Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Addtech AB (STU:AZZ2, Financial) reported a solid net sales growth of 7%, with 2% organic growth.
- EBITDA increased by 19% in the quarter, achieving a satisfying margin of 15.3%.
- The company continued to strengthen its profitability and improve its product mix.
- Cash flow remained at very good levels, with profitable working capital surpassing a new record level of 70%.
- Addtech AB (STU:AZZ2) maintained a high pace of acquisitions, adding SEK860 million in turnover with good profitability.
Negative Points
- Customer activity showed variations between and within segments, indicating some instability.
- The MedTech segment experienced a slight drop due to softer demand and tough year-on-year comparisons.
- Data, telecom, and building installation sectors remained weak, affecting overall performance.
- The market for new projects in the construction sector is still on hold due to high interest rates and weak construction markets.
- Some hesitation in CapEx related investment decisions due to the uncertain economic situation.
Q & A Highlights
Highlights of Addtech AB (STU:AZZ2) Q1 2025 Earnings Call
Q: Are there any Easter effects or other extraordinary dynamics that influenced the organic growth in Q1?
A: There might be some Easter effect spillover from the weaker fourth quarter. Additionally, strong deliveries in process technology, particularly to a couple of customers in the pharma sector, provided a boost. However, this should not be extrapolated for future quarters. - Niklas Stenberg, CEO
Q: On acquiring more profitable companies, do you see any multiple differences compared to lower-margin companies?
A: No, the multiples remain pretty much the same. This is due to our relationship-based acquisition process and the fact that we are still acquiring relatively small companies. - Niklas Stenberg, CEO
Q: How much of the positive impact in electrification comes from a better market versus customers returning to normal investment levels?
A: It's a combination of both factors, but it's difficult to quantify precisely. - Niklas Stenberg, CEO
Q: Can you provide more color on the strong sales towards data halls in the energy segment?
A: Data halls represent roughly 2-3% of our total sales. The largest part of our energy segment is still transmission and distribution. - Niklas Stenberg, CEO
Q: On process technology, excluding the large deliveries, would you say the underlying market is flattish?
A: Yes, excluding the large deliveries, the underlying market is relatively flattish. We see a solid situation overall with good order books, but demand is kind of flattish with variations. - Niklas Stenberg, CEO
Q: Can you provide more details on the one-off projects in process technology?
A: One project was related to the pharma sector with strong deliveries from previous orders, and another was related to an insurance situation for a customer in a different sector. We see structural growth in biotech and pharma, but the strong deliveries this quarter were more exceptional. - Niklas Stenberg, CEO
Q: How much of the year-over-year EBITDA growth was related to acquisitions versus organic growth?
A: It's roughly a 50-50 split between acquisitions and organic growth. - Niklas Stenberg, CEO
Q: Why are receivables up despite reducing inventories?
A: Receivables are up due to strong invoicing at the beginning of the quarter. The difference compared to last year is due to different invoicing patterns. - Malin Enarson, CFO
Q: Have the recently acquired companies had very high margins?
A: Yes, the acquisitions have contributed strong margins, but it's broad-based across multiple acquisitions rather than driven by one or two companies. - Niklas Stenberg, CEO
Q: Is the pricing power still a notable portion of the growth?
A: The growth is more volume-driven now. The pricing power is more about maintaining current pricing levels rather than significant price increases. - Niklas Stenberg, CEO and Malin Enarson, CFO
Q: What drives the growth in the "other" segment?
A: The main driver in the "other" segment is the defense sector, which accounts for around 3% of our total sales. - Niklas Stenberg, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
