Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Duerr AG (DURYY, Financial) achieved a high order intake of EUR1.2 billion in Q3, contributing to a record order intake of EUR4 billion for the first nine months.
- The company reported a strong free cash flow of EUR82 million after nine months, driven by high order intake and disciplined net working capital management.
- The EBIT margin before extraordinary effects improved sequentially to 5.6%, with divisions like paint and final assembly systems reaching or exceeding mid-cycle margin targets.
- Duerr AG (DURYY) confirmed its 2024 outlook, with a good chance to reach the upper end of the guidance corridor for order intake and free cash flow.
- The company is progressing well with its strategic initiative to focus on core business areas, including the merger of divisions and potential sale of non-core businesses.
Negative Points
- Net income decreased by 24% in the first nine months due to higher PPA effects from acquisitions and increased interest costs.
- The order backlog declined slightly compared to the end of Q2, mainly due to negative exchange rate effects.
- Sales at HOMAG declined by 14%, impacting overall revenue growth despite increases in other divisions.
- The EBIT margin for industrial automation systems was temporarily impacted by customer insolvency and project re-evaluations.
- The company faces delays in automotive project execution, affecting sales realization and project timelines.
Q & A Highlights
Q: Could you shed more light on the delays in the automotive sector, especially in Paint and Final Assembly Systems (PFS)?
A: The delays are primarily due to execution issues, such as customers not having buildings ready for us to start projects or needing to adapt designs due to incomplete vehicle designs. These are not cancellations but rather scheduling delays.
Q: With the updated guidance on order intake for application technology, are you expecting a weak fourth quarter for the automotive business?
A: We have a strong pipeline, but the timing of project bookings is uncertain. We remain conservative in our guidance, focusing on orders that benefit the business. We might exceed the upper end of the guidance, but we are prudent as some projects are still pending decisions.
Q: Can you provide a qualitative outlook for 2025 by segment?
A: The automotive market remains healthy, though the exact levels for next year are uncertain. Industrial automation is impacted by slower e-mobility investments but is expected to recover. HOMAG has not yet seen a recovery, but cost-saving measures are in place, and we hope for market improvement in the first half of next year.
Q: The industrial automation margin was weak in Q3, and guidance was lowered. What is the profitability outlook for the next two years?
A: We remain positive about the business, expecting a catch-up effect in the next 12 to 24 months. The margin was impacted by capacity adjustments and a customer insolvency, but our strategic approach remains unchanged.
Q: How is the current pressure in the auto industry affecting your business?
A: Despite challenges, we continue to receive orders as customers need to modernize old, inefficient paint shops. This demand is driven by the need to reduce energy consumption and operational expenses. We expect this trend to continue for several years, providing a stable backlog.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
