Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sdiptech AB (SDTHF, Financial) reported a strong organic sales growth of 9% excluding currency effects.
- The company achieved a total sales growth of 19%, reaching almost SEK1.4 billion in the quarter.
- Adjusted EBITDA increased by 13%, with SEK260 million in adjusted EBITDA for the quarter.
- Strong cash flow from operations, with almost SEK200 million generated, improving the company's financial position.
- The company has a diversified portfolio with no single business unit contributing more than 10% of total profit, reducing dependency on any one unit.
Negative Points
- The company's profit margin was lower than last year, at 18.7%, partly due to a sales mix shift and restructuring costs.
- The elevator business in Central Europe continues to face challenges, with a negative performance of minus SEK7 million in the quarter.
- Higher interest costs and taxes have led to a decrease in profit after tax and earnings per share compared to the same quarter last year.
- CapEx was higher than usual in the quarter, at 4.6% of sales, which may impact short-term cash flow.
- The company faces tough comparisons for Q3 due to strong performance in the same quarter last year, which may affect future growth metrics.
Q & A Highlights
Q: Could you provide comments on the seasonality of Q3 versus Q2, particularly on sales and earnings?
A: Historically, Q3 tends to be weaker due to vacation periods, resulting in lower sales and profit compared to Q2. However, Q3 can sometimes have adjusted EBITDA on par or slightly higher than Q2. This year, we had a strong Q2, so Q3 might see a bit of a dip.
Q: Do you see any further potential to release more from working capital in the coming quarters?
A: The work on improving working capital is ongoing, particularly in inventory management and accounts receivables. We aim to continue these efforts, which should reflect positively in future numbers.
Q: The CapEx was higher than usual this quarter. Was there anything special driving this increase?
A: The higher CapEx was not due to any special projects. It aligns with our net depreciation, indicating regular replacement and maintenance of assets.
Q: Do you see any potential to improve the current debt structure and reduce interest expenses?
A: We are exploring options to optimize our debt structure. Our bond is trading at lower rates than what we currently pay, and we have additional funding options if needed. However, our primary focus remains on reducing overall debt levels.
Q: Should we expect a gradual improvement in the elevator business during the second half of the year?
A: The restructuring of the elevator business has taken longer than expected, involving significant layoffs and cost adjustments. We aim to achieve profitability by year-end, but it will be a gradual process.
Q: Could you provide an update on the order situation?
A: The order situation remains stable compared to the previous quarter. Transparency varies across business units, with some having short-term orders and others long-term.
Q: How do you view the impact of the new UK government on your business units?
A: The new UK government is more supportive of electrification and infrastructure development, which should positively impact our business units involved in these areas. However, it is too early to see concrete effects.
Q: Do you foresee any challenges in scaling up M&A activities with the current pricing strategy?
A: We believe we are now on equal terms with sellers, and the reduced price levels should not pose a significant obstacle. We remain confident in our ability to scale up M&A activities.
Q: Are there any other subsidiaries you are considering divesting?
A: We continuously evaluate our portfolio, but we do not have immediate plans for further divestments. Our focus is on improving the performance of our existing companies, including the elevator business.
Q: How is your pricing strategy adapting to the current market environment?
A: We have not experienced significant pushback from customers on price increases. We continue to adjust prices as needed and maintain a strong pricing position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
