Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net sales increased by 1% in constant currencies, driven by strong installations in the US.
- The book-to-bill ratio improved to 1.10, indicating a solid foundation for future sales growth.
- Major customer win from the largest private healthcare provider in Mexico, amounting to $64 million.
- Strong sales growth in the Americas region, with a 16% increase driven by both North and South America.
- Strategic joint venture with a Chinese software partner to strengthen market position in China.
Negative Points
- Gross margins declined year over year to 37.8%, impacted by inflation and reduced inventory revaluation.
- Adjusted EBIT margin declined to 7.4%, driven by lower gross margins and increased operating expenses.
- Sales in the Europe, Middle East, and Africa region declined by 12% compared to last year.
- Continued negative impact from the anti-corruption campaign in China, affecting sales growth.
- Sequential cash flow after continuous investments amounted to SEK891 million negative, similar to last year.
Q & A Highlights
Q: First on the service margin, was that back now to more normal level after the weakness in Q4? And how much of the sequential improvement does that explain?
A: Yes, it's more back to a normalized level, and it's actually a quite significant part of the sequential improvement that we see. (Tobias Hagglov, CFO)
Q: Related to China, if you could comment on the water situation specifically in China now and based on that orders last year, how you foresee sales in China coming quarters?
A: We foresee the next quarter will continue to be impacted, but less so than this quarter. Going forward in the third and fourth quarter, we expect that all that pent-up demand together with the big stimulus packages to drive growth. (Gustaf Salford, CEO)
Q: Can you talk a little bit more about orders for Q2 based on sort of tender per tonnes and also wait and see what you've seen so far, maybe outside China?
A: We have a good activity, but where we expect most of the orders is to come from the new product launches. Some of that will be later in the quarter and primarily into Q3 and Q4. (Tobias Hagglov, CFO)
Q: On pricing, how should we think about the magnitude of that impact through the course of the year?
A: We first see that in the increase on the order side and now in Q4, we start to see price increases coming to the P&L as well as now in Q1. It's the low single digits, but the key thing is that the momentum is there. (Gustaf Salford, CEO)
Q: On the R&D capitalization rate in the quarter and if there are any one-offs in there that explain the sort of increase?
A: The total R&D spend will actually go down gradually, it will be a quite stable but slight decline over the quarters. In terms of the capitalization rate, it will stay fairly stable. (Tobias Hagglov, CFO)
Q: On the midterm targets beyond 2024-2025 at 14% is it from next year onwards or is still select midterm?
A: We are confident to reach those levels. We haven't provided a specific time point on that. (Tobias Hagglov, CFO)
Q: On the sales dynamics, how significant was the pull forward effect in the US market?
A: For the overall Elekta, it does not have a huge impact. It is relating to some CT linac and MR Linac projects in the US. (Gustaf Salford, CEO)
Q: On the cost savings, you talked about you're targeting SEK250 million annualized cost savings. How much do you expect to contribute to the P&L already this year?
A: Approximately SEK150 million will hit this year and then the rest will be year over year impact into next year. (Tobias Hagglov, CFO)
Q: Have you already seen any kind of inventory valuation upwards in Q1 this year as well?
A: No, that was related to Q1 last year where we had exceptionally strong development for both USD and inflation. (Tobias Hagglov, CFO)
Q: On the current financing situation of customers, are you seeing any changes in credit conditions or financing income for customers in emerging markets?
A: I haven't seen a big change, but some customers are looking forward to lower interest rates and lower inflation, which would lower costs for constructions and make it easier to finance new hospitals and clinics. (Gustaf Salford, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
