Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Troax Group AB (STU:5TO, Financial) reported an 8% growth in order intake, supported by a 9% structural effect from acquisitions.
- Sales increased by 12% year-over-year, with a strong EBITA margin of 19.7% despite lower volumes.
- The company delivered strong operating cash flow and continued to reduce net debt, strengthening its balance sheet.
- Troax Group AB inaugurated a new facility in China, enhancing its growth potential in the APAC region.
- North America showed a 12% growth in the quarter, driven by the warehousing and automotive segments.
Negative Points
- Organic growth was down by 1%, indicating reliance on acquisitions for growth.
- Continental Europe, the largest sales area, saw a 5% decrease in the quarter.
- The Nordic region continued to decline, mainly due to the construction segment's weakness.
- The EBITA margin of 19.7% was below the previous year's 20.9%, indicating margin pressure.
- The company faced challenges in the northern parts of Europe, with mixed demand and weak market conditions.
Q & A Highlights
Q: Can you elaborate on the sales and order intake in Europe, given the mixed results?
A: Martin Nyström, President and CEO, explained that Europe presents a mixed picture. The Nordics remain weak, and the German-speaking regions also show underlying market weakness. However, the southern parts of Europe are more stable, and the overall picture is expected to remain mixed into the fourth quarter and 2025.
Q: What is driving the growth in North America, and how significant is active safety in this growth?
A: Martin Nyström noted that while active safety is promising for the future, the current growth is driven by conventional business, particularly in warehousing and automotive sectors. Active safety is still in the early stages but shows potential for future growth.
Q: Can you provide details on the investment plans for North America?
A: Martin Nyström stated that Troax is evaluating options to grow and improve efficiency in North America, with plans to invest between $8 million and $10 million in machinery. The aim is to have a new facility operational by 2026.
Q: How does the new facility in China contribute to Troax's strategy?
A: Martin Nyström highlighted that the new facility in China enhances internal efficiency and supports growth by reducing lead times and costs. This regionalization strategy is aimed at serving both the Chinese market and other regional markets more competitively.
Q: What are the expectations for gross margin sustainability given the current capacity utilization?
A: Martin Nyström expressed confidence in maintaining strong gross margins, attributing it to effective value selling and pricing strategies. Despite low volumes, the company remains aligned with internal targets and does not anticipate significant deviations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
