Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kongsberg Automotive Holdings ASA (KGAUF, Financial) reported an improvement in EBIT to EUR6.4 million, a significant increase from a negative EUR12.5 million last year.
- The company achieved a record high book-to-bill ratio of 2.1, with new business wins totaling EUR1.1 billion in the first half of the year.
- Operational KPIs have improved compared to the previous year, attributed to cost reduction efforts and employee commitment.
- The company successfully refinanced its old Euro bonds with new Nordic bond notes, maintaining similar interest costs.
- Kongsberg Automotive Holdings ASA (KGAUF) achieved its best safety performance in the past ten years and improved its CDP Climate Change rating to a B- score.
Negative Points
- Revenues in Q2 were EUR209.3 million, a decrease of EUR15.2 million or 6.8% compared to the previous year, primarily due to a decline in the European commercial vehicle market.
- Free cash flow was negative EUR4.4 million in the quarter, impacted by accelerated interest payments on old bond notes.
- Net interest-bearing debt increased to EUR116.5 million, up by EUR16.3 million from the end of 2023.
- The company revised its full-year revenue guidance downwards to EUR790 million to EUR830 million due to volume reductions in customer production programs.
- The global commercial vehicle and passenger car markets are experiencing negative growth trends, particularly in Europe and North America.
Q & A Highlights
Q: What are you doing to offset the effect of declining volumes in customer production programs?
A: We are adjusting all variable costs in accordance with the weakening top line. However, significant fixed costs in the manufacturing industry are challenging to adjust in the short term. We continue to focus on optimizing these costs to ensure the best possible outcome for the full year. - Linda Nyquist-Evenrud, CEO
Q: When will this year's business wins materialize in revenues?
A: We have secured about 85% of our anticipated revenues for 2026 and 70% for 2028. Typically, it takes two to five years from program nomination to start of production. Some programs, like the gear control unit, will impact revenues in the second half of this year. - Linda Nyquist-Evenrud, CEO
Q: What are the drivers of the expected upturn in global commercial vehicle production in 2025?
A: The commercial vehicle market is cyclical, related to trade and manufacturing activities. The expected 5% uptick in 2025 is a return to 2023 levels, driven by normal economic cycles and potentially lower interest rates. - Christian Johansson, CFO
Q: Can you explain the decrease in accounts payable this quarter? When do you expect the net working capital ratio to return to normal?
A: The decrease is partly due to a softer market leading to fewer orders. Payment timing also affects this. We are working hard to optimize stock levels and adhere to payment terms with suppliers. - Christian Johansson, CFO
Q: How will the change in guidance play out during Q3 and Q4?
A: We cannot provide specific EBIT numbers for the quarters. We are adjusting to the decline and focusing on flexing variable costs while managing fixed costs. Q3 is typically weaker due to the European vacation period. - Christian Johansson, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
