Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BHG Group AB (STU:7B1, Financial) reported a significant improvement in earnings, with a profit of SEK52 million in the second quarter, marking a SEK40 million increase compared to the same quarter last year.
- The company achieved a positive cash flow of SEK103 million and a cash conversion rate of 65%, deviating from the usual negative cash flow pattern in the third quarter.
- BHG Group AB (STU:7B1) has successfully reduced its inventory levels from a peak of over SEK3 billion in 2022 to approximately SEK1.3 billion, enabling a reduction in warehouse footprint.
- The company has made progress in its international expansion, with the premium living segment growing by 11% outside of the Nordics.
- BHG Group AB (STU:7B1) has improved its adjusted EBIT by SEK133 million on a rolling 12-month basis, demonstrating effective cost management and strategic initiatives.
Negative Points
- Net sales decreased by 18% in the third quarter, with organic growth at minus 9.8%, indicating ongoing market challenges.
- The market remains challenging, with a recovery not expected until the first half of 2025, particularly in markets like Finland and Norway.
- Premium living segment experienced negative mixed effects, impacting gross margin and profitability negatively.
- The company's net debt stands at SEK1.2 billion, with a net debt to LTM adjusted EBITDA ratio of 4.6 times, indicating a high level of leverage.
- Interest costs, including a negative currency effect, amounted to SEK55 million, with a projected run rate of SEK150 million annually, posing a financial burden.
Q & A Highlights
Q: What is your view on the profitability impact from the Nordic Nest Warehouse Automation initiative?
A: Gustaf Oehrn, CEO, explained that the automation initiative is expected to positively impact gross margins by reducing handling costs. The investment aims to support continued growth and improve efficiency, with the most significant efficiency gains anticipated during high-volume months. These gains will increase over time with higher volumes.
Q: Are there any more warehouse closures planned for the rest of the year?
A: Jesper Flemme, CFO, stated that there will be no further warehouse consolidations in 2024. However, there will be an impact on depreciation and amortization (D&A) in the fourth quarter from actions taken in Q3, amounting to approximately SEK5 million.
Q: You report SEK38.6 million in interest costs excluding leasing and SEK4.5 million in IFRS 16 interest, but the total is SEK55 million. What accounts for the difference, and what is a reasonable run rate going forward?
A: Jesper Flemme, CFO, clarified that the difference is due to interest income and a significant negative currency effect during the period. The expected run rate, given current interest rates, is approximately SEK150 million on a full-year basis.
Q: How is the market outlook affecting your strategic focus?
A: Gustaf Oehrn, CEO, noted that while the market remains challenging, there are signs of improvement. The company continues to focus on profitability through growth initiatives, consolidations, and efficiency improvements, including investments in automation and AI.
Q: What are the main drivers behind the improved EBIT margin?
A: Jesper Flemme, CFO, highlighted that the improved EBIT margin is primarily driven by a reduced fixed cost base and efficiency improvements in last-mile operations. Organizational costs have decreased significantly, contributing to the margin improvement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
