Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Storskogen Group AB (FRA:0VK, Financial) reported a positive organic sales growth of 3% across all business areas.
- The company achieved an adjusted EBITA margin of 9.8%, inching closer to their target of 10%.
- Cash conversion remains strong at 99%, exceeding the company's target.
- The company's leverage ratio improved slightly to 2.6, with no significant bond maturities until 2027.
- S&P affirmed Storskogen Group AB's credit rating at BB with an improved outlook from negative to stable.
Negative Points
- Net sales declined by 4% due to divestments and currency effects.
- Consumer demand remains subdued, impacting the trade business area.
- The construction market remains soft, affecting companies exposed to this sector.
- Global uncertainties pose potential delays in broader recovery, especially for consumer and construction markets.
- The return on equity and return on capital employed are lower compared to last year, despite slight sequential improvements.
Q & A Highlights
Q: Can you elaborate on the margin impact of the portfolio divestments announced during the summer?
A: The divestments primarily impacted the business area services, contributing to a margin uplift of over a percentage point, approximately 1.3%. The impact was less visible in trade and industry. The divestments, along with operational improvements, contributed to the positive margin development.
Q: How should we interpret the stable order books in the industry segment? Are you seeing a slowdown in orders?
A: The order books remain at healthy levels, though slightly slower in Q3 compared to Q2. We have not observed a significant slowdown in October or early November, but we are monitoring the situation closely.
Q: What is the company's strategy regarding leverage, given the current levels?
A: Our focus is on improving EBITA through operational enhancements. We aim to reduce leverage by increasing profitability as demand returns. Historically, Q4 has been a stronger quarter for cash flow, which should aid in deleveraging.
Q: Can you explain the substantial cash outflow in non-current assets and whether this will continue?
A: The outflow includes investments in IT systems and real estate for productivity improvements, as well as a one-off shareholder contribution related to divestments. While some investments will continue, the level may be lower going forward.
Q: Could you provide details on the reversal of the incentive program in Q3?
A: The reversal amounted to SEK12 million, related to provisions from an incentive program initiated in 2021. This program is maturing, leading to the reversal of costs previously booked.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
