Release Date: November 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Elekta AB (EKTAF, Financial) launched its latest AI-powered adaptive CT-Linac, Elekta Evo, and Elekta ONE Planning, receiving positive customer feedback and ongoing installations in Europe.
- The company achieved its target of providing radiation therapy access to 300 million people in underserved markets six months ahead of schedule.
- Elekta AB (EKTAF) reported strong double-digit order growth in China, indicating a recovery in public procurement activities.
- The company's service business grew by 4% year-over-year, with growth in most business lines and regions.
- Elekta AB (EKTAF) is implementing a cost reduction initiative expected to generate annual savings of SEK250 million by the end of fiscal year '24-'25.
Negative Points
- Net sales decreased by 4% in constant currencies, primarily due to declines in Europe and Latin America.
- Gross margins declined to 35.7%, impacted by reduced net sales, market mix changes, and foreign exchange rates.
- The adjusted EBIT margin fell to 9.8%, affected by lower sales and higher amortization costs from recent product launches.
- The book-to-bill ratio was 0.99 for the second quarter, indicating no major tenders in the market.
- Cash flow after continuous investments was negative SEK31 million, compared to SEK211 million positive last year, due to lower earnings and higher investments.
Q & A Highlights
Q: Could you quantify order growth in China for the quarter and elaborate on the key drivers of order weakness in other geographies?
A: In China, we saw strong double-digit growth in orders, driven by increased public procurement activity. However, in other regions, particularly Europe, there were no major tenders, and some markets are waiting for new product launches like Elekta Evo and Elekta ONE Planning, which impacted order intake.
Q: What gives you confidence in achieving mid-single-digit sales growth for the full year, especially given the softer order print?
A: The confidence comes from a strong book-to-bill ratio over the past 12 months, ongoing installations of Elekta Evo in Europe, and the expected recovery in China. Additionally, the comparison base for Q4 is easier, as last year's Q4 saw a decline.
Q: Can you provide more details on the gross margin evolution and the impact of new products like Elekta Evo and ONE on profitability?
A: The gross margin was impacted by lower revenues, negative FX effects, and market mix changes, particularly in Ukraine. New product launches like Elekta Evo and ONE are expected to drive higher price points and better profitability, contributing to the goal of reaching a 14% EBIT margin in the future.
Q: How is the anticorruption campaign in China affecting your business, and what is your outlook for the region?
A: The anticorruption campaign is becoming a new normal, but we are seeing increased public procurement activity. Elekta has a strong position in China, and we expect continued growth driven by the need for radiotherapy and government stimulus packages.
Q: What are the key risks to achieving your full-year guidance, and how much of it is out of your control?
A: Key risks include geopolitical factors and the FDA approval process for Elekta Evo in the US. However, the FDA approval is not heavily factored into this year's Americas numbers, and we are focusing on what we can control, such as installations and sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
