BDM Q3'23 Results: New Production Facility Challenges Offset by Revenue Growth and Positive Financial Activities

Last recommendation BDM: BUY with target price 26.4 PLN/share (2023/09/15) 

Q3'23 results burdened by opening and operating costs of new production facility - slightly negative Sales revenue in Q3'23 amounted to PLN 11.7m and was 9% higher than our forecast. Foreign sales accounted for 35% (vs. 28% in Q3'22). In line with our assumptions, ca. 60% were products and the remaining 40% goods. There were no significant contracts in the period under review, so we view the level of regular sales slightly positively. A year earlier, revenues were supported by the delivery of 3 analysers (PLN 3.1m in total). Diversification of revenue sources is a positive sign - in Q1-3'23, the share of the 4 largest customers in revenue was 16.5%.

In Q3'23, the company reported an operating loss of PLN -0.6m and EBITDA of PLN 0.1m. Our forecasts assumed PLN -0.2m EBIT and PLN 0.5m EBITDA. Q3'23 was a period of fitting out a new production facility, so additional one-off costs reduced the quarter's result. The company estimates that the cost of moving some inventory from the old building to the new one, as well as a change in the organization of warehouses, resulted in costs in excess of PLN 220,000.

With a delay of five months, the company launched a new production facility. The test and reagent production department was relocated to it, and the vacated space was modernised. As of today, production of microbiological media on the new production lines following the modernisation of the building is already operational. We expect the first results of the increased production capacity to appear in 2024.

Financial activities were a positive surprise, with debt service costs coming in lower than our assumptions. In addition, the company reversed most of the write-downs on trade receivables made in Q2'23, resulting in a lower gross loss (very close to our forecasts).

We view Q3'23 results slightly negatively. Delays in the commissioning of new capacities combined with the difficult macro situation resulted in increased costs, which led to a loss. Increased costs for the maintenance of new space and equipment have not yet translated into revenue. Production is now up and running, so we expect the improvement in performance that was expected in 2H'23 and delayed by protracted construction work to be seen in 2024.

 

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