Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lindab International AB (FRA:L5E, Financial) achieved the highest sales ever for a third quarter, with a 3% increase in sales.
- Ventilation systems, which account for 76% of sales, grew by 6% due to successful acquisitions.
- The company maintained a solid cash flow, with SEK 259 million from operating activities.
- Lindab's financial position remains healthy, with a net debt to EBITDA ratio of 2.3 times, below the target of three times.
- The company is focusing on digital tools and services to enhance customer service and efficiency, positioning itself well for future demand.
Negative Points
- The adjusted operating margin of 9.1% was below both the target and expectations, indicating profitability challenges.
- Organic sales growth was negative by 3% due to slow market demand, impacting overall sales performance.
- Profile systems experienced a 6% decrease in total sales, with no signs of improvement in Eastern Europe.
- The company had to write off 100% of its investment in Leapcraft, a software and sensor company, due to difficulties in finding a viable commercial model.
- The UK Competition and Markets Authority's decision requires Lindab to divest branches, potentially impacting sales in the UK by approximately 2%.
Q & A Highlights
Q: Can you explain the decline in organic growth and margin drop in the quarter?
A: Ola Ringdahl, President and CEO, explained that the company was unable to implement price increases to the necessary level, resulting in weaker gross margins. The decline in volumes and a slight negative currency effect also impacted profitability. The company plans to reduce costs and continue pricing activities to address these issues.
Q: Are there plans to implement further price increases in ventilation systems?
A: Ola Ringdahl confirmed that price adjustments are being made monthly, with increases implemented in July, August, and September. The company is working to improve gross margins through these price increases, despite the challenges of maintaining market position and factory load.
Q: What cost-saving measures are being targeted in ventilation systems?
A: Ola Ringdahl stated that the company aims to improve profitability by at least 1% through a combination of strengthening gross margins and reducing fixed costs, including staff levels. Cost actions will be implemented in the fourth quarter to lower the cost base for the next year.
Q: How is the situation in Eastern Europe affecting the profile systems' margins?
A: Ola Ringdahl noted that Eastern Europe is currently not profitable and is diluting the overall profitability of profile systems. The challenging market environment, exacerbated by geopolitical tensions, has led to consideration of structural actions, including potential divestments or closures.
Q: How confident are you in achieving a 10% operating margin by 2025?
A: Ola Ringdahl expressed determination to reach the 10% margin target by 2025, emphasizing the importance of reducing the cost base and eliminating unprofitable businesses before entering 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
