Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grenke AG (WBO:GLJ, Financial) achieved a record EUR3 billion in leasing new business, marking a significant milestone in the company's history.
- The company reported a strong contribution margin of 17%, indicating robust profitability in its leasing operations.
- Grenke AG's focus on cost management and digital excellence is expected to enhance efficiency and scalability.
- The company has successfully diversified its portfolio across industries, asset types, and countries, which helps mitigate risk.
- Grenke AG's operating income has shown significant growth, driven by the expansion of its leasing new business over the past three years.
Negative Points
- The company faced a challenging operating environment in 2024, with macroeconomic uncertainties and increased insolvencies impacting financial performance.
- Grenke AG's cost-income ratio increased to 59.2%, higher than expected, indicating rising operational costs.
- The company experienced a significant increase in settlements of claims and risk provisions due to a rise in customer insolvencies.
- Despite top-line growth, Grenke AG's bottom-line profits have been shrinking, raising concerns about profitability.
- The return on equity for 2024 was around 6%, the lowest in company history, and the company is not expected to return to historical mid-teens ROE in the near term.
Q & A Highlights
Q: Johannes Thormann from HSBC asked about Grenke's outlook, noting that while the company is growing its business, profits have been shrinking. He questioned the reliability of the new net profit guidance and the likelihood of a capital increase given the equity ratio.
A: Sebastian Hirsch, CEO, acknowledged the importance of top-line growth for future earnings and emphasized that the new business today is the source of future profits. He mentioned that the company is focused on improving cost efficiency and is confident in achieving the guidance provided. Regarding capital increase, Hirsch stated that it depends on the growth pace, and currently, the company is well-covered with its equity.
Q: A question from the chat asked if Grenke expects to return to historical mid-teens return on equity (ROE) in the mid or long term, given the current lower ROE levels.
A: Sebastian Hirsch responded that the company aims to achieve a double-digit ROE in the long term. He highlighted the importance of investments in digitalization and governance, as well as the need to grow new business and improve efficiency to reach this goal.
Q: Another chat question inquired why Grenke is not more profitable despite increasing leasing receivables and CM2 margins, and how the company plans to address this.
A: Hirsch explained that the operating income is growing due to new leasing business, but there is a time lag in realizing profits. He noted that costs are primarily incurred at the beginning of leasing contracts, while earnings are spread over four years. The company is focused on maintaining a strong contribution margin and improving cost efficiency.
Q: A question was raised about the impact of current insolvencies on Grenke's profitability and how the company plans to manage this risk.
A: Martin Paal, CFO, stated that the company is experiencing an elevated level of insolvencies, which is reflected in the loss rate. He mentioned that Grenke is well-prepared with a guidance of a 1.5% to 1.6% loss rate for 2025 and is monitoring the situation closely.
Q: An inquiry was made about Grenke's collaboration with INTESA SANPAOLO and whether similar partnerships are expected in the future.
A: Sebastian Hirsch explained that the collaboration with INTESA SANPAOLO is a new sales channel for Grenke, and its success will determine future partnerships. He emphasized that the company will evaluate the integration and performance of this collaboration before considering similar partnerships.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
