Release Date: November 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TCM Group AS (OCSE:TCM, Financial) achieved an organic sales growth of 7% in Q3, driven by a strong uplift in B2C sales.
- The company reported an improvement in gross margin from 17.7% in Q3 last year to 20.3% this year, attributed to a better sales mix with a higher share of B2C sales.
- Adjusted EBIT increased significantly to DKK17 million from DKK3 million in Q3 last year, with an EBIT margin improvement from 1.0% to 6.0%.
- Cash conversion was strong at 120.6%, indicating efficient cash management.
- The company opened two new Nettoline-branded stores in Denmark, expanding its retail presence to 114 branded stores in Denmark and Norway.
Negative Points
- B2B sales declined due to a continued slowdown in the project sales market, impacting overall revenue growth.
- Revenue in Norway decreased by 0.4% in Q3, reflecting challenging market conditions in both private and business segments.
- The company faces significant macro-driven declines in demand from B2B project sales and house builders, which is expected to continue into Q4.
- Intense price competition in the market has led to higher-than-normal discounts by competitors, potentially impacting margins.
- Production bottlenecks, particularly in the lacquering department, have led to longer delivery times and increased costs, affecting operational efficiency.
Q & A Highlights
Q: In your updated guidance, you increased the earnout reversal by DKK5 million compared to the guidance from Q2. When will these reversals be booked in your P&L?
A: The earnout adjustments will be booked in Q4. Nothing has been included in the Q3 figures. - Thomas Hjannung, CFO
Q: Your year-to-date adjusted EBIT is DKK60 million to DKK61 million, and you will get an uplift of DKK8 million to DKK10 million from this earn-out reversal. Why does your Q4 guidance seem conservative?
A: It depends on the revenues. If we reach the lower range of expectations, there will be an impact on the bottom line due to our cost structure. Whether it's conservative or not is up to others to judge. - Thomas Hjannung, CFO
Q: Can you comment on the current trading and order intake for October and November?
A: We saw better activity in stores in September, and this trend has continued into October and November. We are more optimistic about the B2C part of the business than we were at the beginning of Q3. - Thomas Hjannung, CFO
Q: Has price competition become more intense compared to previously?
A: Competition is at least as hard as it has been this year, and maybe even a little worse. We have seen higher-than-normal discounts by competitors. - Torben Paulin, CEO
Q: Are you planning any price increases given the current market outlook?
A: Yes, we have announced price increases in all four brands, around 2%. - Torben Paulin, CEO
Q: What is the latest development on staffing at your facilities?
A: We have ramped up a little to ensure we can deliver in Q4. We have sufficient capacity in general, but we have a bottleneck in our lacquering department due to high demand for trendy colors. - Torben Paulin, CEO
Q: When should we expect the project market to bottom out and stop negatively impacting your revenue?
A: We are seeing more requests for quotations, indicating the market is opening up. However, we expect very little from the project market in 2025, with improvements likely in 2026. - Torben Paulin, CEO
Q: Will the transition to new lacquering equipment in Q1 next year negatively impact gross margins?
A: There will be a balancing act as we phase in the new facility, which may require sourcing certain products externally at a cost, potentially impacting margins slightly. - Torben Paulin, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
