Our 'BBB+' issuer and issue ratings on Jotun A/S are unchanged following the publication of its results for the first four months of 2022.
Stronger sales, lower margins
Jotun reported 14% year-on-year growth in revenue in the first four months, driven by strong demand in all market segments. In particular, the company saw strong growth in sales to the shipbuilding industry in South Korea. On a negative note, increased raw material prices led to a 22% drop in reported EBIT from the corresponding period of 2021. Jotun reported an EBITDA margin of 17.0% for the period compared with our full-year expectations of 17.7%. We note that the company expects price adjustments to lead to improved margins in the second half, but understand that uncertainty related to raw material inflation and supply chain disturbances continues.
Increased working capital
Higher raw material prices, a weak Norwegian krone, and delays have led to increased working capital and net interest-bearing debt since end-2021. Nevertheless, Jotun's credit metrics remain strong (see Figure 1).
Figure 1. Jotun A/S key credit metrics, 2019–T1 2022
| NOKm | 2019 | 2020 | 2021 | LTM to 30 Apr. 2022 |
|---|---|---|---|---|
| Total revenue | 19,652 | 21,070 | 22,809 | 23,827 |
| NCR-adj. EBITDA | 3,118 | 4,076 | 4,208 | 3,931 |
| NCR-adj. net debt | 2,875 | 1,821 | 2,169 | 3,286 |
| Total assets | 19,136 | 20,574 | 23,432 | 24,926 |
| NCR-adj. net debt/EBITDA (x) | 0.9 | 0.4 | 0.5 | 0.8 |
| NCR-adj. EBITDA/net interest (x) | 15.4 | 26.5 | 28.6 | 26.7 |
| NCR-adjusted FFO/net debt (%) | 80.5 | 174.2 | 150.9 | 93.1 |
| NCR-adjusted FOCF/net debt (%) | 30.3 | 124.9 | 28.0 | -16.4 |
This commentary does not constitute a rating action.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com