Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nolato AB (LTS:0OA9, Financial) reported a strong cash flow from operating activities amounting to SEK434 million.
- The company achieved an operating profit of SEK245 million, reflecting a 24% increase from the previous year.
- The EBITDA margin improved to 10.0% compared to 8.0% last year.
- The medical solutions segment, which is the largest part of the group, maintained its sales and saw growth in the in vitro diagnostic (IVD) area.
- Nolato AB (LTS:0OA9) has a solid financial position with net financial liabilities of just above SEK1.1 billion and an adjusted debt ratio of 0.8 times.
Negative Points
- Overall sales decreased by approximately 2% when adjusted for currency and acquisitions.
- The VHP effect, which has been a drag on performance, will continue to impact the next quarter.
- The pharmaceutical packaging segment experienced lower volumes due to inventory adjustments and geopolitical effects.
- The engineered solutions segment saw a 4% decrease in sales, primarily due to lower volumes in consumer electronics.
- The company anticipates a bigger vacation effect in Q3, which could negatively impact sales.
Q & A Highlights
Highlights from Nolato AB's Q2 2024 Earnings Call
Q: What is the underlying reason for the bigger vacation effect into Q3 this year compared to recent years?
A: It's a general observation based on history. If the business cycle is weaker, some customers tend to wait longer to close down and move products. - Christer Wahlquist, CEO
Q: Are the improved margins in both segments sustainable, or were there unusual factors affecting them this quarter?
A: There are no unusual factors affecting the margins this quarter. Under current circumstances, with sales and utilization levels as they are, the margins should be sustainable. - Per-Ola Holmstrom, CFO
Q: Do you agree with Trelleborg's assessment that the protracted inventory adjustment phase in the medical segment has eased?
A: We operate in different market segments, but we have seen stock changes in different segments at different times. We saw it in pharma packaging but eased in other areas. - Christer Wahlquist, CEO
Q: Can you provide an outlook for the EMC or materials segment, especially considering weak demand in telecom?
A: We will focus on growth in new areas like automotive. Telecom demand is hard to predict, and following major players in that area might provide better insights. - Christer Wahlquist, CEO
Q: How should we interpret the guidance regarding the vacation effects in Q3?
A: The guidance is mostly around sales numbers. Personnel-related costs are reserved earlier in the year, so the comment is primarily about sales. - Per-Ola Holmstrom, CFO
Q: Is the specific customer situation in IVD, where a middleman was cut out, finished?
A: The situation has developed as anticipated. We have gained business with large OEMs and decreased sales to the middleman. - Christer Wahlquist, CEO
Q: Can you comment on the quarter-over-quarter development in IVD?
A: The development is similar to last year, with no big effect between quarters. It's not a clear trend going forward. - Per-Ola Holmstrom, CFO
Q: Are the VHP effects completely phased out, or do you still produce some volumes?
A: We still have some low volumes towards that customer, which will continue on a low level going forward. - Christer Wahlquist, CEO
Q: How much of the margin improvement in the medical side is driven by mix versus internal cost work?
A: Most of the improvement comes from cost improvements and other measures rather than mix effects. - Per-Ola Holmstrom, CFO
Q: Can you get back to organic growth in the medical segment in the second half of the year?
A: Our long-term targets for medical remain. The large new program we are addressing takes some energy out of other areas in the short term. - Christer Wahlquist, CEO
Q: What is the outlook for demand in the engineered segment, particularly in automotive?
A: There might be a stronger seasonal effect during vacation time if automotive players have a slowdown and use longer vacation times. - Christer Wahlquist, CEO
Q: Is it fair to assume that EMC will accelerate its organic growth pace, or will telecom hamper it in the second half of the year?
A: The development of telecom is uncertain, but other segments within EMC are growing. We are also coming to lower comparison quarters for telecom. - Christer Wahlquist, CEO
Q: Can you update us on the organic growth pace during Q2 in the former industrial solution segment?
A: Excluding the VHP effect, engineered solutions saw roughly 5% growth between quarters. - Per-Ola Holmstrom, CFO
Q: Will the slower number of project starts recently hit you in the short term or mid-to-long term?
A: We have a good pipeline of projects. The hesitance on starting new projects is short-term and likely won't affect growth rates going forward. - Christer Wahlquist, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
