Deceuninck will issue its 1Q11 trading update on 10 May before market.We remind that Deceuninck hinted at the time of the FY results release for continued sales and profit growth in 2011. Order intake in the first weeks of the year was said at that time to be in line with management’s budget.
We expect 1Q11 revenue to increase by 9.5% (to € 119.5m), broken down in a +6% volume effect, a +2.5% price effect and a +1% FX effect.
Thanks to fairly easy comps due to very harsh weather conditions in 1Q10, we think 1Q revenue trends will clearly have been positive. Thekey risk/uncertainty is however the impact from rising raw materials prices on margins/profits. We point out that PVC prices are up about 8% (to € 1,285/ton) since the start of the year. Deceuninck is trying to cope with higher rawmat prices by increasingits own selling prices, but history has shown there is often a significant lagging effect that temporarily affect margins.
Our model currently assumes 5% FY11 revenue growth and a 50bps contraction in REBITDA margin (to 9.8%).
We stick to our Accumulate rating and € 2 target price for now and will revaluate our stance after the 1Q11 trading update.