Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Interroll Holding AG (IRRHF, Financial) saw a rebound in product sales in the first half of 2024, partially mitigating the absence of bigger projects.
- The EBIT increased by 4% to CHF29.9 million, driven by favorable raw material prices and high cost discipline.
- The EBITDA margin improved from 15.6% to 16.6%, indicating better operational efficiency.
- The company maintained a strong equity ratio of 73.9%, showcasing financial stability.
- Interroll Holding AG (IRRHF) is well-positioned to meet future demand with innovative product platforms and production capacities.
Negative Points
- Order intake decreased by 5.1% compared to the first half of 2023, with foreign exchange effects having a strong negative impact.
- Sales decreased by 3.5%, with significant declines in the Americas and Asia Pacific regions.
- Operating cash flow dropped significantly to CHF16.2 million from CHF75.2 million a year ago due to an increase in net working capital.
- The Conveyors & Sorters product group saw a 25.5% decline in order intake, reflecting challenges in this segment.
- The company anticipates a slower recovery in the APAC region and expects overall more of the same for the next six months rather than a strong rebound.
Q & A Highlights
Q: My first question is regarding the work-in-progress inventory, which went up significantly against the intuition of the order backlog from big projects. So did you speculate here that it will pick up or is this reflecting your hope for an acceleration?
A: At Interroll, we only produce for order, so we do not produce on stock. You can assume that this is a positive inventory, which soon will then also be invoiced. β Heinz Hossli, CFO
Q: I see it's against my intuition that you experienced lower sales in rollers, while the sales in drives went up. Is that price related or is there another explanation you could share with me?
A: During the supply chain crisis, we lost a lot on Drives, especially on RollerDrive. We could gain back quite a number of customers who are now buying 90%-plus from us and keeping the second source at a very low level. β Heinz Hossli, CFO
Q: In pallet handling, I noticed that you have project business that grows. Is that driven by the smart pallet mover or is it just overall?
A: It's driven by the fact that the comparable period last year was very weak. The current order intake looks very good compared to the previous year, but in fact, it's just an okay order intake. β Heinz Hossli, CFO
Q: Can you say something on the regional and client diversification in pallet handling?
A: The region driving this is EMEA and Americas. It's diversified with various smaller projects, not a big project. β Heinz Hossli, CFO
Q: If you could comment on the discussions with customers and how these are developing at this point specifically, how is the pipeline?
A: We see that the conveyor sort of product group will come back as soon as the overinvestment into e-commerce is absorbed in the market. Big integrators look positive into the future, but we don't see the projects yet. β Heinz Hossli, CFO
Q: Is there anything worth mentioning when it comes to your pricing policy as opposed to competition?
A: Quite a few competitors have increased prices. We have kept most of the prices stable for '24 compared to '23, and we decreased prices for RollerDrive and rollers slightly. β Heinz Hossli, CFO
Q: On the gross profit margin, what is the directional trend?
A: If our outlook comes through, you can expect that the gross margin stays on the same level. When we go back into growth mode, projects with lower margins will have a negative impact, but for the second half year, I don't see this happening. β Heinz Hossli, CFO
Q: Is there any scope for cost cutting or would you say that what you can do, you have done already?
A: We already squeezed the lemon quite a bit last year. We deliberately do not reduce headcount, only temp people. We keep the people and the knowledge onboard. Much more cannot be expected from cost cutting. β Heinz Hossli, CFO
Q: Can you go through the key verticals like airports, warehouse, distribution, food and beverage?
A: The highlight of the first six months is the airport business in EMEA. European airports are investing in new scanning technology. The rest is basically unchanged, with everything related to e-commerce not yet on the same level. β Heinz Hossli, CFO
Q: How should we think about the development of the service business?
A: We will increase a little bit year by year, but this is not what makes the big chunk now. Even if we can increase to 13%-14%, it won't change the overall picture too much. β Heinz Hossli, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
