Release Date: July 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Western Europe profitability reached almost an all-time high at 10.5%.
- Operating cash flow was strong at SEK154 million.
- Inventory levels have declined significantly, reaching a two-year low.
- Expansion plans for the Torsby factory are expected to facilitate over 100% growth.
- The company has a strong balance sheet with an equity ratio of 49%.
Negative Points
- Sales were disappointing, with a 6% decline and 10% organic decline.
- Communication segment sales were down 20% for the first half and 27% in the second quarter.
- China's performance was weak, with a 30% decline in sales.
- Greentech segment continued to decline, down about 20% so far this year.
- The company had to lower its guidance for the year to SEK4.1 billion to SEK4.4 billion.
Q & A Highlights
Q: Given the lower guidance, how do you view Q3 in terms of sales and margins?
A: We expect Q3 sales to be lower than Q2 due to normal seasonality, particularly the impact of vacations. However, we aim to maintain margins at similar levels to Q2. (Johannes Lind-Widestam, CEO)
Q: Can you provide an indication of the order intake compared to sales levels?
A: The order intake is well-aligned with our sales. Although we don't measure it precisely, our gut feeling is that the order intake balances our sales fairly well at the moment. (Johannes Lind-Widestam, CEO)
Q: With strong cash flow in Q2, should we expect this trend to continue?
A: Yes, we expect strong cash flow in Q3 as well, driven by reduced inventory levels and normal sales conversion into cash. (Johannes Lind-Widestam, CEO)
Q: How is the M&A evaluation progressing?
A: We are constantly looking at M&A opportunities, but there is a gap between our price expectations and those of sellers. We are selective and cautious in our approach. (Johannes Lind-Widestam, CEO)
Q: What are your expectations for gross margin improvement?
A: While we expect the gross margin to remain stable or slightly improve, higher volumes will likely lead to better EBIT profit increases rather than significant gross margin changes. (Johannes Lind-Widestam, CEO)
Q: Is it reasonable to expect strong growth in 2025 to meet long-term targets?
A: Yes, we expect strong growth in 2025 and onwards, driven by underlying market demand and recovery from destocking activities. (Johannes Lind-Widestam, CEO)
Q: How has reduced spot market purchases impacted organic growth?
A: Reduced purchase prices have impacted our numbers, leading to lower material costs in sales. This has affected our organic growth figures. (Johannes Lind-Widestam, CEO)
Q: What is your view on the long-term prospects of the Chinese factory market?
A: Despite current weaknesses, we see China as a significant production market. We are adjusting our customer portfolio to align with market trends and maintain efficiency. (Johannes Lind-Widestam, CEO)
Q: What are your inventory levels now compared to a year ago, and are they in line with targets?
A: Inventory levels have reduced by about 25% from SEK1.4 billion to SEK1.1 billion. We aim to reduce it by another 10-15% to meet our turnover targets. (Johannes Lind-Widestam, CEO)
Q: Are there any efficiency gains from AI and machine learning in your new investments?
A: Yes, we are leveraging AI and machine learning for efficiency gains in modern equipment, automated warehouses, and production processes. (Johannes Lind-Widestam, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
