Equity research, Lohilo Foods Q1 2025: Solid cost control ahead of high season

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Lohilo’s sales declined and came in below our estimates in a seasonally slow quarter, further affected by an adverse Easter effect. However, the gross margin was better than expected. Due to seasonal tailwinds and improving margins, we are still optimistic regarding the coming quarters. 

Promising margin trend in a slow season

In Q1 2025, Lohilo Foods reported net sales of SEK 43m, corresponding to a 6% decline. Our forecast for the quarter was SEK 54m. The difference from our forecast was in Dry products and export orders. Specifically, lower orders to Normal negatively impacted Group Sales by minus 12%. Export sales in the same period last year were boosted by a large SEK 5.3m initial order to the Danish bargain retailer.

Despite the lower sales, gross profit was flat and aligned with our expectations. We are encouraged by the better-than-expected gross margin, which increased to 34.8 per cent (33.2). Lohilo cites FX effects and price adjustments as positive factors. We conclude that a lower export share also contributed to a mix effect on the margin. Consequently, profitability (EBITDA) was somewhat better than anticipated in absolute terms. We acknowledge that it is hard to draw conclusions from a single quarter. However, we believe the report supports our view of further margin improvement in 2025.

Cash decreased to SEK 1.8m from SEK 3.2m in the quarter. Lohilo says it has secured liquidity for the upcoming seasonally strong summer season, and debt increased to SEK 18.2m from SEK 10.9m during the quarter.

Despite export headwinds, a positive outlook is warranted

While Q1 sales were below our expectations, Lohilo will launch new products in the protein drink and ice cream categories in the current quarter. This could help drive sales of both its own and distributed brands. Lohilo has experienced headwinds in some export markets. However, the company sees good development in Sweden and Finland. We reduce our sales estimates somewhat on a slightly more cautious view of the export business in the short term. However, in contrast, we expect a faster margin improvement than previously assumed, supported by a stronger gross margin. Hence, we only make minor adjustments to our earnings forecasts.

Relative valuation is still supportive

We have become somewhat more optimistic on margins going forward. At the same time, higher debt and lower peer valuation since our initial coverage report inhibits further adjustments in the short term. Our estimates correspond to an EV/EBITDA NTM of 9.6x. The full reference group is valued at a median EV/EBITDA NTM of 10.1x. Signs of accelerated growth with solid margins is a trigger for the share.

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