Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted EBIT margin increased to 8.5% in Q2 2024, showing improvement year-over-year.
- Net operating cash flow showed a strong increase of more than EUR11 million to a total of EUR43.6 million in Q2.
- Equity ratio improved to 47% at the end of June 2024.
- Water Management business recorded robust sales growth of 6.7% across all regions.
- Step Up efficiency measures are visibly improving margin profiles and operational efficiency.
Negative Points
- Net sales decreased by 5.5% in Q2 2024 compared to the previous year's quarter.
- Sales in the Mobility & New Energy business division fell by 10.7% year-over-year.
- Weak economic environment in the APAC region, particularly in China, impacted sales negatively.
- Adjusted EPS and reported EPS decreased by 12% and 17.5%, respectively, in the first half of 2024.
- Order backlog declined by almost 9% in the first half of 2024, raising concerns about future sales prospects.
Q & A Highlights
Q: Could you explain the reason for the sequential margin improvement in EMEA in H2 and the impact of water-related investments?
A: The margin improvement in EMEA is driven by continuous self-help efforts and operational efficiency measures. Despite economic challenges, particularly in vehicle production, the Water Management business in EMEA has developed well, contributing positively. The expected ramp-up costs for water-related investments are EUR3 million to EUR5 million for the full year.
Q: What are the main reasons for the expected sequential improvement in APAC sales in H2, particularly in Water Management?
A: The improvement is expected due to the recovery of government contracts in India, which were on hold due to elections. The Indian market has shown positive car sales, and we anticipate a rebound in water infrastructure investments in H2.
Q: What caused the sharp decline in APAC margins, and how should we think about margin progression in the second half?
A: The decline in APAC margins is mainly volume-driven. We expect margins to improve with the anticipated increase in sales volume in the second half of the year.
Q: How does the decline in order backlog impact your outlook for the second half of the year?
A: The decline in order backlog is seen positively as it reflects improved delivery performance and reduced safety stock by customers. However, the overall economic situation and transition in the automotive sector may still pose challenges.
Q: What is your outlook for the commercial trucks business in the second half of the year?
A: We expect the commercial trucks business to remain weak overall, with a slight pickup post-summer break due to natural production increases, but no significant improvements are anticipated.
Q: How are personnel costs and temporary workers impacting your financials?
A: Personnel costs have increased due to inflation-related wage hikes. However, we have significantly reduced costs related to temporary workers, saving nearly EUR2 million. This improvement is reflected in other operating expenses.
Q: How are price negotiations with OEMs progressing?
A: Price negotiations are tough but progressing well. We have managed to maintain pricing quality despite inflationary pressures on labor costs. The environment has changed with reduced material cost inflation, but labor cost increases are now a focus.
Q: Which regions and segments are key drivers for the lower end of the sales guidance?
A: The Americas region is performing well and is expected to continue doing so. APAC is challenging, with slight improvements expected in H2. EMEA is expected to be level, with performance dependent on the overall economic situation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
