Release Date: October 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Despite lower sales, Note AB (FRA:NQA, Financial) achieved better-than-expected profitability, indicating effective cost management.
- The company reported strong cash flow, with SEK157 million in the quarter and nearly SEK400 million year-to-date.
- Note AB (FRA:NQA) is actively reducing inventory and supplier debt, which is expected to positively impact future cash flow.
- The company is investing in new facilities and automation, preparing for anticipated demand growth in 2025.
- Western Europe operations are less affected by the sales decline, maintaining relatively stable performance.
Negative Points
- Sales fell short of expectations, with a 22% decline in Q3, and the company had to revise its guidance.
- The Chinese market remains extremely weak, with a 35% decline, and no quick recovery is anticipated.
- The communication segment underperformed due to a significant gap between forecasted and actual orders.
- The company faces challenges in converting customer forecasts into actual orders, impacting sales.
- There is a risk of customers in the Greentech and Communication segments going out of business due to market conditions.
Q & A Highlights
Q: Do you believe that the expected sales in Q4 is primarily due to timing factors, seasonal patterns, or an increase in end consumer demand?
A: Our guidance is fairly flat to our run rate if you look at the month. We don't expect a recovery and anticipate Q4 to have similar market conditions as Q2 and Q3, excluding July, which is lower. We expect destocking to decrease gradually.
Q: Besides lower interest rates, what other factors would encourage customers to shift from a defensive approach to a more active one?
A: The general economic climate is a limiting factor. Many private individuals and companies are not investing much currently. If the economy bounces back, especially the construction industry, it would positively impact our business.
Q: Do you still see the 7% estimated market growth as realistic until 2030, given recent global challenges?
A: We believe this number is valid for Europe, which will benefit from geopolitical disturbances, leading to more production in Europe. However, the global economy may grow only 2% to 3% annually, but European production is expected to grow faster.
Q: Can you comment on new customer wins year-to-date and how they compare to previous years?
A: We have seen a decline this year compared to previous years. The time from quote to decision has increased, although we are working with a similar number of quotes and bids. This has resulted in a weaker performance this year.
Q: Can you comment on price pressure and pricing in the market? Are customers demanding lower prices?
A: Customers always want lower prices, but we are in an inflationary economy with cost pressures. We have not reduced prices more this year than usual. Price adjustments are based on material costs, and we haven't seen increased price pressure this year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
