Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Resilient margin development despite reduced sales levels.
- Improvement in cash flow, although still not fully satisfactory.
- Continued good cost management and finding synergies in aggregates area.
- Positive outlook for decision-making improvement in H2, especially in the minerals segment.
- Strong pipeline in minerals segment, with delayed customer decision-making expected to improve.
Negative Points
- Continued headwinds in orders for both segments, impacting sales.
- Significant decline in top line orders and sales, with orders down 14% and sales down 13%.
- North American Mobile Equipment market slowdown, particularly in destocking of dealer stocks.
- Lower order intake in minerals segment, with equipment orders down 34% and services down 6%.
- Challenges in achieving sustainability targets, particularly in logistics with a minus 8% reduction against a target of minus 20% by 2025.
Q & A Highlights
Q: What underpins your comment that the speed of decision-making will improve in H2?
A: We have a few major packages in our mineral sites heading towards a decision by our customers. This is why we see some light there. However, there is no wider improvement in decision-making speed, but specific packages could be concluded within this year. Regarding aggregates, we expect sales to end up below last year's numbers due to continued weakness.
Q: Was the weak service business in June a timing issue, and should we see improvement in July?
A: June was indeed weaker, and we believe it was more of a timing issue. We expect the aftermarket side in the Minerals segment to perform better in the coming months. The lower sales were due to project-type services not being completed by month-end, impacting revenue recognition.
Q: Do you expect decision-making to improve in H2 due to technical phasing or improved customer conversations?
A: Discussions are more positive, especially with copper customers. We are in advanced stages of discussions with several customers, and decisions are expected within this year. However, we do not comment on individual customer cases.
Q: What are you seeing on pricing in aggregates, particularly in North America?
A: We do not comment on specific price developments, but market conditions have changed, and supply side has eased off. Our focus is on managing margins rather than individual sales prices.
Q: Why are your minerals equipment sales going down despite a healthy backlog?
A: The composition of the backlog includes shorter cycle minerals equipment parts, leading to lower sales. We had indicated earlier that the second quarter would be challenging due to this composition. We expect a better balance in the second half.
Q: How much sequential improvement do you expect in minerals equipment sales in the second half compared to Q2?
A: We do not provide quarterly sales guidance, but we expect a better balance in the second half due to the backlog composition.
Q: What has caused the weakness in the North American aggregates market, and how long will destocking continue?
A: The North American mobile equipment market slowed down dramatically towards the end of Q2. This was likely due to expectations of interest rates coming down, which have not materialized. We see robust demand in other regions like South America and India.
Q: What is behind the record high gross margin this quarter?
A: The improvement is due to a favorable sales mix, particularly a higher share of aftermarket sales, and our focus on cost and price management. Execution in projects and overall cost management have also contributed.
Q: What visibility do you have that working capital will improve in the second half?
A: We have clear focused actions on inventories across all businesses. We follow these actions on a granular level, giving us realistic targets for improving inventories in the second half.
Q: Can you comment on the scale of the service business and its composition?
A: Our consumables business is closer to EUR1 billion in sales, with the remaining part of the service business making up the rest. We do not provide a detailed breakdown.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
