Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SAF Holland SE (XTER:SFQ, Financial) successfully opened a new tech center in India, enhancing its global R&D capabilities.
- The company issued a €100 million promissory note, improving its maturity profile and broadening its investor base.
- Despite a challenging market, SAF Holland SE maintained a solid adjusted EBIT margin of 9.8% due to strict cost discipline and a favorable aftermarket business mix.
- The company achieved a solid operating free cash flow of €42.4 million in Q3, demonstrating resilience in a tough market environment.
- SAF Holland SE's aftermarket business remains a strong pillar, contributing 39.7% to group sales, showcasing its robustness against market fluctuations.
Negative Points
- Group sales were 20.4% below the prior year level, with an organic sales decrease of 21.5% year over year.
- The commercial vehicle market weakness, especially in the trailer segment in EMEA and Americas, led to a 17.7% decline in OE sales.
- The company's net financial debt increased by 10.8%, impacting its leverage ratio, which remains at 1.9 times.
- The finance result was negatively impacted by unrealized exchange rate effects, contributing to a finance result of minus €17.5 million in Q3.
- The equity ratio, although slightly improved, remains at a modest level of 28.9%, indicating room for strengthening the balance sheet.
Q & A Highlights
Q: Could you provide more insight on the underlying assumptions for your Q4 sales guidance, which implies a significant sequential improvement from your Q3 organic sales decline?
A: CEO Alexander Geis explained that many trailer customers, particularly in the US and Europe, pushed orders from Q3 into Q4, which will be produced. The aftermarket is expected to be stronger in Q4, and the full M&A consolidation will positively impact Q4. Additionally, the order intake in October was better than in previous months, indicating a positive trend.
Q: How high are the total synergies from the Halex integration in Q3 or year-to-date 2024, and what is the future trajectory of these synergies?
A: CFO Frank Loss stated that while they do not disclose quarterly or annual improvement numbers, they achieved EUR10-12 million in synergies in 2023 and aim for EUR50 million by 2027. Some synergies are linked to the SAP implementation project, which will conclude in 2026.
Q: How should we think about the future trajectory of the aftermarket revenues given the current weak OE business?
A: CEO Alexander Geis noted that while the aftermarket business saw a decline due to cautious stock levels and high interest rates, the population of vehicles has increased over the last 5-7 years. They expect to increase aftermarket sales further as stock levels normalize and demand picks up.
Q: Could you give an indication for the operating free cash flow for the full year?
A: CFO Frank Loss mentioned that while they do not guide a specific cash flow number, they do not expect special impacts on EBITDA or taxes for the rest of the year. The current CapEx ratio is 2.1% of sales, with a maximum guidance of 3%, suggesting a catch-up effect in Q4.
Q: How do you plan to address potential import tariffs in the US, and what is your outlook for the trailer market in 2025?
A: CEO Alexander Geis stated that their regional setup in North America, with facilities in Canada, the US, and Mexico, positions them well. Increased tariffs against China could benefit them by encouraging more insourcing into NAFTA. They expect the truck market to increase in 2025 due to new emissions regulations in 2027, with trailers following suit.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
