Steico Increases net Profit by 185% in the First Quarter. Demand for Ecological Insulation Materials Returns!

• Steico manages to increase net profit by 184.5% to €5.9 million in the first quarter. At 11.6%, the EBIT margin is above the 2024 target corridor.
• Steico's business should be at the turning point for the positive. The share should soon break out of the bottom.

The construction of single and multi-family homes and renovations are suffering from the rise in interest rates. Demand for houses has collapsed. In January alone, building permits for single-family homes were a good 42.7 % lower. However, building interest rates are now on the decline. The 10-year fixed building rate is currently at 3.55 % after 4.2 % in October last year. Steico, which specializes in wood fibre insulation materials and timber construction products, has come through the construction crisis in robust shape. The company is benefiting from building with natural materials and the prefabricated house trend.

On Friday evening, Steico (A0LR93) reported very respectable figures for the first quarter. The company succeeded in keeping revenue stable at €95.9 million. At the same time, earnings improved significantly. EBIT increased by 85.1% to €10.8 million and net profit even climbed by 184.5% to €5.9 million. Steico says that the stabilization continued in the First quarter. Falling inflation, stable interest rates and a constant competitive position had a positive effect on demand. In terms of earnings, Steico benefited from lower purchase prices and cost reductions. As a result, the EBIT margin in relation to total performance was a very good 11.6%. After the first quarter, it is therefore even above the annual forecast of 9% to 11%. The outlook remains cautious, with management anticipating further stabilization. Therefore, the guidance of EUR 365 million in revenue with the above-mentioned margin remains unchanged.

2024 is a transition year. In 2025, more new construction and refurbishments should ensure revenue growth to over €400 million again. EPS could climb from €1.36 to €1.72. Steico would be valued at simple revenue and a forward P/E 2025 ratio of 17. This is not cheap, but not too expensive given the opportunity of a new growth phase. More synergies from the major shareholder Kingspan in particular should have a positive effect in the medium term. In terms of the chart, Steico's bottoming out is now coming to an end.

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