Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fuchs SE (FUPBY, Financial) reported a strong third quarter and year-to-date performance despite challenging market conditions.
- The company achieved a 7% increase in EBIT year-to-date, with an improved EBIT margin of 12.5%, indicating strong profitability.
- Fuchs SE (FUPBY) experienced volume growth across all regions, driven by successful sales efforts and new contract wins.
- The company generated nearly EUR 200 million in free cash flow in Q3, supported by strong operational results.
- Fuchs SE (FUPBY) completed its share buyback program, contributing to a double-digit growth in earnings per share.
Negative Points
- Sales were slightly down due to negative currency effects, despite being on par with the prior year in local currency terms.
- The automotive market remains challenging, impacting sales development, although Fuchs SE (FUPBY) managed to maintain flat volumes.
- Functional costs increased, driven by inflation-related wage adjustments and the acquisition of LUBCON, which added over 200 employees.
- The company's net financial debt increased due to acquisitions and share buybacks, although it plans to return to zero net liquidity by year-end.
- The market environment remains difficult, with economic challenges in key regions like Germany and South America affecting overall performance.
Q & A Highlights
Q: Congratulations on the results, particularly the volume growth. Is there anything specific you want to highlight in terms of new customer wins?
A: We saw a broad-based pickup in our specialty business, especially in medical technologies and semiconductors. We also had significant wins in the automotive sector, maintaining flat volumes despite a challenging environment. Additionally, our service business in Poland is expanding, which is an exciting area for us.
Q: With the company generating a lot of cash and the buyback finished, how are you thinking about using the incremental cash?
A: We aim to allocate about one-third of cash to M&A and two-thirds to share buybacks and dividends. We are selective with acquisitions, focusing on value accretive opportunities. The market is fragmented, and many targets are family-owned, requiring the right timing for acquisition.
Q: Can you elaborate on the market share gains in Poland and China? Did competitors step out, or were there production issues?
A: Market share gains are across the board, not from one specific competitor. In China, as companies plan to go global, they need a global supply chain, which benefits us. In Poland, we won significant service contracts, enhancing our market position.
Q: Why is the EBIT margin lower in EMEA and the Americas despite growth in specialty products?
A: In EMEA, the margin was impacted by a one-off effect. In the Americas, while the specialty business is strong, the core business remains weaker. The upcoming U.S. elections have also led to cautiousness among customers, affecting visibility and confidence.
Q: Regarding the electrolyte facility co-owned with E-Lyte, what is the financial impact, and when might you expand the facility or buy the rest of the stake?
A: We hold a 28% stake in E-Lyte, and the facility is operational but not at full capacity. The business is profitable, and we have a call option to increase our stake. We are monitoring the market and customer orders to decide on expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
