Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Solar AS (STU:ZVR, Financial) has introduced a new AI tool, Sula, which enhances customer experience by providing fast and comprehensive product information and assistance.
- The company is seeing a gradual recovery in organic growth, particularly in Denmark, indicating potential for future improvement.
- High-capacity heat pump sales are showing increased conversion rates, with a significant order intake expected to be delivered within six months.
- The company is focusing on cybersecurity and ISO 27001 certification, which strengthens risk management and customer trust.
- Despite revenue challenges, Solar AS (STU:ZVR) has managed to maintain a stable EBITDA margin, showing effective cost management.
Negative Points
- Solar AS (STU:ZVR) experienced a revenue decline to DKK2.9 billion in Q3, down from DKK3.8 billion the previous year.
- All main segments, including installation, industry, and trade, posted negative organic growth in Q3.
- The company's climate energy revenue remained low, with a significant drop compared to the same quarter last year.
- Inventory levels are higher than optimal, indicating potential inefficiencies in inventory management.
- The company has adjusted its revenue guidance downwards for 2024, reflecting slower-than-expected recovery in key markets.
Q & A Highlights
Q: Your business model relies on economies of scale, yet this quarter saw a margin increase despite falling revenue. Can you explain this and whether it will continue in future quarters?
A: Michael Jeppesen, CFO: The margin increase is partly due to non-recurring income from the sale of a warehouse. Additionally, Q3 typically sees a drop in costs due to vacation periods, which reduces holiday allowance provisions. This seasonal cost reduction contributes to the margin increase.
Q: With your guidance of DKK12.3 billion in revenue for the year, do you expect growth to be evenly distributed across categories, or will some perform better?
A: Michael Jeppesen, CFO: We anticipate a full-year negative organic growth of approximately minus six percent. However, we expect positive organic growth in Q4, particularly in installation segments, and some improvement in industry segments like O&M and MRO.
Q: Can you comment on the potential growth of industrial heat pumps in 2025?
A: Michael Jeppesen, CFO: While I can't provide specific guidance for 2025, there is significant interest in thermal heat pumps, especially from large companies committed to sustainability targets. We are optimistic about future growth in this segment.
Q: With falling interest rates and improved inflation in the EU, when do you expect the industry to return to growth?
A: Michael Jeppesen, CFO: We expect growth to continue into 2025, although uncertainties remain. Installation is typically late-cycle, but we've won several projects, particularly in Denmark, which should support growth.
Q: The tax rate in Q3 was relatively low. Will this continue into Q4?
A: Michael Jeppesen, CFO: Tax rates can fluctuate quarterly, but over the long term, we expect an effective tax rate of around 24%. This includes non-deductible costs and varies slightly by country.
Q: What makes you confident in achieving a positive organic growth of 4.6% in Q4 2024?
A: Michael Jeppesen, CFO: The trend over the past months supports this expectation. The comparison point from Q4 last year, when we faced significant headwinds, is more favorable now. We are seeing better trends in most countries.
Q: What level of price pressure are you experiencing, and what relief in gross margin do you expect when growth returns?
A: Michael Jeppesen, CFO: Price pressure has been significant, especially in energy products. We expect normalization during 2025 as supply and demand balance out, which should improve gross margins over time.
Q: Are there any factors affecting operating and staff costs that we should consider for 2025, particularly regarding your new warehouse in Sweden?
A: Michael Jeppesen, CFO: The new central warehouse in Sweden will not impact costs until 2026. We've made adjustments in 2023 and 2024 to align with current levels, and we'll continue to monitor and adjust as needed.
Q: Can you provide an update on the ERP implementation project at Mac 45?
A: Michael Jeppesen, CFO: The ERP project is progressing according to plan, though it's a large undertaking. We aim to be fully operational by the end of next year, transitioning to Microsoft Dynamics from an unsupported platform.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
