Aquafil Group Shows Resilience and Growth Amid Market Challenges

The Aquafil Group (ECNL.MI) has reported a notable improvement in its financial performance for the fourth quarter of 2024, showcasing resilience in the face of market challenges. Despite experiencing revenue declines in the EMEA and Asia markets, the company saw a year-over-year increase in volumes, aligning with its expectations. The North American market faced volume headwinds, yet early signs of recovery were observed, particularly in fiber product lines, with management noting an uptick in orders as fiscal year 2025 commenced.

On a consolidated basis, Aquafil Group achieved improved EBITDA margins compared to the same period in the previous year, even with lower revenue. This enhancement is attributed in part to the growing contribution of ECONYL® sales, which made up 57.2% of fiber revenues in the fourth quarter. The company's focus on debt repayment has also yielded positive results, with the net financial position showing a decreasing trend. The NFP/EBITDA ratio improved to 3.42x at the end of 4Q24 from 5.11x at the end of FY23, marking a significant stride towards financial stability.

Aquafil Group completed a capital increase operation during the quarter to further bolster its Business Plan, underscoring its commitment to long-term growth. The company reported revenue, adjusted EBITDA, and adjusted EPS of €128.4M, €14.3M, and (€0.09), respectively. While revenues were impacted by a shift in product mix, the adjusted EBITDA saw a 36.0% increase from the previous quarter, driven by a reduction in fixed costs.

Looking ahead, Aquafil Group is optimistic about its growth prospects through 2025. The company is addressing short-term challenges with strategic cost-cutting measures and has secured a covenant holiday from lenders for FY24. With rising volumes in the EMEA and Asia regions and signs of recovery in the U.S. market, Aquafil Group anticipates continued profitability improvements and volume growth in the coming fiscal year.

The expansion of ECONYL® remains a key driver of the company's success, with its contribution to revenues increasing to 57.2% in 4Q24 from 56.7% in the previous quarter. For the full year, ECONYL® accounted for 54.8% of revenues, up from 49.6% in FY23. The company aims to further increase this contribution to 60% by the end of FY25, reinforcing ECONYL®'s role as a cornerstone of its financial strategy.

Valuation analyses, including DCF and EV/EBITDA models, present a positive outlook for Aquafil Group, with valuation ranges indicating potential growth. The company's strategic focus on high-margin products like ECONYL®, coupled with its efforts to improve financial health and market position, positions it well for sustained success in the evolving global market.