Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stratec SE (XTER:SBS, Financial) reported positive sales dynamics in Q2 and Q3, indicating a recovery in demand.
- The company has successfully implemented an efficiency program, which has helped stabilize margins despite lower sales volumes.
- Stratec SE is strengthening its market position in Asia Pacific and showing good sales synergies in the United States.
- The company is seeing increased demand for service parts and consumables, suggesting higher utilization rates of their equipment.
- Stratec SE is actively pursuing M&A opportunities to drive growth and diversification, particularly in the United States.
Negative Points
- Sales in Q3 were 8.7% lower year-on-year, and nine-month sales were down 6.1% compared to the previous year.
- The company faced reduced customer forecasts, cancellations, and postponements of deliveries into Q4 and 2025.
- Stratec SE's adjusted EBIT dropped by 45% in Q3, reflecting challenges in maintaining profitability.
- The company is still affected by lower demand for molecular diagnostic solutions and underutilized capacities built during COVID-19.
- Inventory levels have risen slightly due to purchase commitments made during the pandemic, impacting cash flow.
Q & A Highlights
Q: How do you define "slightly declining" sales growth, and what is the likelihood of achieving the upper end of your guidance?
A: Marcus Wolfinger, CEO, explained that "slightly declining" could mean low single-digit declines. The company has reviewed its order book and manufacturing schedule, and while there is a chance to achieve flat sales, the worst-case scenario would be a low single-digit decline. The guidance is based on confirmed orders and manufacturing schedules, but it remains conditional on certain additional orders being finalized.
Q: Can you provide more details on the expected orders and their impact on 2025?
A: Marcus Wolfinger stated that some orders have already been received, with a significant one expected by the end of November. The company is cautious about its 2025 budget, particularly in the molecular franchise, and expects some recovery in the market. Major product launches are anticipated in immune hematology and immunoassays towards the end of 2025.
Q: What is the nature of the additional order expected to be signed, and will it support recurring business?
A: Marcus Wolfinger clarified that the additional orders involve various revenue streams, including instrument sales and development revenues. These are not one-time sales events but part of ongoing business activities that include recognized revenues from development and instrument sales.
Q: How do you plan to achieve the target of a 15% EBIT margin, and what are the key drivers?
A: Marcus Wolfinger mentioned that the company has improved its gross margin through structural changes and price increases. Achieving the 15% EBIT margin will depend on operational excellence, scalability, and market recovery. The company is not promising this margin level for 2025 but is working towards it as market conditions improve.
Q: Can you elaborate on your M&A strategy and the potential size of future deals?
A: Marcus Wolfinger indicated that the company is open to both smaller and larger transactions, focusing on technological advancements and diversification. The strategy includes increasing exposure in the United States and leveraging customer bases. The company is actively exploring opportunities but cannot provide specific details until deals are finalized.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
