Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Midsona AB (FRA:9KF, Financial) achieved organic sales growth for the second consecutive quarter, with a growth rate of 2.6% in Q3.
- The company's EBIT improved significantly from SEK 9 million last year to SEK 32 million this year, indicating strong operational performance.
- Gross margin increased from 25.2% last year to 28% this year, despite high raw material prices.
- Net debt to EBITDA ratio improved significantly, reducing from 4 times last year to 2 times this year, showcasing enhanced financial stability.
- The Nordic division showed strong performance, with a 35% improvement in operating profit to SEK 66 million, driven by a more profitable product mix.
Negative Points
- Overall sales were slightly down due to currency effects, despite organic growth.
- The company faced production constraints in its German factories, limiting potential sales growth in the organic segment.
- Conventional health food brands saw a decline due to the termination of less profitable contracts.
- The North division posted a loss of SEK 3 million, although it was an improvement from the previous year's loss.
- Market conditions remain challenging, with some markets and channels still depressed, affecting overall growth potential.
Q & A Highlights
Q: Could you provide an update on the progress of SKU reduction and the remaining work in this area?
A: We are more than halfway through the SKU reduction process. It has improved our model profile despite some lower net in certain categories. We are setting up a central purchasing organization and hiring a purchasing director, which will continue into 2025. Our focus remains on improving our modern profile while achieving organic growth targets. - Peter Ãsberg, CEO
Q: Regarding the new organizational structure, will this lead to higher OPEX due to new hires, or is it just an adjustment?
A: It's primarily an organizational adjustment. We are flattening the organization with a stronger headquarters and fewer resources in divisions. This should not significantly increase OPEX, although we are hiring a sourcing director. Tight cost control remains crucial. - Peter Ãsberg, CEO
Q: Your working capital tie-up seems lower than expected. Is this due to SKU discontinuation or improved efficiency?
A: The lower working capital tie-up is due to both SKU discontinuation and improved efficiency. We have conducted a return on capital employed analysis, leading to discontinuation of low-margin contracts that also tied up capital. This should reduce the need for inventory build-up in the future. - Max Bokander, CFO
Q: Can you clarify the impact of the new central marketing, innovation, purchasing, and HR functions on your operations?
A: These changes are part of our organizational adjustment to strengthen our headquarters while reducing resources in divisions. This should not drive major OPEX increases, except for a few strategic hires like the sourcing director. - Peter Ãsberg, CEO
Q: How do you plan to continue improving your financial stability and growth?
A: We aim to achieve organic sales growth of 3-5% per year and an EBIT margin of 8% by 2027. We are focusing on streamlining our product range, enhancing internal efficiency, and strengthening our market position to meet these targets. - Peter Ãsberg, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
