Lindab, a company specializing in the development, manufacturing, and sale of ventilation systems, recently issued a profit warning that caused its stock to plummet by 10.7% on Friday, January 17th. This Scandinavian company has a strong presence in the Nordic region, which accounts for 45% of its revenue. Lindab holds a market share of 30-50% in circular ventilation ducts in the Nordic countries, establishing its dominance in the industry.
The company’s CEO, Ola Ringdahl, who has been in his position since the summer of 2018, owns 130,000 shares worth approximately 25 million SEK. The Chairman, Peter Nilsson, holds shares worth just under 29 million SEK. Despite their significant stakes, the majority of Lindab’s ownership lies with fund companies, with Carnegie Fonder being the largest shareholder at 9.8%, followed by Fjärde AP-Fonden at 8.6%.
The profit warning issued by Lindab was a result of the preliminary figures for the fourth quarter of 2024, which showed a 1% growth in revenue compared to the previous year, falling below expectations. The lower sales in December affected both business areas, Ventilation Systems and Profile Systems, leading to negative organic growth for the eighth consecutive quarter. Ventilation Systems experienced a 5% decrease in sales, while Profile Systems saw an 8% decline.
December, traditionally a slower month for construction activity, witnessed particularly low market activity in crucial regions like Germany and Sweden for Ventilation Systems. This, coupled with an unfavorable product mix, contributed to the overall decline in sales. The company’s focus now lies on cost reductions, structural measures, and the restructuring of its Eastern European profile operations to enhance profitability in 2025.
In light of these challenges, Lindab announced a cost-cutting program in November, primarily targeting the ventilation business to streamline operations and reduce fixed costs. The program involves cutting 180 full-time positions and closing operations at ten sites within the areas of warehousing and logistics. These measures are expected to reduce the company’s fixed costs by 120 million SEK annually, with one-time costs of 70 million SEK impacting the fourth quarter of 2024.
Despite the setbacks, Lindab made significant acquisitions in 2024, adding six companies with a total revenue of approximately 1.3 billion SEK and around 360 employees to its portfolio. The company’s net debt stood at 2.7 billion SEK at the end of the third quarter, indicating a manageable debt-to-EBITDA ratio and providing room for further acquisitions. The company’s financial goal is to keep this ratio below 3 times.
Looking ahead, analysts forecast a 3-5% annual growth for Lindab, with a projected operating margin of 12.4% by 2027. The company’s valuation at 14 times its 2025 estimated operating profit puts it in line with other players in the energy-efficient solutions market. With a promising outlook for profit growth in the second half of 2025, Lindab’s stock remains one to watch, offering potential for recovery and value in the long term.
In conclusion, despite facing challenges and issuing a profit warning, Lindab’s strategic initiatives, acquisitions, and cost-saving measures position the company for a turnaround. With a solid financial foundation, industry dominance in the Nordic region, and a focus on profitability, Lindab is poised for growth and value creation in the coming years.