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Ferro (WSE:FR) – Strategy 2022-2026 – Warsaw Stock Exchange

Ferro (WSE:FR) – Strategy 2022-2026 – Warsaw Stock Exchange| FXMAG.COM
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Table of contents

  1. Strategy F1: 2019- 2023
    1. Strategy F1R2: 2022-2026
      1. Conclusions

        Strategy F1: 2019- 2023

        The Group pursued the Strategy F1 successfully and realized it earlier than assumed; revenues and EBITDA beat the strategic targets (assumed at PLN 700 million and PLN 90 million, respectively, in 2023) hitting PLN 831 million and PLN 119 million, respectively, already in 2021, and all without incorporating the acquisition effectively closed in March 2021.

        ferro wse fr strategy 2022 2026 warsaw stock exchange grafika numer 1ferro wse fr strategy 2022 2026 warsaw stock exchange grafika numer 1

        Strategy F1R2: 2022-2026

        For the years 2022-26 the management adopted a new strategy that assumes using the Group’s competitive advantages and its stable financial condition to accelerate its growth and expand the market share. The Strategy F1R2 defines the Group’s goals and directions of development in 3 dimensions: strategy, structure, and organizational culture. It includes ESG issues as well. The new strategy is based on 4 pillars:

        â–  market expansion,

        â–  product expansion,

        â–  production,

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        â–  effectiveness.

        The market/ product expansion is aimed at a sales growth through market widening and product offer increase. The third pillar is supposed to support the Group’s perception as a producer through investments in production capacities, and the fourth one indicates internal transformation and elimination of the organization’s weaknesses. These last two are supposed to extend the Group’s operational flexibility and lower the risks related to unexpected changes in supply chains.

        ferro wse fr strategy 2022 2026 warsaw stock exchange grafika numer 2ferro wse fr strategy 2022 2026 warsaw stock exchange grafika numer 2

        The Strategy F1R2 defines key directions of the Group’s development as:

        • new markets,
        • well-adjusted offer,
        • operational perfection,
        • strong brand.

        The Company’s strategy covers M&A activities. Future acquisitions should enable the Group to take over a company offering complementary products to Ferro’s offer. A business growth potential after a takeover target has been incorporated, and means to raise capital for funding a potential acquisition are factors which play an important role in making a decision about the transaction.

        The management estimates that the realization of two main assumptions of the Strategy F1R2 will allow the Company to deliver in 2026:

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        • revenues at PLN 1,400 million,
        • EBITDA at PLN 193 million, with
        • the annual capex not exceeding PLN 30 million.

        The discussed assumptions do not cover the Company’s acquisition plans.

        The Strategy F1R2 assumes a dividend payout in the amount not less than 50% of the Company’s NI in the stable market and financial situation including, among other things, the consolidated ND/ EBITDA ratio staying ⩽ 2.5x.

        Conclusions

        The goals for 2026 assumed by the management are higher than our revenues and EBITDA forecasts by c. 20%. We assumed lower capex which is to be verified. The Company’s new strategy covering expansion, diversification, and competitive position improvement is, in our view, realistic. Given the current market circumstances, we are more concerned about our short-term forecasts, especially for the next year.

        ferro wse fr strategy 2022 2026 warsaw stock exchange grafika numer 3ferro wse fr strategy 2022 2026 warsaw stock exchange grafika numer 3

        Catalysts

        1. Expansion in European markets
        2. Strengthening position on the existing markets
        3. Launching a new logistic center in the southern Europe
        4. New products (expanding the product offer)
        5. Own brands repositioning
        6. Favorable FX rates and raw materials prices
        7. Acquisitions in the attractive segment (heat sources)

        Risk factors

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        1. Economic slowdown in Europe
        2. Falling demand for new flats
        3. Falling frequency of renovations
        4. Qualified workforce shortage
        5. Pressure on salaries
        6. Energy/ heat price increase
        7. Volatile raw materials prices (of copper and zinc, in particular)
        8. Unfavorable/volatile FX rates (currency risk when PLN and CZK weaken against US$ and EUR)
        9. Own brands developed by shopping chains
        10. Turmoil in the region (war in Ukraine)
        11. Temporary higher inventories

        This report is prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 3.0.

        Analyst: Sylwia Jaśkiewicz, CFA

        GPW’s Analytical Coverage Support Programme 3.0


        GPW’s Analytical Coverage Support Programme 3.0

        GPW’s Analytical Coverage Support Programme 3.0

        The Warsaw Stock Exchange's (GPW's) Analytical Coverage Support Programme 3.0 supports investment firms in drafting analytical reports which are financed by GPW. The objective of the Programme is to improve the availability of research covering less liquid companies, facilitating investors' informed investment decisions based on a reliable independent source of issuer information. Eligible to participate in the Programme are companies listed on the GPW Main Market (other than WIG20 participants) and on NewConnect. The Programme covers up to 50 issuers.

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