Top 5 Nordic ESG-companies

Top 5 Nordic ESG-companies

Investors has in the recent years become more aware of the companies they invest in and “green” companies has received a premium valuation. This premium valuation may be justified, but it can also be a sign of a overvaluated area to invest in. Either way, the increased focus has caused the cost of capital of these companies to go down, investors to receive a high return on their investments and the market expects these companies to contribute to the UN Sustainable Development Goals in year to come.

The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. In this post you’ll be introduced to 5 Top Nordic ESG-companies that will benefit from the increased focus from investors on climate change, pollution and plastic in the sea.

The 5 Top Nordic ESG-companies in this article adresses various goals. Below you can find the goals that these five companies are most focused on:

  • Goal 7: Affordable and Clean Energy
  • Goal 12: Responsible Consumption and Production
  • Goal 13: Climate Action
  • Goal 14: Life Below Water

#1 Tomra Systems

Tomra was founded in 1972 on an innovation for return of emty beverage containers, and has since then grown into a global company with market-leading positions in their two segments; Sorting Solutions and Collection Solutions. One of the biggest environmental challenges today is plastic in the ocean, and continuing on today’s path will cause the ocean to contain more plastic than fish by 2050. Herein lies the great business potential for Tomra Systems as more focus will be on collecting waste, recycle it and create a circular economy (moving away from the linear economy).

Tomra Investor Presentation

Financials:

P/EP/BNet debt / EBITDA EV / EBITDA Dividend yieldPayout ratioROE
45 7 2.0 27 1.05%* 50 %*15.3%

The current valuation of the company is the only drawback as it is trading at a P/E of 45 and a EV / EBITDA of 27. Tomra has increased their dividends since 2007 and has paid a consistent dividend since 1993.

Source. Borsdata.se * adjusted for extraordinary dividend in 2018

#2 Beijer Ref

Beijer Ref is one of the largest refrigeration wholesalers in the world and has also operations in air conditioning and heat pumps.

Within the EU, a new F-gas regulation was published in April 2014 which increases the demand for the phasing out of HFC(3) refrigerants with a high greenhouse impact. The F-gas regulation also regulates the authority for intervening in the refrigerant cycle in order to avoid leakage, all in order to reduce the discharges. The new F-gas regulation will also regulate the imported volume of refrigerants into the EU with a falling import volume until 2030. This is to give owners of installations time to adapt their selection of refrigerant (source: Beijer Ref).

This EU-regulation will keep demand for Beijer Ref’s products high in the coming decade since few retailers has replaced their old refrigerators. Furthermore, the heat pump segment is also experiencing high growth since warmer summers drives demand for heat pumps (can also be used for cooling).

Financials:

P/EP/B Net debt / EBITDA EV / EBITDA Dividend yieldPayout ratioROE
40.4 7.9 2.2 24.2 1.1% 45.2%19.7%
Source. Borsdata.se

The company has paid a dividend since its spinoff from Beijer Electronics in 2010 and paid out an extraordinary dividend based on the 2018 financials.

#3 Eolus Vind

Eolus Vind is Sweden’s first commercial wind power developer. Since inception in 1990, the company has become a leading Nordic wind power developer and has installed and delivered more than 540 wind turbines. The core business is to construct wind power facilities in favorable wind locations and transfer them to customers. The company operates in the Nordics, Baltics and the US and the company is listed on Nasdaq Stockholm Small Cap.

Demand for electricity and wind power is expected to increase over the next decades at a 7 % CAGR. The shift to renewable energy will require investments in wind power parks, as there is little room for more hydro power and solar power is less competitive in the Nordic region due to the climate

Financials:

P/EP/B Net debt/ EBITDA EV / EBITDA Dividend yieldPayout ratioROE
20.2 3.0 (6.5) 15.1 1.4%28.1%14.9%
Source. Borsdata.se

The company has paid out a steady dividend in the past decade, and paid out an extra ordinary dividend in 2014. The company announced that it will pay out a dividend of 1.5 SEK on the basis of 2018-2019 financials, even though the market expected it to distribute an additional lumpsum due to its net cash position.

#4 Scatec Solar

Scatec Solar develops, builds, owns and operates solar power plants across emerging markets. Technical improvements has changed the solar power industry, and it is expected that the industry will be even more competitive compared to fossil fuels and coal in the coming decade.

Scatec Solar’s business setup is positioned to provide electricity to energy-demanding regions, where the number of sunhours is an obvious comparative advantage. The solar industry in general is subject to governmental incentive programs in order to facilitate increased capacity and energy production from this source. Typically, Feed-in-Tariff (FiT) schemes are used to improve the economics for a renewable energy provider. The company signs Power Purchase Agreements (PPAs) typically on a 20-25 year basis which gives great visibility in the company’s earnings and cash flows.

Scatec Solar has an aggressive target of 4.5GW of installed capacity by the end of 2021, and as of end of Q3 the installed capacity is approximately 1.2GW. This means that in order for the company to defend its current valuation it must deliver on its project backlog. The company announced a new segment, Release, which is a small-scale redeployable solar power generator. The ambition is to grow the new segment by 300 – 500 MW per year from 2022 and onwards.

Financials:

P/EP/B Net debt/ EBITDA EV / EBITDA Dividend yieldPayout ratioROE
NA 3.8 (1.9) 7.9 0.9%NA 0.51%

Source. Borsdata.se

As more projects are finalised the earnings and cash flows will increase substantially in years to come. Based on the dividends distributed so far it is expected that the dividend growth will be attractive for dividend growth investors in the coming years.

#5 Nederman Holding

Nederman, The Clean Air Company, is one of the world’s leading experts in creating solutions for handling and recycling of production waste streams. Their products and solutions for eco-efficient manufacturing contribute to improved production economics, safer work places and reduced environmental impact.

Goal No 12 “Sustainable consumption and production” is about promoting resource and energy efficiency, sustainable infrastructure, and providing access to basic services, green and decent jobs and a better quality of life for all. One of the targets for this goal is to substantially reduce waste generation through prevention, reduction, recycling and reuse by 2030.

According to the Health Effects Institute (HEI) in the US, 95 percent of the world’s population is exposed every day to poor quality air and the solutions to current problems of air pollution largely can be found in industry. Solutions provided by Nederman is filtering, cleaning and recycling of air to make industrial environments more efficient, safe and sustainable.

Financials:

P/EP/B Net debt/ EBITDA EV / EBITDA Dividend yieldPayout ratioROE
16.93.1 2.010.7 2% 33.2%18.2%
Source. Borsdata.se

Disclaimer: I hold various positions in Tomra, Beijer Ref, Eolus Vind, Scatec Solar and may, in the future, initiate a position in the Nederman Holding.

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