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
NOKm | 2019 | 2020 | 2021 | LTM to 31 Aug. 2022 |
---|---|---|---|---|
Total revenue | 19,652 | 21,070 | 22,809 | 26,077 |
NCR-adj. EBITDA | 3,118 | 4,076 | 4,208 | 4,140 |
NCR-adj. net debt | 2,875 | 1,821 | 2,169 | 2,721 |
Total assets | 19,136 | 20,574 | 23,432 | 25,797 |
NCR-adj. net debt/EBITDA (x) | 0.9 | 0.4 | 0.5 | 0.7 |
NCR-adj. EBITDA/net interest (x) | 15.4 | 26.5 | 28.6 | 26.4 |
NCR-adjusted FFO/net debt (%) | 80.5 | 174.2 | 150.9 | 116.3 |
NCR-adjusted FOCF/net debt (%) | 30.3 | 124.9 | 28.0 | 35.1 |
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