Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lifco AB (LFCAF, Financial) reported an 8% growth in sales, driven by acquisitions and a minor positive impact from foreign exchange rates.
- EBITDA also grew by 8%, maintaining a stable EBITDA margin of around 24%, consistent with the previous year.
- Operating cash flow increased significantly by 37.5%, indicating strong cash generation capabilities.
- Earnings per share grew by 5%, reflecting improved profitability.
- The company has a robust financial position with a net debt-to-EBITDA ratio of 1.3 times, providing capacity for future acquisitions.
Negative Points
- Organic sales growth was negative at -4% for the first six months, indicating underlying challenges in core operations.
- The demolition and tools segment faced weak market conditions, with a sales decline of 8% in the second quarter and a severe 13% drop in the first six months.
- Higher interest costs led to slightly lower profit before tax, impacting overall profitability.
- The dental field experienced a negative effect from Easter, affecting sales and operational performance.
- The market conditions in Europe, particularly in construction-related sectors, remain tough and uncertain, posing ongoing challenges.
Q & A Highlights
Q: The big sequential margin delta in demolition was surprising. Can you quantify the special order deliveries in Q2 versus Q1?
A: There were some pension levers, but not significant enough to mention in the report. The main effect was that higher-margin companies held up better than lower-margin ones. This can vary between quarters due to delivery schedules.
Q: Can you provide any indications of quotations or differences between quotations and firm orders, especially in the construction-related segments?
A: We don't consolidate quotations at the group level. The construction-related weaker part of our business hasn't changed much since the last call. The market remains tough but not catastrophic. The underlying market sentiment hasn't changed significantly since the end of last year.
Q: Regarding dental, is the mix effect driven purely by prosthetics companies, or is there something else?
A: This quarter saw slightly better deliveries and sales in high-margin areas like manufacturing, software, and prosthetics. However, it's a short period, and we shouldn't draw too many conclusions from one quarter.
Q: On acquisitions, the number seems low, but sales are running at a nice pace. Are these larger acquisitions intentional or coincidental?
A: It's more coincidental. The deals made this year are within our typical range, though slightly higher on average. We haven't changed our approach; we continue to seek the best businesses at reasonable valuations.
Q: On system solutions, you mentioned a bounce back due to the Easter effect. How material is this?
A: The Easter effect is more pronounced in the dental field, where businesses close for a few days. In system solutions, the impact is less significant.
Q: How should we anticipate the impact of an improving construction market on margins, considering the mix effect?
A: Companies doing better now have both construction and other segments. They will benefit from a construction market recovery, but the exact impact is difficult to describe due to operational leverage.
Q: On acquisition strategy, there have been several acquisitions in specific regions. Is this strategic or coincidental?
A: It's somewhat coincidental. We look for companies in many geographies and where we find the most attractive targets. We have increased our capacity slightly each year, leading to better coverage in more geographies.
Q: What is the range of margins for your companies, especially those exposed to construction?
A: The margin range is slightly smaller than described. In normal market conditions, the spread of margins is lower. If the market weakens significantly, margins could be tougher due to volume drops.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
