Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total growth of 20% driven by the acquisition of Red Lion Controls.
- Sequential growth in order intake from the last quarter by 9%.
- Improvement in EBIT margins and cash flow.
- Strong position in the industrial market with over 10 million connected devices.
- Positive progress in North America with good market orders.
Negative Points
- Organic growth decline of 22% in order intake.
- Weak revenue situation with a 20% decline in organic growth.
- Challenges in Europe, particularly in Germany, with slower market recovery.
- Significant impact from destocking, especially in Continental Europe and Japan.
- Integration of Red Lion Controls requiring substantial effort and investment.
Q & A Highlights
Q: Can you provide an outlook for 2024 based on your largest customers' current sentiments?
A: Many customers initially expected a strong second half of 2024, but now anticipate growth delays into 2025. This reflects a general sentiment of postponing recovery by about two quarters. - Staffan Dahlstrom, CEO
Q: What are the positive and challenging aspects of the Red Lion integration so far?
A: Positively, we see strong team capabilities and opportunities for collaboration. Challenges include balancing integration efforts with maintaining current sales momentum and addressing underinvestment in manufacturing. - Staffan Dahlstrom, CEO
Q: Are all assets of Red Lion necessary for future operations, or are there parts that might be divested?
A: While most of Red Lion's assets fit well with our portfolio, there are some areas under review for potential divestment or changes. - Staffan Dahlstrom, CEO
Q: Can you elaborate on the customer recovery in North America and the challenges in Europe?
A: North America shows a good pickup, especially in machine builders and building automation. Europe, particularly in embedded components, faces slower recovery due to inventory reductions and weak market demand. - Staffan Dahlstrom, CEO
Q: What is the status of inventory buildup and working capital release?
A: Inventory reductions have started but are slow due to long lead times. Significant reductions are expected in the second half of the year. - Joakim Nideborn, CFO
Q: Are there any seasonality effects in Red Lion's performance?
A: No significant seasonality has been observed. We expect gradual improvement throughout the year. - Joakim Nideborn, CFO
Q: What are the expected synergies from the Red Lion acquisition?
A: The main synergies will come from cross-selling, operational improvements, and technology integration. These will materialize over the next few years. - Joakim Nideborn, CFO
Q: How do you view the current gross margin levels and future expectations?
A: Current gross margins are satisfactory and expected to remain stable. Improvements in high-margin areas like building automation contribute positively. - Joakim Nideborn, CFO
Q: What is the outlook for operating expenses (OpEx) in the coming quarters?
A: OpEx is expected to increase slightly as we resume marketing and travel activities, balancing cost control with necessary business initiatives. - Joakim Nideborn, CFO
Q: Are there any planned price changes for HMS or Red Lion products?
A: Annual price updates are typical, with small percentage increases for inflation compensation. Specific plans will be discussed later in the year. - Staffan Dahlstrom, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
