Concentric AB (FRA:2DN) Q2 2024 Earnings Call Highlights: Navigating Market Challenges with ...

GuruFocus News
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In This Article:

  • Net Sales: SEK955 million, down 13% year on year.

  • Electric Product Sales: SEK224 million, representing 23% of group sales.

  • Operating Margin: 13% before items affecting comparability.

  • Operating Income: SEK124 million, down from SEK175 million last year.

  • Cash Flow from Operations: SEK103 million, with a cash conversion of 137%.

  • Book-to-Bill Ratio: 89% for the quarter.

  • Warranty Provision: SEK100 million for a customer warranty claim.

  • Net Debt: SEK777 million, down from SEK950 million last year.

  • Gearing Ratio: Reduced from 42% to 35%.

  • Net Debt-to-EBITDA Ratio: 1.33.

  • Cash and Cash Equivalents: SEK374 million.

  • Dividend Paid: SEK158 million during the quarter.

Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Concentric AB (FRA:2DN) reported strong sales in its electric product segment, which accounted for 23% of total sales, up from 18% in the same quarter last year.

  • The company made significant progress in its electrification strategy, including the development of an e-Pump solution for data center cooling, expected to launch in early 2025.

  • Concentric AB's joint venture, Alfdex, secured two new business wins valued at SEK1.3 billion, strengthening its position in the global truck and off-road markets.

  • The company reported a significant improvement in cash flow from operations, with a cash conversion ratio of 137% for the quarter.

  • Concentric AB is actively investing in its Pune facility to prepare for growth in the Indian market over the next three to five years.

Negative Points

  • Net sales for the quarter decreased by 13% to SEK955 million, with both the engines and hydraulics divisions experiencing declines.

  • The company made a SEK100 million provision for a customer warranty claim, impacting its financial performance.

  • The book-to-bill ratio was 89%, indicating weaker demand and suggesting further sales declines in the upcoming quarter.

  • Concentric AB is facing challenging market conditions, particularly in the agriculture and construction segments, which make up about 50% of total sales.

  • The company is implementing cost-saving measures to maintain margins amid expected lower sales volumes, indicating ongoing market pressures.

Q & A Highlights

Q: Can you provide more details on the demand situation for your largest end markets? A: We are seeing a stronger than expected weakening in agriculture and construction, which together represent about 50% of our total sales. This decline is reflected in the announcements and actions of our major customers in these sectors. Agriculture is currently the most critical market in terms of decline, followed by construction.

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