Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Afry AB (AFXXF, Financial) improved its profitability with an EBITA margin increase from 5.4% to 6.1%.
- The Energy division showed strong growth and stable margins, contributing positively to the overall performance.
- Infrastructure division continued to deliver on margin improvement, aligning with the company's strategic goals.
- Afry AB secured significant projects, including a partnership with SSAB for decarbonizing the steel industry and a pump storage solution in Australia.
- The company maintained a stable order stock at SEK20 billion, indicating a steady pipeline of future work.
Negative Points
- Process Industries faced a challenging market with negative growth of 8.5%, impacting overall performance.
- Demand for IT and telecom consultants was weak, affecting the Industry and Digital Solutions segment.
- Real estate market remained sluggish, contributing to lower levels of activity in the Infrastructure division.
- Negative FX effects impacted growth, with total growth shifting back to negative 1% in Q3.
- Utilization rates were lower than last year, particularly driven by declines in Process Industries.
Q & A Highlights
Q: Can you elaborate on the challenges faced by the Process Industries division and your response to these challenges?
A: Jonas Gustavsson, CEO, explained that the Process Industries division is experiencing a challenging market, particularly in the Pulp and Paper segment, with negative growth of 8.5%. The company has been proactive in addressing these challenges by adjusting capacity and being aggressive in pursuing available projects. Despite the challenges, the division still delivered a 7% EBITA margin in the third quarter, indicating a strong position in the market.
Q: How are you managing the transfer of skilled personnel between divisions, particularly from Process Industries to Energy?
A: Jonas Gustavsson, CEO, stated that Afry is increasingly working on cross-divisional projects, allowing for the transfer of competencies between divisions. While some expertise is specific to certain divisions, the company is doing its utmost to be flexible and scale into segments with strong demand, such as Energy.
Q: Are there any geographic differences in the demand for Pulp and Paper projects, and what is driving the current weakness in this segment?
A: Jonas Gustavsson, CEO, noted that while there is a general slowdown in large-scale greenfield CapEx projects in Pulp and Paper, South America, particularly Brazil, remains an interesting market due to the healthy cash flow of major players. The current weakness is attributed to an oversupply in recent years and price pressures.
Q: What is the outlook for the Real Estate segment, and how quickly do you expect to see a recovery in orders?
A: Bo Sandstrom, CFO, explained that the Real Estate segment has a shorter time lag for recovery compared to CapEx projects in Pulp and Paper. Typically, it takes one to two quarters to see an effect from a pickup in demand, whereas CapEx projects may take 6 to 12 months.
Q: Can you provide insights into the order intake momentum at the end of Q3 and any notable trends?
A: Jonas Gustavsson, CEO, mentioned that the order intake trends continue as seen in previous quarters, with a notable pickup in Industrial and Digital Solutions. However, this is related to specific strong segments within the division and not necessarily indicative of the overall market trend.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
