Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Eltel AB (STU:E5E, Financial) reported a 4% organic net sales growth, driven by strong performances in Finland and Sweden.
- The company achieved its best-ever quarterly profit on adjusted EBITDA since 2015, marking five consecutive quarters of year-on-year improvement.
- Finland and Sweden led profitability improvements, with Finland achieving a 52% increase in profitability.
- Eltel AB secured new contracts, including a significant agreement with Helen Energy Company in Helsinki and a third agreement with the Swedish Armed Forces.
- The company is actively expanding into new and adjacent markets, particularly in renewable energy and public infrastructure, with a growing pipeline in battery energy storage systems.
Negative Points
- Eltel AB's order book decreased from EUR1.2 billion to EUR1.1 billion, indicating a decline in future business commitments.
- The company faces ongoing challenges in Norway, with a 10% decrease in net sales and a restructuring program impacting personnel and fleet.
- There is a delay in customer decision-making, particularly in new energy areas like solar, attributed to high interest rates.
- The company's liquidity reserves of EUR47.6 million are lower than its current interest-bearing debt of EUR86 million, raising potential liquidity concerns.
- Eltel AB removed its 2025 timeline for achieving a 5% adjusted EBITDA margin, citing current market conditions as unrealistic for meeting this target.
Q & A Highlights
Q: Can you provide an updated timeline for reaching the 5% margin target, given that it won't be achieved by the end of 2025?
A: We don't have a new timeframe to communicate, but we believe that once market conditions normalize, the target will be within reach. The current market, particularly in the last two quarters, has been impacted by interest rates, causing customers to delay new initiatives.
Q: Finland's EBITDA margin was above 7% this quarter. Is this sustainable, or was it an unusually strong quarter?
A: The third quarter is typically our strongest due to seasonality, while the first quarter is the weakest. Although Finland performed well, we recognize the seasonal effects and will continue to work on operational improvements.
Q: Regarding the restructuring in Norway, can you quantify the expected savings and when they will take effect?
A: The restructuring involves over 200 roles and adjustments to our fleet and locations. This will continue through the rest of the year, but we don't have a specific savings figure. We aim to align with market demand by the first quarter.
Q: What are the positive demand drivers for Norway in the short term?
A: We see potential in new areas such as data centers, solar, and charging infrastructure. These areas are becoming more active, with discussions around these solutions increasing.
Q: Could you comment on your liquidity position, given that available reserves are lower than current interest-bearing debt?
A: The lower level of advances received and accounts payable in the third quarter is a normal fluctuation. We have a stronger cash flow from operations due to profitability improvements, and liquidity management remains a key focus.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
