Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 2% despite challenging market conditions.
- Gross margin improved by 1% to reach 47%, indicating better cost management.
- EBIT increased by 13%, delivering SEK119 million this quarter.
- Strong cash flow from operating activities, ending with SEK194 million.
- 18 consecutive quarters of EBITDA increase, with a 13% rise this quarter.
Negative Points
- Organic growth was negative at -7%, reflecting underlying market challenges.
- Some divisions, like Core Solutions, experienced weaker demand affecting revenue and EBITA.
- Safety Technologies division is only on par with last year, showing no significant improvement yet.
- Inventory turnover has not yet returned to pre-COVID levels, indicating inefficiencies.
- Continued weak demand from industrial customers, particularly in the Nordic region.
Q & A Highlights
Q: In this quarter and the last one, you were expecting a stable market and hoping for a pickup in the autumn. Have you gotten more or less confident in that sort of pickup?
A: If you look at macro indicators, there are signals that the buying index for the industry is picking up and interest rates are coming down. However, we haven't seen this reflected in our company orders and deliveries this quarter. Some customers perceive the market is starting to pick up, but it's not yet evident in our figures. - Magnus Soderlind, CEO
Q: On the weaker demand from some of your industrial customers, is this continued weakness broad-based or relatively concentrated?
A: Generally, it has stabilized but at a lower level. The difference this quarter is the core solution and the [SV] which had weaker demand in Q4 and this has continued into this quarter. - Magnus Soderlind, CEO
Q: On safety technology, where you highlight a slight improvement, is this more related to efficiency gains or slight improvements in demand?
A: It's a combination of efficiency measures, slight pickup in demand from some companies, and contributions from acquisitions made a year ago. We expect further acquisitions in this division to support growth and profit development. - Magnus Soderlind, CEO
Q: Regarding the acquisition environment, have you started to see an uptick in valuation multiples?
A: There are some indications that valuations are picking up slightly in the Scandinavian market. However, the UK market remains competitive with many good industrial companies. We don't see a clear pattern yet, but it will be interesting to observe over the next quarters. - Magnus Soderlind, CEO
Q: Can you give us some flavor on the demand between different regions like Sweden, Finland, UK, and Norway?
A: The weakest market is the construction sector in Finland, followed by a decline in the industrial sector in Finland and Sweden. Norway is relatively flat, and the construction sector in Sweden is weaker but not as weak as in Finland. - Magnus Soderlind, CEO
Q: On the minus 7% organic growth, how much of that impact came from phasing out high volume, low margin products?
A: A significant portion of the decline is related to [Quida lebena], with part of it due to product phase-out and part due to a weaker underlying market. This has positively affected the gross margin at the group level. - Magnus Soderlind, CEO
Q: What are the growth opportunities for Luna and [Quinta] over time?
A: Both companies are facing weaker markets but are taking efficiency measures and improving product mixes. Luna has a monopoly situation as a wholesaler in Norway and limited competition in Sweden, providing strong opportunities to leverage over time. - Magnus Soderlind, CEO
Q: Which segments do you see having the highest potential for a pickup in demand in the autumn?
A: The biggest ones are [Quinta, alumina, and SVR]. If the construction sector picks up, it will positively affect SVR. Luna and Quinta are more focused on the Nordic region and exposed to both industrial and construction sectors. Other companies are more niche market-oriented. - Magnus Soderlind, CEO
Q: Should we expect that internal work on margin improvements is mostly done and that acquisitions will drive future improvements?
A: We still have some work to be done, but the low-hanging fruit is done. Future improvements will be more acquisition-driven, although there are still some opportunities for organic improvement. - Magnus Soderlind, CEO
Q: What's your view on your market shares in this market environment?
A: Overall, we have gained some market share. We haven't lost any big customers and have gained new ones, such as [Spraylat] reentering [Bayer]. - Magnus Soderlind, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
