Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EBITDA increased despite a 10% organic decline in net sales.
- Strong order intake, particularly in the construction segment with a 72% increase.
- Cash flow was robust with a cash conversion rate of 127%.
- Technical consultancy companies and industry product solutions showed strong development.
- Return on capital employed and return on invested capital both improved.
Negative Points
- Net sales decreased by 9% overall, with a 10% organic decline.
- Plantasjen had a very weak quarter, significantly impacting group results.
- The construction market remains weak, affecting overall sales.
- The CRO market, especially for biotech companies, has been weak.
- Inventory levels, while reduced, still require further management and reduction efforts.
Q & A Highlights
Q: The construction segment's margin increased significantly despite lower sales. Can you provide details on how this was achieved and what to expect going forward?
A: Jonas Wiström, President, CEO, & Director: HENT, the largest company in this segment, improved their processes and business systems. We focus on the public sector, selecting high-quality projects. Additionally, our advanced IT system aids performance. While we can't promise future results, the preconditions look very good.
Q: Can you provide an update on the Expin situation?
A: Jonas Wiström, President, CEO, & Director: All claims are now submitted, and we know the figures back to 2021. Our focus is now on making Expin Group profitable. Despite Expin's challenges, the infrastructure segment performed well this quarter.
Q: Regarding the cost savings program in Plantasjen, did it have full effect in the quarter, and can we expect further effects?
A: Jonas Wiström, President, CEO, & Director: We saved SEK78 million in the quarter, in line with the plan. More savings are expected in Q3 and Q4. The cost program will continue, along with other initiatives to improve sustainability.
Q: Have you noticed any differences in interest for assets you may want to sell due to falling inflation and lower interest rates?
A: Jonas Wiström, President, CEO, & Director: We see signs of improvement, but we are not back to the previous favorable conditions. We need to wait a bit longer and hope for no further negative political developments.
Q: Inventories are down almost 20% year-over-year, mainly driven by Plantasjen and Diab. Are these normal levels, and should we expect further declines in Q3?
A: Jonas Agrup, CFO & IR: Plantasjen's inventory levels were down SEK200 million compared to last year, and Diab's were down over SEK100 million. The inventory reduction program will continue, and we expect further declines by year-end.
Q: Can you give a sense of how much of the order backlog will be realized in 2024 and 2025?
A: Jonas Wiström, President, CEO, & Director: Most of the orders reported in Q2 and early Q3 will be delivered from 2025 onwards.
Q: What drove the increase in EBITDA margin in industrial services despite the net sales decline?
A: Jonas Wiström, President, CEO, & Director: The positive effect on the daily gross margin from pricing and the utilization rate contributed to the increase. This is an ongoing focus for us.
Q: How much was the positive calendar effect in the quarter, especially for consultants?
A: Jonas Agrup, CFO & IR: The positive calendar effect was around SEK13 million.
Q: The margin in construction services is a highlight. Is there anything one-off in nature, or is this representative of the segment's performance?
A: Jonas Agrup, CFO & IR: There were no one-offs in the quarter. The solid project portfolios suggest good performance going forward.
Q: The top line looks weak across all business areas. Is this worse than anticipated?
A: Jonas Wiström, President, CEO, & Director: The top line is down mainly due to construction and Plantasjen. Despite this, we are not shocked by the numbers and are relatively happy with the quarter's performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
