want to to communicate what those measures and initiatives are, but we have a good plan. And we have a plan to partly try to increase the EBIT margin in ’25, but also ’26 and ’27. So this is ongoing work and a never ending story actually.

Moderator/Host, Borusta: Thank you. Last question. Given the dividend proposed for 2024, improved operations and solid balance sheet, How should we think about further distribution and also your capital allocation strategy going forward?

Paul Larsen, CEO, Borusta: For, Bergst, I’ll start to to propose, or for the board to propose a dividend. Of course, we are, we are, the the sub, the the the group companies needs to perform. And Hans Buergsta is performing good at the moment, and we expect them to to increase further. We strongly believe with the depth level they have today and probably the, savings back transaction completed within ’25. We expect further dividend from Helens Bogsta up to Bogostasa, which will be distributed to our shareholders.

For Agorabitum, we have a facility agreement with Banpukau that is ring fencing Agorabitum. So additional cash in Agorobeetto will be used to repay debts because we don’t have the possibility to pay dividend up to to Borisasa. But, in general, what we have communicated is that we will pay ordinary dividends when we have cash flow and and results for that, and extraordinary dividends when it’s a liquidity event or transaction.

Moderator/Host, Borusta: Could we see any m and a going forward?

Benedik Amerssen, Head of M&A and IR, Borusta: That’s absolutely possible. Obviously, linked to to what we already have to strengthen the position of of of our holding companies. But, yeah, we’ll

Moderator/Host, Borusta: see. Thank you. And thank you for everyone who watched Bergustos Q4 presentation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.