NCR comments: Jotun A/S T2 2022 report

Our 'BBB+' issuer and issue ratings on Jotun A/S are unchanged following the publication of its eight-month results.

Strong sales growth, uncertain outlook for 2023
Jotun reported 22% year-on-year revenue growth for the first eight months of 2022, driven by strong demand in all market segments and price increases to compensate for higher raw-material prices. NCR-adjusted EBITDA is up by 14% on the same period last year, adjusted for a gain of NOK 54m from the sale of Jotun Russia in July, while the NCR-adjusted EBITDA margin is down by 1.3pp to 18.3%. This, however, is stronger than our full-year expectations of 16.6% (stated in February 2022).

The company has a relatively confident outlook for the remainder of 2022, and there are signs that raw-material prices have started to ease. However, there is considerable uncertainty in the longer term, related to global growth projections and the geopolitical situation.

Working capital build-up may have peaked
Higher raw-material prices and delays have led to a build-up of working capital during 2022, despite some reductions in recent months. This is the main reason for Jotun's higher net interest-bearing debt (NIBD) since year-end 2021. We note, however, that NIBD has decreased by NOK 565m in the last four-month period. Jotun's credit metrics remain strong, as illustrated in the table below.

Figure 1. Jotun A/S key credit metrics, 2019–T2 2022

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