Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SIG Group AG (SCBGF, Financial) reported a strong performance in aseptic and chilled cartons, with constant currency growth of 6.7% for the first half of the year.
- The company successfully refinanced a significant portion of its debt, extending its maturity profile to beyond 2030 at competitive rates.
- Free cash flow improved significantly in Q2 to a positive EUR24 million compared to a negative EUR118 million in Q2 2023.
- Europe delivered strong second-quarter growth of 7% at constant currency, driven by aseptic carton volumes in the dairy sector.
- The company expects to place over 75 fillers by the end of the year, indicating strong future growth potential.
Negative Points
- Revenue for the first half of the year was down 12%, primarily due to underperformance in the bag-in-box and spouted pouch segments.
- Production challenges due to a plant relocation from Canada to the US led to capacity constraints and delayed shipments, impacting profitability.
- The adjusted EBITDA margin guidance was revised to the lower end of 24% to 25%, down from the previous range of 25% to 26%.
- The Americas region saw a revenue decline of 4.1% on a constant currency basis for the first half of the year.
- Foreign currency headwinds and under-absorption of production costs negatively impacted adjusted EBITDA.
Q & A Highlights
Q: Can you explain the low drop-through rate in the first half despite increased sales?
A: Samuel Sigrist, CEO: The low drop-through rate is mainly due to under-absorption and mix effects. Last year's Q2 had a strong margin mix, which is a tough comparison. The under-absorption issue is primarily from the bag-in-box and spouted pouch operations.
Q: With raw materials like aluminum and polymers coming down, is there an incremental margin support for the second half?
A: Samuel Sigrist, CEO: Our updated guidance considers current information, including raw material costs. We expect consumer demand to accelerate in the second half, but end markets are not rebounding as strongly as anticipated. The guidance reflects these factors, including lower absorption issues.
Q: How do you view average selling prices for the next 12 to 18 months amid deflationary pressures?
A: Samuel Sigrist, CEO: We were behind on price increases and will take time to adjust prices downward. This year, prices are broadly flat, reflecting volume growth. It's too early to predict 2025, but there might be slight pricing pressure.
Q: Can you provide insights on the current trading trends, especially in the IMEA region?
A: Samuel Sigrist, CEO: We manage performance over the full year, not quarterly. IMEA is more volatile but offers decent margins. We might see muted growth in Q3, but expect strong growth for the full year.
Q: What is the impact of the new sleeves plant in India on growth and costs?
A: Samuel Sigrist, CEO: The plant is a growth investment, offering cost optimization by localizing production. It will initially have ramp-up costs but will contribute positively to margins over time as we localize more production processes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
