Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stabilus SE (SIUAF, Financial) reported a 14.4% increase in sales quarter-over-quarter, driven by the consolidation of DESTACO.
- DESTACO generated EUR48.8 million in revenues with a 19.9% EBIT margin, which is in line with expectations.
- The company is seeing positive organic revenue growth in the Asia Pacific region, up 3.2%.
- Stabilus SE (SIUAF) has implemented cost-cutting and efficiency programs across all plants, showing early positive results.
- The company remains confident in achieving its STAR 2030 goals despite challenging market conditions.
Negative Points
- Organic revenue growth in the EMEA region was down by 5.1%, and in the Americas, it was down by 3%.
- The automotive and commercial vehicle sectors experienced softer sales, impacting overall revenue.
- Fixed cost leverage was negatively impacted by volume reductions in the second half of the year.
- The company faced significant labor cost inflation, ranging from 5% to 11% globally.
- Integration costs for DESTACO are expected to increase in the fourth quarter, impacting profitability.
Q & A Highlights
Q: Could you give us more details on the slowdown in the Powerise business in North America? Is it OEM-specific or a broader trend?
A: The slowdown in North America was primarily due to higher inventory levels among major electric vehicle producers, not a reduction in take rates. The demand for electromechanical devices like Powerise and door actuation systems remains strong.
Q: Can you provide more details on inflation and cost recoveries? What have you achieved this year, and how should we think about margins in Q4?
A: We've seen significant labor inflation globally, ranging from 5% to 11% depending on the region. We've countered this with automation and cost recovery negotiations with customers and suppliers. We expect these efforts to materialize in Q4, supporting our guidance of 11.7% to 12.3% EBIT margin.
Q: Could you give more flavor on end-market demand across different industrial business segments?
A: The industrial business is stabilizing, with some segments like construction and agricultural equipment still facing challenges. The solar business is stable but dependent on U.S. election outcomes. DESTACO's diverse portfolio helps mitigate market softness.
Q: Have you lost any market share in the Powerise segment, particularly in China?
A: No, we have not lost any market share. While BYD builds some features internally, we supply to other major Chinese OEMs like Guangzhou Auto, Li Auto, and Geely. Our win rates remain strong, between 35% to 37%.
Q: Could you shed more light on the EUR48 million in DESTACO revenues? Does this include delayed conveyor orders?
A: DESTACO's strong performance was due to its wide product portfolio, which offset any delays in conveyor orders. We expect a stable revenue level for DESTACO in the last quarter.
Q: Should we expect an increase in integration costs for DESTACO in Q4?
A: Yes, integration costs will likely increase to around EUR4 million to EUR5 million in Q4, mainly due to IT integration efforts. This is included in our forecast.
Q: Are there any additional factors that might impact Q4 results?
A: No additional factors are expected beyond the softer volumes and integration costs already discussed. We anticipate stabilization in sales and no further significant impacts.
Q: How do you see the start of the next fiscal year? Will it be back-end loaded like previous years?
A: We expect a more stable start to the next fiscal year based on current GDP and IHS numbers. However, we are still in the midst of our budget planning, so it's too early to provide specific details.
Q: How far along are you with automation and cost-cutting measures?
A: We have completed about 70% to 75% of our automation initiatives, including Cobot systems and automated lines for Powerise. These measures are sustainable and will continue to be rolled out in the coming quarters.
Q: What is the outlook for the industrial business, particularly in the aerospace and distributor segments?
A: The aerospace segment is performing well, and distributor business is normalizing. We expect these segments to contribute positively in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
