- Organic Growth: 5.3% in the segment, 3.8% for the whole group.
- New Contract Value: EUR317 million, compared to EUR164 million in the previous year.
- Order Book Value: Increased to EUR1.3 billion from EUR1.2 billion.
- Profit Improvement: EUR2 million improvement in the second quarter.
- Net Working Capital: Improved to minus EUR54 million.
- Gross Profit Year-to-Date: Increased by 40%, from EUR29 million to over EUR40 million.
- New Business Contract Value: EUR14.6 million, compared to EUR4 million a year ago.
- Adjusted EBITDA: Improved by EUR2 million.
- Return on Capital Employed: Improved from negative 11.7% to positive 14.3%.
- Divestment Impact: Negative EUR23.1 million from the divestment of Poland.
- Net Sales in Finland: Increased by 8.7% in the second quarter, 3.6% higher in the first half compared to the previous year.
- Adjusted EBITDA in Finland: Improved by EUR1.5 million to EUR2.4 million.
- Net Sales in Sweden: Remained stable compared to the previous year.
- Adjusted EBITDA in Sweden: Slightly higher than the previous year, at EUR1 million.
- Net Sales in Norway: Declined by 2.5% in the second quarter, more than 11% lower in the first half compared to the previous year.
- EBITDA in Norway: Negative EUR1 million, EUR200,000 lower than the previous year.
- Net Sales in Denmark: Grew by 17.9% in the second quarter compared to the previous year.
- Profitability in Denmark: EBITDA bouncing back to 4.6%.
- Net Debt: Decreased from EUR141.6 million to EUR127.9 million.
- Interest-Bearing Debt: Decreased from EUR161.8 million to EUR141.6 million.
- Net Working Capital Development: Improved from negative EUR2.4 million to negative EUR54.3 million.
- New Business Revenue: EUR8.5 million in the second quarter, compared to EUR3.5 million in the first quarter.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eltel AB (FRA:E5E, Financial) reported a solid organic growth of 5.3% in the segment and 3.8% for the whole group, aligning with their targets.
- The company secured a significant contract valued at EUR 317 million, increasing their order book value to EUR 1.3 billion.
- Gross profit year-to-date increased by 40%, from roughly EUR 29 million to over EUR 40 million.
- Cash flow year-to-date has improved across all segments, and the liquidity situation is significantly better than a year ago.
- The divestment of the high-voltage Poland business was finalized, reducing risk and allowing stronger focus on core markets in the Nordics.
Negative Points
- There was a decline in volume in Norway, negatively impacting both the top line and bottom line.
- The communication market in Norway was slower than anticipated, leading to a negative EBITDA of EUR 1 million for the second quarter.
- The updated market regulation in Finland has created hesitation and reduced investment from power distributors.
- The divestment of the high-voltage Poland business resulted in a negative EUR 23.1 million impact on the financial results.
- The shift from communication to power projects incurs additional costs and has a temporary negative impact on profitability.
Q & A Highlights
Q: Do you expect any improvement in the communications business towards the end of the year?
A: Yes, we believe that the swap of 5G from 3G and 4G has been done based on the existing footprint. Now, more greenfield sites need to be built, which means more work for us. Additionally, we hear from some operators that they need to increase investment on the fiber side. Public infrastructure projects, such as private 5G networks for hospitals and defense, are also growing rapidly. However, it is not yet proven if this will fully compensate for the decline from traditional telecom operators.
Q: Are there any mix effects to consider with the shift in demand from communications to power?
A: Every time there is a shift in volume, there is a cost to adjust. For example, in Denmark, the margin was softer in the second quarter due to the shift from communication to power. However, we do not see any reason why margins in power would be lower than in communication, and we see potential for higher margins in new business areas.
Q: How much in cost savings would scaling back operations in Norway lead to, and what is the timeline?
A: We do not have a specific number today, but we believe that more adjustments will be seen later this year and early next year. This is due to the general investment level and the new contract with Telenor, where we have a smaller footprint.
Q: Can you share the EBITDA contribution from the divested high-voltage business in Poland for Q2?
A: Poland was included until the end of May, so there is only one month without Poland. We do not have the specific number for Poland's contribution to earnings in this quarter.
Q: Do you have the capacity to do more power projects, and what impact does the shift from communication to power have on profitability?
A: We see the shift as positive. The skills and people we have can contribute to the power segment, even though they have traditionally worked on the telco side. There is a cost when we train and help our people to get skilled in new areas, but it is not significant. Profitability-wise, there is a bit higher cost during the shift, but we have the capacity and capabilities to handle more power projects.
Q: What is the impact of the updated market regulation in Finland on power distribution sales volumes?
A: We do not expect this to be a long-term effect. The regulation is set for four years, with a checkpoint after two years. The need in the market is strong, and the infrastructure in energy distribution has to be built out. We expect the volume to come back.
Q: Are there any short-term opportunities in power that could mitigate the negative effects of reduced volumes in communication in Norway?
A: We do not have any setup for the Power segment in Norway today. We will focus on communication with a broadening customer base and new businesses like EV mobility and solar initiatives.
Q: Are there any financial actions still to be taken regarding the divestment of Poland?
A: The divestment is complete. The financial effect is a negative cash flow impact of EUR4 million. The P&L effect of EUR23.1 million was taken in the first quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
