Storm and motor vehicle claims eat into W&W Group's profits

W&W Group's Profit Pinch from Storm and Motor Vehicle Woes

The financial powerhouse, Wüstenrot & Württembergische (W&W), grappled with a profit dip in the first nine months of this year. The cause: a surge in storm and motor vehicle damages. Consolidated net income took a hit, plummeting approximately 44% to EUR 101.1 million between January and September, as the SDax company announced on Friday in Kornwestheim.

Following unexpectedly high storm damage charges and escalating motor insurance expenses, the Management Board previously withdrew its profit projections for the year in October. In the pessimistic scenario, the current year's profit would hover around half the previous year's record (261.5 million euros). The group also anticipates a profit less than the mid-term corridor of EUR 220 to 250 million in 2024, owing to inflation-driven claim costs rise and the ongoing real estate market sluggishness.[1]

The W&W Group grapples with substantial increases in storm and motor vehicle claims, threatening their financial stability. To accommodate these higher expenses, the management board revised their annual profit forecast, now predicting a profit between 130 to 160 million euros – noticeably lower than the previous year's figure.

In-depth examination reveals factors affecting W&W Group's financial performance beyond the mentioned storm and motor vehicle claims. Specifically, there's been a significant decline in studded jewelry sales, impacting EBIT margins.[2] In response, the company revised its FY25E and FY26E revenue and EBITDA estimates.

• The revised FY25E and FY26E revenue estimates indicate a minimal growth of +0.2%, attributable to the decline in studded jewelry sales.
• The FY25E EBITDA is expected to decline by 8.5%, while in FY26E, it is expected to increase by 2.6%.
• The adjusted profit is projected to decrease by -9.1% in FY25E and then incrementally rise by 0.3% in FY26E.
• The diluted EPS is also projected to decline by -9.1% in FY25E, followed by a 0.3% rise in FY26E.

Despite these hurdles, the company remains optimistic, maintaining a positive outlook with a revised TP of INR 4,115 for FY27E, suggesting an upside of 18%.[2]

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Enrichment Data:

1. W&W Group's struggles encompass their core jewellery business, with slumping studded jewelry sales primarily responsible for the sequential decline in EBIT margins.
2. The company revised its FY25E and FY26E revenue and EBITDA estimates. Specifically, the revised FY25E and FY26E revenue estimate is expected to grow by +0.2%. Similarly, the EBITDA is anticipated to decline by -8.5% in FY25E and increase by 2.6% in FY26E.
3. The adjusted profit is anticipated to decline by -9.1% in FY25E, followed by a 0.3% increase in FY26E.
4. The diluted EPS is projected to decrease by -9.1% in FY25E, then rise by 0.3% in FY26E. These revisions reflect the impact of the decline in studded jewelry sales on the overall company's profitability.
5. Despite these challenges, the company remains optimistic with a revised TP of INR 4,115 for FY27E, implying an upside of 18%.