Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amotiv Ltd (ASX:AOV, Financial) reported a 7.7% overall revenue growth, with nearly 6% coming from organic growth.
- Gross margins expanded, reflecting effective price and currency management.
- Net debt reduced significantly, and the balance sheet was further strengthened.
- Employee engagement and safety scores improved year-over-year, surpassing global averages.
- The company successfully integrated acquisitions and expanded its footprint, doubling its employee base.
Negative Points
- New Zealand market showed significant softness, impacting the four-wheel drive segment.
- Caravan and RV market experienced declines, affecting related revenue streams.
- Higher operating costs were incurred due to growth strategies, including greenfield initiatives and product development.
- The July trading update indicated mixed results, with some segments experiencing slower starts.
- Disc Brakes Australia faced operational challenges, impacting its performance and requiring future optimization.
Q & A Highlights
Q: On the guidance and outlook, given the mixed July trading update, do you expect an improvement over the next 12 months?
A: We expect growth, not just from acquisitions but also organic growth. July is not a great benchmark for the year. We are monitoring the softness in the caravan RV market and New Zealand, but the aftermarket remains resilient, and new vehicle sales are stable.
Q: Can you discuss the gross margin outlook and the impact of hedging and pricing over the next 12 months?
A: We have expanded our gross margin despite choppy times. Freight costs are managed under a consortium contract until June 30 next year. Currency management is in place with 80% hedged at around $0.67. We expect to reprice at the beginning of the next calendar year, with price rises generally around 3-4% in the aftermarket.
Q: What are your thoughts on capital allocation and potential for share buybacks given your strong balance sheet?
A: We will present a capital management framework in the coming months. The balance sheet is a weapon, and we will deploy it with discipline. There are plenty of opportunities for great returns, and we will evaluate bolt-on acquisitions.
Q: Can you provide more details on the greenfield spend and its impact on EBITDA?
A: The net of the $6 million greenfield spend will carry through. We may spend a bit more on Infinitive, but the overall greenfield spend will be consistent with FY '24. The returns from these investments will be seen over the next 24 months.
Q: What is the outlook for the four-wheel drive segment in New Zealand and its impact on EBITDA growth?
A: New Zealand's economy is soft, impacting the four-wheel drive segment. We are downsizing the workforce to reflect current throughput but expect the market to recover over time. The cost base changes will take effect gradually, and we are monitoring the situation closely.
Q: Can you elaborate on the impact of lower orders from a major reseller on the LPE segment?
A: The impact is nuanced, with different levels of revenue tied to divisions. We expect the situation to improve over time, and we are monitoring the broader economic conditions.
Q: What are your expectations for four-wheel drive new car sales in Australia for FY '25?
A: We expect new vehicle sales to remain stable. Dealer inventories are lifting, and OEMs may incentivize the market. Fitment rates are not changing, and we expect continued resilience in the market.
Q: Can you provide more details on the offshore revenue growth in the Lighting, Power, and Electrical segment?
A: The offshore revenue growth is primarily from Vision X in the US and Rindab. The greenfield initiatives are foundational, and we expect modest revenue growth from these efforts.
Q: What is the outlook for the Powertrain and Undercar segment, considering the greenfield investment?
A: The segment is resilient with good margin management. We expect continued growth in unit volume and deliberate pricing to manage cost inflation. The greenfield investment will support long-term growth.
Q: Can you explain the attraction of Milford Industries and your plans for future acquisitions?
A: Milford Industries fits well with our functional accessories and OEM relationships. We will continue to pursue attractive bolt-ons in the four-wheel drive and lighting, power, and electrical divisions, both onshore and offshore.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
