Hexatronic Group AB (HTROF) Q3 2024 Earnings Call Highlights: Navigating Growth Amidst Market ...

GuruFocus News
4 min read

In This Article:

  • Revenue: SEK 1,951 million in Q3, a 2% increase year-over-year.

  • EBITA: SEK 230 million, down from SEK 296 million last year.

  • EBITA Margin: Improved to 11.8% sequentially from 11% in Q2, but down from 15.4% in Q3 last year.

  • Gross Margin: 43.1%, up 0.8 percentage points from Q3 last year.

  • Cash Flow from Operating Activities: SEK 144 million, with a cash conversion of 70%.

  • Interest Bearing Net Debt: SEK 1.9 billion, reduced by SEK 70 million from the previous quarter.

  • Leverage Ratio: Increased from 1.9 to 2 during the quarter.

  • Capex Investments: SEK 77 million in Q3, 3.9% of sales.

  • Fiber Solutions Revenue: 74% of total revenues in Q3.

  • Harsh Environment Revenue: 14% of total revenues, grew 47% year-over-year.

  • Data Center Revenue: 12% of total revenues, grew 8% year-over-year.

  • Order Book: Approximately 2.5 months of sales.

Release Date: October 25, 2024

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

Positive Points

  • Hexatronic Group AB (HTROF) reported a 2% increase in net sales for Q3, driven by higher sales in fiber solutions in North America and new focus areas such as harsh environment and data centers.

  • The EBITA margin improved sequentially to 11.8% in Q3 from 11% in Q2, indicating better profitability.

  • The company has a strong financial position with a leverage ratio of 2 and a cash conversion rate of 70%.

  • Hexatronic Group AB (HTROF) completed the acquisition of parts of the Icelandic company Endor, enhancing its data center market offerings.

  • The new duct and pipe factory in Ogden, Utah, has started production, expanding the company's market reach in the western US.

Negative Points

  • Hexatronic Group AB (HTROF) experienced a 4% sequential decline in sales compared to the previous quarter.

  • There is continued weak demand for fiber solutions in Europe, particularly in the UK and Germany, coupled with price pressure in most markets.

  • EBITA decreased to SEK 230 million from SEK 296 million in the same quarter last year, reflecting lower profitability.

  • The company's order book is relatively short, covering approximately 2.5 months of sales, which may indicate potential volatility in future revenues.

  • CEO Henrik Larsson Lyon announced his decision to step down, which could lead to leadership transition challenges.

Q & A Highlights

Q: Can you explain the increase in costs despite a strong gross margin? A: Pernilla Linden, CFO: The cost increase is mainly due to higher sea freight costs and changes in the LTIP Accrual. Additionally, there were startup costs for the Ogden plant in this quarter.

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