Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NIBE Industrier AB (NDRBF, Financial) has implemented an internal action program to improve efficiency and reduce costs, which is expected to show results in the second half of the year.
- The company has seen slight improvements in invoice sales and operating margins, indicating some positive trends.
- NIBE Industrier AB (NDRBF) is optimistic about the future, expecting gradual market improvement and a return to normal operating margins by 2025.
- The company has maintained a strong cash position with unappropriated liquid assets of SEK 4.6 billion.
- Positive signs are emerging from the automotive and semiconductor industries, which could benefit NIBE Industrier AB (NDRBF)'s elements segment.
Negative Points
- The heat pump industry has been significantly impacted by high inventory levels and low production, particularly in Germany.
- High interest rates and low new construction activity continue to pose challenges for the company's climate solutions segment.
- The stove business has experienced a significant drop in demand, leading to a loss in the second quarter.
- NIBE Industrier AB (NDRBF) has had to let go of many employees, which has been a tough but necessary decision.
- The company's working capital remains high, which is a concern for the CFO and indicates inefficiencies that need to be addressed.
Q & A Highlights
Q: Can you provide more details about the pricing landscape for thermals and air water pumps? Have you experienced any tightening pricing sentiment in your major geographies, and have you made any price adjustments?
A: We have observed price decreases primarily due to inventory adjustments in distribution chains, but manufacturers, including us, have not significantly lowered prices. We maintain our premium product positioning and are observant of market price movements.
Q: Can you help us understand the volume development month by month during the quarter and possibly entering July and August?
A: The market dropped significantly in the initial part of the year, not representing actual end consumer demand. The destocking process started at the end of 2023, and we expect the second half of the year to show improvement as inventory levels normalize and interest rates potentially decrease.
Q: What gives you confidence in the improvement of the inventory situation, and can you provide examples of countries where you see this improvement?
A: Germany remains an exception due to overstocking based on government signals. However, in other major markets, inventory levels have diminished to more acceptable levels. For instance, in Sweden, inventory levels have normalized.
Q: Can you elaborate on the structural cost reduction measures within climate solutions, beyond reducing headcount?
A: Investments are focused on modernization, automation, and environmental friendliness. We are also working on joint product development and procurement within the group to improve efficiency. The aim is to be more rational and collaborative in our operations.
Q: Can you provide any indication of the underlying heat pump demand now that inventory levels are moving towards more acceptable levels?
A: It's challenging to provide precise figures, but the actual end consumer demand is higher than what production levels have indicated due to the destocking process. We expect a sequential improvement in demand as inventory levels normalize.
Q: When will we start to see material benefits from the cost savings actions, given the redundancy of 340 employees announced in March?
A: The impact of the cost savings program will be more visible in the second half of the year. The program is being implemented in a balanced and civilized manner, and we aim to achieve the full SEK750 million improvement by the end of the year.
Q: Does the ambition to return to historical margin levels by 2025 assume a significantly better market, or just normalized inventories and cost savings?
A: The assumption is that the market will not contract further from current levels. We expect to benefit from normalized inventories and somewhat better market conditions, along with the full impact of our cost savings program.
Q: What is left in the SEK10 billion expansion program, and how should we think about the timing and phasing of these investments?
A: Most major investments are complete, and we aim to return to a more balanced investment level aligned with depreciation. Future investments will focus on adding capacity and flexibility within existing premises as needed.
Q: Can you provide more details on the incremental margins given the recent capacity investments and acquisitions?
A: The incremental profitability remains aligned with historical guidance, with operational margins expected to return to historical spans as volume increases. The recent investments have positioned us for long-term productivity improvements.
Q: How do you assess the inventory levels in the distribution channels, and what quantitative data points inform your view?
A: We maintain close contact with installers and wholesalers, particularly in key markets like Sweden, where inventory levels have normalized. Our assessment is based on these communications and the observed destocking trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
