Release Date: March 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ElringKlinger AG (EGKLF, Financial) achieved its annual targets with an adjusted EBIT margin of 4.9% and an operating free cash flow of EUR 58 million.
- The company has a solid financing structure, with a new syndicated loan of EUR 450 million, providing flexibility in uncertain times.
- Revenue in the e-mobility division more than doubled compared to the previous year, indicating strong growth potential in this segment.
- The aftermarket segment performed strongly, increasing sales by around 12% to EUR 336 million, contributing significantly to the group's revenue.
- ElringKlinger AG (EGKLF) successfully reduced its net debt to a long-term low of EUR 246 million, with an adjusted net debt to EBITDA ratio of 1.2, indicating financial stability.
Negative Points
- The company recorded a slight year-on-year revenue decline of 2.4%, impacted by challenging market conditions and currency exchange effects.
- EBITDA fell by 28% compared to the prior year, with reported earnings per share in negative territory due to impairment losses.
- The equity ratio decreased to 39%, below the medium-term target range of 40 to 50%, indicating a need for improvement in financial stability.
- ElringKlinger AG (EGKLF) recognized impairments and restructuring charges totaling EUR 238 million as part of its strategic measures.
- The company faces a mixed market situation, with stagnating automotive markets in Europe and North America affecting overall growth prospects.
Q & A Highlights
Q: Can you elaborate on the strategic measures taken to improve profitability and cash flow?
A: The CEO explained that ElringKlinger AG has implemented a strategic package aimed at enhancing profitability and generating sustainable cash flow. This includes discontinuing the system business for electric drive units and focusing on profitable components. The company recognized impairments of €85 million related to these changes and is reviewing other shareholdings for potential further steps. Additionally, they have closed divestments in Switzerland and the U.S., recognizing impairments and charges totaling €103 million. The strategy also involves consolidating the global footprint and discontinuing operations in certain locations, with total impairments of €50 million related to these actions.
Q: How is the e-mobility division performing, and what are the future expectations?
A: The CFO reported that revenue in the e-mobility division more than doubled compared to the previous year, with sales increasing from around €48 million to €102.5 million in 2024. The share of total revenue from e-mobility is expected to continue rising. The company is preparing for further large-scale orders, which will require investments, but they expect the CapEx ratio to eventually decrease to between 2% and 4% of total sales.
Q: What are the financial highlights for the fiscal year 2024?
A: The CFO highlighted that ElringKlinger AG recorded revenue of €1.83 billion, a slight decline of 2.4% year-on-year. Adjusted EBITDA was €197.1 million, and the adjusted EBIT margin was 4.9%, meeting the target level. Operating free cash flow was €58 million, significantly above expectations, allowing the company to reduce net debt to €246 million. The adjusted net debt to EBITDA ratio is at a low 1.2.
Q: How is the company addressing the challenging market environment, particularly in Europe and North America?
A: The CEO stated that despite the lack of market momentum in Europe and North America, ElringKlinger AG is compensating with large-scale orders and strong aftermarket business. The company expects organic sales to remain at previous year levels and anticipates moderate growth in the medium term. They are also optimizing costs and simplifying organizational structures to improve profitability.
Q: What are the expectations for the company's financial performance in 2025?
A: The CFO mentioned that ElringKlinger AG expects an adjusted EBIT margin of around 5% for 2025, similar to the previous year. Operating free cash flow is projected to be in the range of 1% to 3% of revenue, with a medium-term target of 2% to 4%. The net debt ratio is expected to return to a range of 1 to 2 in the medium term, following an initial increase due to technical effects of IFRS 16 leases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
