Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wacker Neuson SE (WKRCF, Financial) reported a positive development in their services segment, with rental demand and spare part sales increasing by over 3% year-on-year.
- The company successfully reduced its inventories by EUR 154 million year-on-year, contributing significantly to free cash flow generation.
- Wacker Neuson SE (WKRCF) has been recognized for product innovation, receiving awards for their new products, including the dynamic weighing system in the telehandler KT 360 and the electric hoof truck with the 'follow me' function.
- The company has implemented cost-cutting measures, reducing SG&A costs below EUR 100 million per quarter, and targeting a sustainable minimum contribution of 1% point of margins in 2025.
- Wacker Neuson SE (WKRCF) strengthened its market presence by acquiring 100% of the Belgian dealer company, Compact Machinery BV, enhancing its product and service offerings in Belgium.
Negative Points
- The company experienced a 14.5% decline in revenue year-on-year for the first nine months of 2024, primarily due to weak market conditions and full dealer stocks.
- EBIT margin fell to 4.8% in the third quarter, a significant drop from 9.8% in the prior year, due to reduced revenues and production output.
- Revenues in the Europe region, which accounts for 77% of group revenue, fell by 12%, significantly impacting core European markets.
- The Americas region saw a 20% decline in revenue, with reduced end customer demand and excessive stock levels.
- The Asia Pacific region experienced a 30% revenue drop, reflecting softened demand in Australia, a previously strong market.
Q & A Highlights
Q: Last call you mentioned that dealer de-stocking would be largely complete by year-end. Has this timeline shifted to the end of Q1 2025? Also, how much short-time work was there in Q3, and will it increase in Q4? How do Q3 and Q4 production levels compare?
A: We expect dealer de-stocking, particularly for Grama and in the US, to extend into Q1 2025. In core markets, it might conclude by year-end. Production levels in Q3 were low due to plant closures in August. Q4 typically mirrors this due to December closures, but we saw a slight uptick in October orders, which we're analyzing for December production impact.
Q: Regarding the acquisition in October, is it significant to financials or CapEx?
A: The acquisition is relatively small and not significant to financials or CapEx. All previous CapEx items remain valid.
Q: What are your thoughts on 2025 production planning and pricing dynamics given current market conditions?
A: We are maintaining current production levels and working to improve the book-to-bill ratio. Pricing pressure exists but is limited. The main issue is dealers not placing orders, which cannot be resolved by price reductions alone. We are supporting customers with financing to facilitate sales.
Q: Can you clarify the savings program and its impact on 2025 and beyond?
A: The savings program aims for sustainable SG&A reductions, contributing over EUR 20 million in 2025, with a 1% margin improvement. These savings will be annualized into 2026, with no further restructuring costs expected, ensuring a sustainable positive impact.
Q: What is the outlook for free cash flow in 2025, assuming stable market conditions?
A: We aim for continued positive free cash flow generation in 2025, though possibly not at the same scale as 2024. Further reduction of networking capital, particularly inventory, is a priority.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
