DALLAS, TX -- March 19th, 2025 -- Aquafil Group (ECNL.MI): Stonegate Capital Partners updates coverage on Aquafil Group (ECNL.MI). In 4Q24, ECNL observed continued improvement within the macro environment in both EMEA and Asia markets, with volumes growing year over year and aligning with company expectations despite the posted revenue declines in these geographies. The Company experienced volume headwinds in North America, but signs of recovery were noted in both fiber product lines, though management noted that orders are increasing in early FY25. On a consolidated basis, ECNL reported improved EBITDA margins compared to 4Q23 despite lower revenue. This improvement is partly due to the increasing percentage of ECONYL® sales, which accounted for 57.2% of revenues generated from fibers in the fourth quarter. The Company also remains focused on debt repayment with a decreasing trend in net financial position, as evidenced by the NFP/EBITDA ratio improving to 3.42x at the end of 4Q24 from 5.11x at the end of FY23. Lastly, ECNL’s capital increase operation to further support the Business Plan was completed in the quarter. 

Company Updates:

Quarterly results: ECNL reported revenue, adj EBITDA, and adj EPS of €128.4M, €14.3M, and (€0.09), respectively. This compares to our/consensus estimates of €150.4M/€131.9M, €14.7M/€16.9M, and (€0.06)/(€0.06), respectively. Revenues were impacted by a 6.9% increase in volumes sold year over year, which was unable to overcome the negative change in mix from a decrease in fibers sold and increase in polymers sold. The largest year over year decrease in revenues was seen in North America as volumes dropped 5.9% leading to a 6.5% decrease in revenues. Despite revenue headwinds, adj. EBITDA increased 36.0% from 4Q24 marking a significant improvement in profitability driven by a decrease in fixed costs.

Outlook: The Company is optimistic about growth through 2025, addressing short-term challenges with cost-cutting measures and a covenant holiday from lenders for FY24, while benefiting from rising volumes in EMEA and Asia. Profitability has significantly improved year over year, with fourth-quarter EBITDA margins exceeding 11%, alongside a notable improvement in the net financial position and NFP/EBITDA ratio. Demand in the Asia Pacific and EMEA regions has met budget forecasts, and the U.S. market is showing signs of recovery in fibers. We anticipate continued profitability improvements and rising volumes in FY25.

ECONYL® Expansion on Track: The Company reported another quarter of strong ECONYL® contributions to revenues at 57.2% for 4Q24. This is an increase of 50 bps from 56.7% seen in 3Q24. For the full year ECONYL® contributed 54.8% of revenues, up 520 bps from 49.6% in FY23. We expect the North American market to see a rebound over FY25 as ECNOYL® continues to be an important portion of the Company’s revenue. This level of ECONYL® contribution to revenue is in-line with management’s expectations and is expected to remain a positive addition to the financials, with the goal of reaching 60% by the end of FY25.

Valuation: We use both a DCF Model and EV/EBITDA Analysis to frame our valuation of ECNL. Our DCF analysis relies on a range of discount rates between 10.75% and 11.25%. This arrives at a valuation range of €4.62 to €5.02 with a mid-point of €4.81. Our EV/EBITDA analysis relies on a range of 6.0x to 7.0x leading to a valuation range of €3.97 to €5.05, with a midpoint at €4.51.

About StonegateStonegate Capital Partners is a leading capital markets advisory firm providing investor relations, equity research, and institutional investor outreach services for public companies. Our affiliate, Stonegate Capital Markets (member FINRA) provides a full spectrum of investment banking, equity research and capital raising for public and private companies.

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