Bonava – bad annual report 2022 and weak forecastsNegative drivers: OMXSTO:BONAV_B
1. Write down of assets in Russia – extra costs for shareholders
2. Growing interest rated ruins the business
3. Lack of liquidity in 2023 decreases shareholders value
4. Additional costs as a result of inflation.
5. Deterioration on real estate market in Europe and bubble growing risk for investors
Additional info:
Looking back over 5 years Bonava returns have been really bad:
- Not growing revenue and even decreasing in 2021 vs 2020
- Decreasing net profit (down from SEK 1,94 bn in 2017 to SEK 1,23 bn in 2021)
- No dividends at all (except 4Q 2020)
- Enormous losses for the shareholders - share price down 71% in the period
And 2022 results would be the weakest for 5 year period (will be release on 9.00am CET 2 Feb 2023).
Bad facts about the company and what to expect for full year 2022:
1. Write down of assets in Russia – extra costs for shareholders
In October 2022 Bonava sold out its subsidiaries in Russia because of war in Ukraine. The price is EUR 98 m (SEK 1.1 bn) and it is much lower that the real market price of the assets.
The write-down of net assets amounts to SEK 0.9 bn in 2022 financial statements.
It would negatively affect the share price when the financial statements be released.
2. Growing interest rated ruins the business
The Company has relatively high debt and it tend to grow over the last periods.
Average interest rate increased from 2.15% in 3Q2020 to 3.23% in 3Q2022. This leads to interest expenses increase and additional losses.
3. Lack of liquidity in 2023 decreases shareholders value
Moreover Bonava will have to make significant payments on its debt obligations in 2023 as shown on the diagram below. Most probably part of the debt will be refinanced at a higher rate which will decrease shareholders value of the Company.
4. Additional costs as a result of inflation.
Bonava faces growing construction costs as a result of rapidly growing inflation. At the same time the Company cannot increase sales price because demand is very sensitive to further price increase which is already record high. The marked is in bubble condition which could burst anytime in 2023.
In such situation investors are not willing to deposit their money in assets like real estate and Bonava has to deal with that somehow.
5. Deterioration on real estate market in Europe and bubble growing risk for investors
The demand for homes is rapidly falling and the unemployment rate is getting higher coupled by increasing interest rate.
The uncertainty in geopolitical aspects and Europe economy in all have already started to impact real estate demand and prices. The marker is overheated and prices are starting to get down.
6. Global macroeconomics outlook is negative
Eurozone economy has no drivers for growth. Below is McKinsey forecast over 3 year period and long-term till 2030.
Oil and gas prices are set for further growth in all scenarios which will slow down GDP growth even more.
Inflation will freeze at record high levels and will be the main problem.
