Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alligo AB (FRA:1MH, Financial) reported slight growth in Q3 2024, primarily driven by acquisitions.
- The company has successfully linked existing loans to sustainability targets, signaling a strong commitment to sustainability.
- Alligo AB (FRA:1MH) completed eight acquisitions in 2024, adding significant revenue, particularly in the welding segment.
- The company is investing in sales by hiring Nordic sales segment managers to drive growth in construction and industry sectors.
- Alligo AB (FRA:1MH) is focusing on technical sales, particularly in the welding sector, which has shown resilience and growth potential.
Negative Points
- The market remains weak, particularly impacting small and medium-sized businesses, leading to a decline in contribution margin.
- Adjusted EBITDA margin decreased from 9% to 6.4% due to weak demand and unfavorable customer mix.
- Organic growth in Finland and Sweden was negative, with a decline of 3% in Q3 2024.
- The company faced disruptions at its logistics center, affecting profitability.
- There is ongoing pressure on margins due to a shift in customer segments and size mix, particularly in Sweden and Norway.
Q & A Highlights
Q: Can you provide insights into the performance of your different business niches, particularly product media, legacy business, and welding?
A: The welding business is resilient and performing well, benefiting from its industrial focus. Product media is holding up okay, while the mainstream business, especially small and medium-sized customers, is struggling, particularly in the construction sector. However, there are positive signals across the group.
Q: How has the gross margin been affected in Q3 compared to Q2, and what are the main factors influencing this?
A: The gross margin decline is due to several mix effects, including a stable share of own brands and customer handling costs. The drop is consistent with Q2 levels, and while margins per customer segment remain stable, the overall mix has shifted towards lower-margin sectors.
Q: What is the outlook for the gross margin in the upcoming quarter?
A: The gross margin is expected to remain stable in the last quarter of 2024, with no major changes anticipated. However, improvements are expected in 2025 as market conditions stabilize and acquisitions and sales efforts begin to pay off.
Q: How is the acquisition pipeline looking, and are there specific sectors you are targeting?
A: The acquisition pipeline is strong, with a focus on larger deals in welding and product media. We are also exploring other technical areas similar to welding for potential growth opportunities.
Q: Is the current gearing level affecting your ability to pursue acquisitions?
A: No, the current gearing level of 2.2 is not limiting our acquisition activities. We remain within our financial target range and continue to pursue strategic acquisitions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
