Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stable order intake growth of 6% and net sales increase of 5%, supported by good acquisition pace.
- Strong performance in the MedTech and pharma sectors, particularly in the diabetes area.
- Record high acquisition pace with 12 acquisitions completed in 2024, contributing to a combined annual sales of SEK1.1 billion.
- Solid EBITDA margin of 14.8%, consistent with the previous year, indicating strong cost management.
- Positive organic gross margin development and solid sales growth in Life Science, Process, Energy & Water, and Technology System Solutions.
Negative Points
- Business climate in the infrastructure and construction sector remains dampened, with a slow expected recovery.
- Slightly weaker business climate in central parts of Europe, particularly in the Benelux area.
- Sales to North America and Asia remain volatile, influenced by single projects and companies.
- Organic sales growth did not fully compensate for the increase in expenses, despite improved cost management.
- Higher interest rates have increased finance net by 15% in the quarter and 16% year to date.
Q & A Highlights
Q: Can you elaborate on the sequential margin development in Life Science and its impact on margins?
A: Bo Annvik, President, Chief Executive Officer, Director: It's a broad-based good situation, particularly with production increases and device sales in the Nordic markets. There is still potential in the single-use area, with customers holding high inventories. The Novo Nordisk situation will continue to be strong for several years, with different phases of extensions.
Q: What are the drivers behind the good margin development in Process, Energy, and Water, and are they sustainable?
A: Bo Annvik, President, Chief Executive Officer, Director: The good margin development is broad-based and linked to ongoing projects, including the Green Transformation and defense projects. While the pulp and paper market is currently lower, it is expected to recover. Overall, the situation is sustainable.
Q: How have companies managed costs in the quarter, and what improvements have been seen?
A: Bo Annvik, President, Chief Executive Officer, Director: Indutrade companies are generally cost-conscious. There has been a clear dialogue between business area management and companies to manage costs effectively. Improvements have been seen in the latter part of Q2, and this trend is expected to continue in Q3 and Q4.
Q: Can you provide more details on the cost management and its impact on SG&A expenses?
A: Patrik Johnson, Chief Financial Officer: The cost level has stabilized, with a slight decrease in certain companies facing a softer business climate. The focus is on maintaining a sideways cost level unless demand worsens significantly.
Q: What is the outlook for Life Science volumes and order intake?
A: Bo Annvik, President, Chief Executive Officer, Director: There could be volatility between quarters, but the long-term trend is stable. New orders are being taken, and the backlog is not being drained with every delivery.
Q: What caused the increase in central costs in the quarter?
A: Patrik Johnson, Chief Financial Officer: The increase is mainly due to the absence of earn-out releases seen in the previous year. Central costs include various items such as earn-out releases, potential write-downs, and IS adjustments.
Q: How has the new group structure impacted collaboration and cost efficiency?
A: Bo Annvik, President, Chief Executive Officer, Director: The new structure is in early days, with segment leaders engaging with companies and assessing potential areas for sharing and synergies. The benefits are expected to be more medium-term than short-term.
Q: What is the outlook for the Infrastructure and Construction segment, given the current demand situation?
A: Bo Annvik, President, Chief Executive Officer, Director: The demand is still muted, with no quick bounce back expected in Q3 and Q4. The segment is expected to see more impact in 2025.
Q: How do you see the margins in the Infrastructure and Construction segment performing once demand normalizes?
A: Bo Annvik, President, Chief Executive Officer, Director: The margins are expected to be at 14% in a normal business climate, with potential to go beyond that. The segment includes high-quality companies that should perform well as the market recovers.
Q: Can you quantify how much of the gross margin improvement was due to price hikes versus purchasing gains?
A: Bo Annvik, President, Chief Executive Officer, Director: The improvement is more on the price side than effective purchasing reductions. It is difficult to quantify the exact contribution from each factor.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
