Yesterday, Rosenbauer decreased its FY22 EBIT margin guidance to -1% (previously: ‘positive EBIT’; eNuW old: 0.3%). This was stemming from the inability to pass on higher input costs to customers that ordered more than a year ago. Further, closure of operations in Russia lead to an EBT loss of € 6m. The company maintained its FY22 sales guidance of about € 1bn (eNuW: € 1bn). Key takeaways:

• High throughput times, contracts dated back up to 1.5 years. With a production cycles of 12-16 months, Rosenbauer executed orders from 2021 in 2022. Pricing of these contracts was based on notably lower material prices compared to today. The company was unable to re-negotiate these contracts and pass the higher input prices on to customers.
• FY22 sales guidance confirmed. Historically, Q4 has been the strongest quarter for Rosenbauer. The confirmed FY22 guidance of about € 1bn implies a Q4 with 10.5% yoy sales growth to € 353m (eNuW). The strong sequential improvements should have been carried by easing supply chain constraints contributing towards a more timely production and delivery of firetrucks.
• All time high order intake and order backlog. Demand for firetrucks and firefighting equipment remains exceptionally strong. FY22 order backlog and order intake are expected to reach historically record levels of € 1.5bn (eNuW) and € 1.2bn (eNuW) respectively; implied book-to-bill ratio 1.2x.
• Closure of Russian operations. Russian joint venture PA Firefighting Special Technics (48% stake) was deconsolidated, resulting in an EBT loss of € 6m.

Significant improvements expected in 2023. Rosenbauer had two prices increases in 2022 in response to the rising input costs. However, some contracts, mainly from the first half of 2022 still need to be executed with unadjusted pricing. This is seen to dampen Rosenbauer’s margins in H1 2023 (eNuW new: 2% vs 3.5% before). Taking heed of easing supply chain constraints and its record order backlog, the company looks set to be able to show high single-digit sales growth (eNuW 7.4%).

We reiterate our BUY recommendation with a new PT of € 53 (old: € 54) based on DCF (terminal growth 2%, terminal EBIT margin 5.8%, WACC 7.5%).