Equity research, Viva Wine Group: We expect solid performance in a slow market in Q3 2024
21 Oct 2024
Viva Wine Group (the company or Viva) will release its Q3 2024 report on 20 November 2024. Below are Carlsquare Equity Research’s updated estimates ahead of the report.
- We expect wine volumes in the Nordic monopolies to have continued to decline in Q3, albeit at a slower rate than the previous quarter. On 10 June, a reform of the Finnish alcohol law, allowing food stores to sell beer, cider, and wine with an alcohol content of up to eight per cent, went into effect. This has significantly impacted sales in the Finnish Alko stores, with wine volumes down by 10.5 per cent according to statistics from the Finnish national retailer monopoly.
- On 14 October, Nordic Peer Anora lowered its full-year 2024 EBITDA guidance to be between EUR 65-70m compared to EUR 75-85m (2023: EUR 68.2m) previously. The main reasons for lowering the guidance are lower volumes in beverage sales in Wine and Spirits segments in September than previously forecasted, especially in the monopoly channels, with a negative impact on comparable EBITDA.
- We believe Viva has fared better than Anora in this environment due to a more favourable geographic and category revenue mix. Moreover, it has gained significant market share in Sweden during the year, partly due to logistics issues for some of its main Swedish competitors during the first half of the year. Already in Q2, the company also demonstrated that it had made strong headway in the grocery channel in Finland and had strengthened its position overall in the country.
- Still, we lower our estimates slightly ahead of the Q3 report as a result of anticipating a slower market than previously. We expect four per cent growth in the Nordics segment in Q3. Total net sales for Viva Wine Group, including the Other segment and eliminations, are expected to grow by 2% to SEK 973m. In conjunction with the Q2 report, management guided for a bumpy road for the e-com segment in the second half of 2023. We predict lower sales in Q3 followed by a slight increase in Q4. According to BEHV, e-commerce overall in Germany increased by 1.5 per cent in Q3. However, we believe there has been a negative effect on wine demand around the EURO 2024 championship in Germany.
- For the group, we anticipate a gross profit calculated from net sales at SEK 202m, equivalent to a margin of 20.7%. That can be compared to a gross margin of 18.7% in Q3 2023. This in line with company guidance of a gradual improvement in the gross margin underpinned by price adjustments and a weaker EUR/SEK.
- For the group, we expect an adjusted EBITA of SEK 90m, corresponding to a margin of 9.3%. That translates to an improvement in margin by 1.5 percentage points for the quarter, year-over-year. See the table below for more detailed estimates per segment.
- For the full year, we lower net sales and adjusted EBITA estimates by 1-2 per cent. However, we reiterate our base case valuation of around SEK 51 per share as the adjustments are relatively small.
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