Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Element Solutions Inc (ESI, Financial) delivered strong financial results with 6% organic sales growth and 8% constant currency adjusted EBITDA growth.
- The electronics segment grew 9% organically, driven by advanced packaging solutions and semiconductor assembly.
- The company announced the divestiture of its graphic solutions business, which is expected to be accretive to growth, margin, and return on capital.
- ESI's energy business showed robust performance with double-digit sales growth.
- The company is well-positioned for future growth with investments in new technologies and strategic capacity expansions in growth geographies.
Negative Points
- Smartphone sales growth did not accelerate as expected, impacting the electronics market.
- The industrial and specialty segment faced headwinds from softening demand in Europe and lower revenue from metal price surcharges.
- Automotive demand weakened, leading to softer volumes in industrial service treatment.
- The strengthening US dollar negatively impacted total company net sales and adjusted EBITDA.
- The company faces macroeconomic uncertainty, particularly in industrial end markets, which are weaker than expected.
Q & A Highlights
Q: Can you discuss the acceleration in electronic trends and how it impacts your view for 2025?
A: Benjamin Gliklich, CEO: The electronics market has not been uniformly improving, but we've seen traction in emerging technology trends offsetting broader weaknesses. For 2025, forecasts indicate a general improvement in the electronics market, with MSI expected to grow between high single-digit and double-digit percentages. We anticipate a seasonal impact in Q4 but are optimistic about broader electronic health in 2025.
Q: How significant is the advanced packaging segment across your business units?
A: Benjamin Gliklich, CEO: Advanced packaging impacts all three of our electronics businesses, with a couple of hundred million dollars in revenue and growing rapidly. It plays a significant role in our semiconductor business and also affects our circuitry and assembly businesses.
Q: Are you seeing a need for additional capacity in advanced packaging materials?
A: Benjamin Gliklich, CEO: Our existing footprint is adequate to support increased volumes. We are scaling up Kuprion manufacturing capabilities, but current capacity constraints in the market are not indicative of issues on our side. The demand is robust, and we are well-positioned to meet it.
Q: How do you see the power electronics opportunity evolving?
A: Benjamin Gliklich, CEO: The power electronics business is growing nicely, driven by increased production rates and new business wins. We have a strong pipeline and are seeing contributions to the P&L from wins with Chinese OEMs, Western legacy OEMs, and emerging Western OEMs. The future for power electronics is bright, even in a weak EV market.
Q: How do you view your electronics business growth rate and returns in the medium term?
A: Benjamin Gliklich, CEO: The shift towards emerging growth drivers in electronics is allowing us to outperform. We expect the broader electronics market to recover from a cyclical trough, supporting a mid to high single-digit growth rate for our business. Margins should accrete as electronics becomes a larger percentage of the company.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
