Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Instalco AB (FRA:4IIA, Financial) reported a strong cash flow from operations amounting to SEK907 million, indicating robust financial health.
- The company has a significant order backlog of SEK8.5 billion, providing a solid foundation for future revenue.
- Instalco's decentralized business model allows for adaptability to local market changes, which has been beneficial in the current challenging market conditions.
- The company's multidisciplinary approach, as demonstrated by successful collaborations among subsidiaries, is proving to be a winning concept.
- Instalco's service area grew by 17% year-over-year, making up 34% of sales in the quarter, which acts as a stabilizing factor in challenging times.
Negative Points
- Net sales declined by 5% in the quarter, reflecting a cautious approach to order taking due to market price pressures.
- The order backlog decreased by 7.3%, indicating a slowdown in new project acquisitions.
- EBITDA margin decreased to 6% from the previous year, impacted by a weaker market and less favorable project completions.
- The company experienced project write-downs, particularly in mid and southern Sweden, affecting profitability.
- Instalco's leverage increased to 2.7 times, slightly above their target, due to lower growth in earnings and a slowed acquisition pace.
Q & A Highlights
Q: Can you specify the size of the write-downs in the quarter and if similar amounts are expected in the coming quarters?
A: There were no significant write-downs of specific dignity. The tougher environment means we are not able to get more than anticipated from finalized projects, especially from additional work. It's across the board, small amounts here and there, contributing to a lower margin this quarter. β Robin Boheman, CEO
Q: What is driving the margin improvement in the rest of the Nordics despite a tough market environment?
A: The main reason is our strict cost management in these countries, especially Finland. We have been more prudent with costs, which is positively affecting the margin. The market is not better in Finland or Norway, but cost control is helping us. β Robin Boheman, CEO
Q: Can you highlight any particular mitigating actions being taken to offset price pressure?
A: We focus on helping underperforming subsidiaries through our Go Grade Pro program, which involves cost-cutting, contract reviews, and improving project efficiency. We aim to prepare subsidiaries for future growth while mitigating short-term costs. β Robin Boheman, CEO
Q: Is the deterioration in profitability in Sweden more focused on the service or contracting business?
A: The deterioration is more on the contracting side. We have finalized a few projects that didn't go as planned, with less additional work than usual. β Robin Boheman, CEO
Q: How much business do you have with Northvolt, and have you seen any effects from the bankruptcy of Northvolt Expansion?
A: We had substantial business volume with Northvolt, but currently, our exposure is limited. The bankruptcy of Northvolt Expansion affected us minimally, with only a few million SEK lost. β Robin Boheman, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
