Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NCAB Group AB (STU:XB1, Financial) maintained a healthy gross margin of 38.5%, up from 36.4% last year.
- The company secured four new acquisitions, expanding its footprint in Belgium, Switzerland, Austria, and Italy.
- Order intake in North America and East regions showed positive growth, with notable large projects in North America.
- The company has a strong operating cash flow of SEK101 million, despite a decrease from SEK152 million last year.
- NCAB Group AB (STU:XB1) added an extra credit facility of SEK500 million to support further M&A activities.
Negative Points
- Net sales decreased by 12% year-over-year to SEK935 million, with an organic decline of 15%.
- The European market, especially Germany, showed weak demand, significantly impacting overall performance.
- EBITA margin dropped to 12.9% due to lower sales and nonrecurring costs.
- The company faced a 20% decrease in net sales in Europe, with a comparable unit decrease of 22% in SEK and 23% in USD.
- Implementation of a new IT system and a biyearly employee conference resulted in higher one-time costs, impacting EBITA.
Q & A Highlights
NCAB Group AB (STU:XB1) Q2 2024 Earnings Call Highlights
Q: Europe has shown weak performance with a book-to-bill ratio of 0.89. Can you elaborate on the sequential trends and the impact of Germany's performance?
A: There has been some sequential deterioration from Q1 to Q2, with Germany being the main driver of the decline. The general industry in Germany is quite soft, impacting the overall performance in Europe. Other markets in Europe are performing slightly better, but the majority of the drop in order intake is from German customers. β Peter Kruk, CEO and Anders Forsen, CFO
Q: Can you clarify the impact of destocking on your performance in Q2?
A: Destocking is nearing an end, but the negative economic turn in Germany during Q2 has overshadowed the positive effects of reduced destocking. The overall demand situation in Germany has had a significant impact. β Peter Kruk, CEO
Q: How have the recent increases in freight costs affected your financials in Q2?
A: Most of the increased freight costs have been managed and passed on to customers. There might be a small lag, but it is not material to this report. β Anders Forsen, CFO
Q: Can you provide details on the one-off costs in Q2, particularly the SEK13 million for the biyearly conference?
A: The one-off costs for the quarter are around SEK17 million, with the IT costs impacting the Nordics more and the conference costs evenly spread across regions. β Anders Forsen, CFO
Q: When did you notice the inflection point to weaker demand in Europe during Q2?
A: There was no clear trend shift during the quarter, but a gradual weakening was observed. The expected stable or slightly improving demand did not materialize as anticipated. β Peter Kruk, CEO
Q: Are you seeing any bankruptcies among your PCB manufacturers due to the current market conditions?
A: No, none of our factories have been impacted by bankruptcies. The pace of bankruptcies has decreased, and we have not seen any issues with our suppliers. β Peter Kruk, CEO and Anders Forsen, CFO
Q: Is there a link between the increased M&A activity in Europe and the weaker demand?
A: The pickup in M&A activity is not directly linked to the current weaker demand. Discussions are often long-term, and the trend shifted when the market slowed down from the fast growth seen in '21 and '22. β Anders Forsen, CFO
Q: Will the acquisition of DVS Global have an earnings impact in Q3?
A: The acquisition will not impact Q3 earnings as it will close at the end of the quarter. We expect a positive impact in Q4 and beyond. β Anders Forsen, CFO
Q: How is the progress on acquisitions in Asia, particularly in Southeast Asia and Japan?
A: Progress is ongoing, with more companies being added to our list. The market in Asia is different, but we are making positive strides in identifying potential targets. β Anders Forsen, CFO
Q: What is the potential for the defense segment in Europe, and when do you expect it to impact orders?
A: We have an ongoing presence in the defense sector in Scandinavia and are expanding to Europe. This is a longer process, and we do not expect significant short-term impacts on orders. The defense segment currently accounts for around 5% of sales. β Peter Kruk, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
