Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ependion AB (FRA:TW4, Financial) reported a significant improvement in gross margins, particularly in the Westermo segment, due to normalized cost levels and adjusted labor costs.
- The company maintained a stable EBIT percentage sequentially, despite a drop in sales volumes, indicating effective cost control.
- The establishment of operations in India is progressing as planned, with positive customer feedback and expected full operational status by the end of the year.
- The launch of the new X3 family in Beijer Electronics is on track, with the first product set to be released in November, enhancing competitiveness.
- Ependion AB (FRA:TW4) achieved a positive free cash flow of SEK56 million for the quarter, showing improvement over the previous year.
Negative Points
- The company continues to face a challenging demand environment, with weak order bookings and sales across key segments.
- There was a significant sales drop compared to the previous year, attributed to a lower order book in the train segment of Westermo.
- The order intake and sales levels were negatively impacted by the phaseout of the Display Solutions product group in Beijer Electronics.
- Ependion AB (FRA:TW4) experienced a negative FX impact on EBIT, amounting to minus SEK14 million, primarily due to transactional variances.
- The external market situation remains weak and uncertain, with geopolitical and economic factors contributing to a cautious outlook for the rest of 2024.
Q & A Highlights
Q: Can you discuss the underlying demand and any signs of improvement, particularly in relation to interest rates and projects like trains?
A: Jenny Sjoedahl, President and CEO, explained that while demand is currently weak, there are still ongoing projects such as train and infrastructure developments. She anticipates that the weak demand situation will eventually reverse, especially as interest rates decrease, which should stimulate economic activity. The company believes that the current hesitation in customer investments will not last indefinitely.
Q: Regarding the phaseout of low-margin products in Beijer Electronics, where are you in this process?
A: Joakim Lauren, CFO, stated that the phaseout of Display Solutions is nearing completion, with most volumes expected to be invoiced this year. The company is also reviewing its entire portfolio to focus on high-margin offerings, which may lead to further product phaseouts in the future.
Q: What are your expectations for the X3 product launch, and is there any pent-up demand?
A: Jenny Sjoedahl noted that the X3 launch is imminent, starting in November. While there might be some hesitation from customers waiting for the new product, the X3 range is expected to help win new business and enhance competitiveness.
Q: How flexible is your cost management if the current sluggish trend continues?
A: Jenny Sjoedahl mentioned that while major cost adjustments have already been made, the company is prepared to further adjust costs if necessary. However, they aim to protect R&D resources due to their strategic importance.
Q: Can you provide more details on the partnership with Blu Wireless and its impact on Westermo's offerings?
A: Jenny Sjoedahl explained that Westermo will integrate Blu Wireless products into its rail portfolio. The partnership is in its early stages, but there is a healthy pipeline of projects, and the successful Caltrain project in California is expected to bolster customer interest.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
