Release Date: November 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exco Technologies Ltd (EXCOF, Financial) reported a sustained improvement in EBITDA margins in the casting and extrusion segment, holding steady at around 18%.
- The company achieved a strong free cash flow for the year, totaling $54 million, representing a robust 66% conversion of EBITDA.
- Exco Technologies Ltd (EXCOF) is experiencing strong performance in its 3D printing operations, with the addition of a sixth printer and an order for a seventh.
- The company made meaningful strides in scaling up its greenfield plants, including integrating Halex into its extrusion dye operations.
- Exco Technologies Ltd (EXCOF) has a strong financial position with $46 million in available liquidity under its banking facilities at year-end.
Negative Points
- The automotive solutions segment faced headwinds with a 10% decline in revenues due to lower automotive production volumes and customer-driven program launch delays.
- Margins were pressured by weaker volumes, unfavorable product mix, erratic order releases, and higher labor costs, particularly in Mexico.
- The company experienced a decrease in consolidated fourth-quarter net income to $7.7 million, down from $9 million in the same quarter last year.
- Demand for consumable diecast tooling softened slightly alongside reduced OEM production volumes.
- The ramp-up in Morocco is slower than expected, with challenges in capturing market share from incumbent players in Europe.
Q & A Highlights
Q: Are there any geographies like China where tariffs might impact Exco Technologies either positively or negatively?
A: Darren Kirk, President and CEO, explained that outside of NAFTA, Exco faces competition from China in diecast tooling. Tariffs could level the playing field, benefiting Exco. Imports from Europe are minimal, and as long as NAFTA remains stable, Exco should be unaffected by tariffs.
Q: Can you provide more detail on the ramp-up in Mexico and Morocco?
A: Darren Kirk noted that progress in Morocco is slower due to a soft European market, but the operation is near EBITDA break-even. In Mexico, progress is better, with production moving from Canada to Mexico, and the operation is expected to ramp up strongly through fiscal 2025.
Q: What stage is Exco in automating production in Mexico?
A: Darren Kirk stated that automation is an ongoing process across all facilities, not just in Mexico. The focus is on replacing manual processes with automation to enhance productivity, especially as labor costs rise and program launches increase.
Q: How does the weakening Canadian dollar impact Exco's financial statements?
A: Matthew Posno, CFO, mentioned that a weaker Canadian dollar is beneficial for Exco as it exports to the US. It could also serve as a hedge against potential tariffs, providing a favorable financial impact.
Q: How does Exco plan to reach $120 million in EBITDA, and can this be broken down by segment?
A: Darren Kirk outlined that the casting and extrusion segment is expected to grow from $300 million to $350 million, with a target EBITDA margin of 20%. The automotive solutions segment is projected to grow from $330 million to $400 million, with a target EBITDA margin of 15%. The consolidated EBITDA margin target is 16%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
