Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Matrix Composites & Engineering Ltd (ASX:MCE, Financial) reported an 80% increase in revenue, reaching $85 million, the highest since 2016.
- The company achieved a significant EBITDA growth to $11 million, exceeding consensus forecasts.
- Matrix has a strong market position in the SURF market, with a 30-35% market share and a robust pipeline of $33 million in orders.
- The company's financial position has improved, with cash on hand increasing to $23 million and no term debt.
- Matrix is diversifying its revenue streams, with significant contributions from non-oil and gas sectors, including marine, defense, and offshore renewables.
Negative Points
- The company's revenue is heavily reliant on the subsea buoyancy business, which contributed 87% of total revenue.
- The drilling market, a traditional revenue source, shows no new rig builds on the horizon, limiting growth opportunities.
- The company's growth in the corrosion technologies division was impacted by the absence of large projects, leading to a year-on-year revenue decline.
- Matrix's financial performance is subject to the lumpiness and timing of SURF contracts, which can skew results towards the second half of the year.
- The company faces challenges in maintaining high margins, as the mix of projects, particularly in the drilling sector, can affect overall profitability.
Q & A Highlights
Q: Can you speak to the first half, second half split for the upcoming year and the sustainability of the margins achieved in the second half?
A: The first half, second half split will likely be influenced by the drilling market, with a probable skew towards the second half, though not as pronounced as last year. The sustainability of margins will depend on the mix of projects, with large SURF projects providing a healthy margin and shorter-term drilling projects potentially enhancing the overall margin mix. (Aaron Begley, CEO)
Q: Is there any more growth CapEx expected in FY25?
A: There might be further tooling CapEx depending on project requirements, typically around 4% to 5% of the project value. Sustaining CapEx is expected to be between $1 million to $1.5 million, with an additional $1 million to $1.5 million for specific equipment supporting advanced materials. (Brendan Cocks, CFO)
Q: Could you give an indication of your recent win rate on quotes in the SURF market and whether this can be extrapolated going forward?
A: We have about a 30% to 35% share of the SURF market. Our win rate is solid, especially with existing customers. As we build a track record and deliver more projects, our accessible market and win rate are expected to increase. (Aaron Begley, CEO)
Q: How lengthy is the tender quotation process in the drilling market?
A: The process can vary significantly; we can receive an order the next day or it may take several months. Drilling market inquiries often come several months before a job is awarded, contrasting with the SURF market where we have better visibility due to the structured project phases. (Aaron Begley, CEO)
Q: Was the $13 million order for deep sea mining equipment booked in FY24 numbers?
A: Yes, it was booked in FY24 numbers, with the equipment delivered to the client in July. (Brendan Cocks, CFO)
Q: Have you been shortlisted for the four key projects with a value of $100 million you mentioned?
A: Yes, we have been shortlisted and are in various stages of contract negotiations. (Aaron Begley, CEO)
Q: Why did corrosion technologies revenue appear down year-on-year, particularly in the second half?
A: The prior year included a large, lumpy project which was not repeated this year. The core business remains stable, and we are forecasting growth from this year's numbers. (Aaron Begley, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
