GuruFocus - Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kendrion (AS:SVEL) NV (FRA:K3E) has strategically shifted focus to industrial sectors, which is expected to fuel sustained profitable growth.
- The company reported a slight improvement in both revenue and profitability for its continuing operations in Q3 2024 compared to Q3 2023.
- The sale of the automotive franchise has significantly strengthened Kendrion NV's balance sheet, reducing total net debt from EUR 160.2 million to EUR 101.1 million.
- The Industrial Brakes group experienced a 7% year-over-year revenue growth, primarily driven by the Chinese market.
- Kendrion NV expects to achieve financial targets announced at their capital markets day, including an EBITDA margin of 15-18% from 2025 and a return on invested capital of 23-27% by 2027.
- The added value margin declined by 90 basis points due to a changed sales mix, impacting profitability.
- Industrial actuators and controls revenue decreased by 6% year-over-year, affected by a downturn in the general machine building market.
- The discontinued operations posted a net loss of EUR 9.0 million in Q3, with EUR 7.4 million related to the automotive transaction.
- The company is undergoing a significant reduction in workforce, with a planned decrease of about 70 FTEs by the end of Q4 2024.
- Economic conditions remain challenging, with weak trading in Europe, particularly in Germany, and subdued activity in China, impacting growth prospects.
A: (CFO) The EUR9 million savings include EUR7 million from discontinued operations, with the remaining EUR2 million to be realized from continued operations starting October 1. No additional restructuring charges are expected as everything is included in the Q3 numbers.
Q: What drove the 90 basis points decline in gross margin in Q3, and is this a one-off event?
A: (CEO) The decline was due to a sales mix change, with increased inventory of finished goods, which have a lower margin. This is not a one-off, but we are working on improving margins structurally starting in Q4 and into 2025.
Q: Can you clarify the total proceeds from the sale, including the working capital adjustments?
A: (CFO) We received over EUR50 million in cash initially and expect an additional EUR11.5 million. The total proceeds will equal roughly EUR65 million, as initially announced.
Q: The growth in retained automotive was lower than expected. Can you elaborate on the pace of scaling up new projects?
A: (CEO) The retained automotive growth was 4%, with China ramping up significantly. The Romanian electronics production is declining, but new projects in China are expected to continue growing next year.
Q: Regarding cost savings, there seems to be a discrepancy in the figures. Can you clarify the breakdown?
A: (CFO) The total cost savings are EUR13.5 million, with EUR4.5 million less contribution from synergies. The net savings remain at EUR9 million, as previously communicated.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.