Graanul - comment

The Estonian wood pellet producer reported Q3 2024 revenues of €103.9. million (which was below our expectations of €127 million for the quarter.) Q3 EBITDA was €25.7 million which was slightly better than our expectation of €24 million. The unexpected surprise was the swing in working capital at -€31 million (vs. our projection of working capital inflow of €13 million) leading to €9.3 million in cash burn. The big jump in working capital came from an increase in account receivables to €55 million vs. our projection of €39 million. We would be interested to better understand the dynamics on the bond holder call on Monday.  As a consequence the cash balance has declined to €26 million (again below our expectations of €64 million).  If the company aspires to refinance the bonds in Q1 2025 then they need Q4 2024 to generate cash or the shareholders need to inject equity into the company to delever. We will be updating our model post the call on Monday with our views.