This has come down through two leverage-based margin cuts of 25 bps each, and hitting ESG KPIs for a further 7.5 bps — the facility is sustainability-linked.

The margin compression has led one lender to express relief at the company’s October 2022 SEK 400m (€36m as of 21/11/2022) dividend payment.

“I’m happy for anything that ticks leverage up given the margin ratchets they’ve hit, and I wouldn’t expect anyone to be grouchy,” they said.

Quarterly revenue busted through the roof to SEK 10.4bn and EBITDA reached SEK 1.4bn, up 19% and 17% YOY, respectively. EBITDA is currently 8% higher than the company’s guidance. Ahlsell has demonstrated that it has the ability to push through price increases, with 14% of that revenue increase from organic growth, mainly driven by price increases, though the company’s EBITDA margin has stayed relatively stable, with just a 20 bps decline.

Ahlsell continues to do low level M&A, which is responsible for just 3% of the company’s YoY 19% revenue increase, and will be investing a further SEK 1bn in its Swedish operations. Alas, this investment has, and, for the foreseeable future, will be cash-fuelled, so no extra leverage for low-paid lenders there.

Some of the investment will go towards warehouse construction, multi-year projects, which made the second buysider question capex investment despite the weakening macro environment, but they said the investment will reduce cost and increase efficiency in the long-term, and will be sold and leased back once completed.

The company has extensive liquidity resources backing up its strong underlying performance. It has SEK 3.5bn cash on the balance and a completely undrawn SEK 2.24bn RCF.

Ahlsell supplies building materials to Norway, Sweden and Finland and around 35% of revenue is dedicated to renovation and maintenance, perhaps the safest place to be in European construction going into a recession, according to the first buysider.

Even the slightly weaker points of the business’ credit profile are considered smart moves by the buyside. A second buysider pointed out negative leveraged free cashflow of SEK 572m, due to an SEK 1.36bn working capital outflow spent on more inventory in anticipation of even higher supply prices. On the company’s Q3 lender call management guided that this inventory would be sold within three quarters.

The first buysider agreed they weren’t worried: “Working capital spend is higher than usual, but that’s rational in the current environment when they’re anticipating further price increases.”

Maybe the most negative point any buysider had to make about the company was a warning to lazy lenders.

The third buysider noted that due to Scandinavia having such a strong reputation for economic stability, it’s easy to feel safe with this credit, perhaps unduly so. “The end markets may still be affected by Europe, and I know in Denmark and Norway there’s a brake on starting new housing projects right now, so you run down your existing backlog and there might not be that much to replace it,” they said.