Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NCAB Group AB (LTS:0AAQ, Financial) maintains good gross margins despite lower sales, with a stable gross margin of 36.4%.
- The company has a strong operational cash flow of SEK190 million, indicating robust financial health.
- NCAB Group AB (LTS:0AAQ) continues to expand through acquisitions, with four new acquisitions announced in the latest quarter.
- The company shows growth in North America and East segments, with North America net sales up 10% and East order intake up 10%.
- NCAB Group AB (LTS:0AAQ) is focused on high-tech niches, adding value and technical support, which helps outperform the market in challenging conditions.
Negative Points
- Demand in Europe remains soft, particularly in Germany, impacting overall sales performance.
- Net sales decreased by 11% compared to the previous year, reflecting a challenging market environment.
- EBITA decreased by 33% due to lower volumes and a one-off earnout impact, affecting profitability.
- The company faces weak demand in sectors like green energy, with low activity in EV charging and heat pumps.
- Gross margin decreased by 150 basis points from Q2, influenced by lower volumes and FX effects.
Q & A Highlights
Q: Are you seeing capacity utilization in your supplier base increasing due to China's stimulus programs, and what is the current utilization rate?
A: Peter Kruk, CEO: Utilization with our main partners has improved somewhat, moving from around 50-60% to approximately 70%. However, we are still below the 80% utilization level where price hikes typically occur.
Q: How has the price effect impacted net sales and order intake?
A: Peter Kruk, CEO: The price effect on order intake is almost neutral, with a slight negative impact on revenue. Most price decreases occurred from late 2022 to mid-2023, and prices have been largely stable since then.
Q: What caused the sequential decline in order intake in North America?
A: Peter Kruk, CEO: The decline is due to the absence of large projects that boosted Q2 figures. There is no underlying deterioration in the trend; the underlying progress remains strong.
Q: Can you provide insights into the gross margin fluctuations and the factors affecting it?
A: Peter Kruk, CEO: The gross margin is influenced by a combination of factors, including volume, FX effects, and product mix. The pricing remains stable, but there are transactional FX effects and seasonal impacts, particularly in the Nordics.
Q: How do you view the gross margin trend in the long term, especially if prices increase?
A: Peter Kruk, CEO: Historically, gross margins have increased from the low 30s to around 36%. We believe we can maintain the majority of this margin increase even if prices start to rise, although we may not retain all of it.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
