Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HMS Networks AB (HMNKF, Financial) reported a strong organic order intake growth of 12%, indicating a positive trend in customer demand.
- The company achieved an adjusted EBIT margin of 24.5%, close to its target of 25%, demonstrating effective cost management and operational efficiency.
- Strong cash flow of SEK187 million was reported, aiding in debt reduction and supporting financial stability.
- The integration of recent acquisitions, Red Lion and PEAK-System, is progressing well, contributing positively to the company's performance.
- The new organizational structure into three divisions is functioning effectively, enhancing accountability and operational focus.
Negative Points
- There is a 17% decline in organic sales, primarily due to a decrease in the Anybus embedded business, which impacts overall revenue growth.
- The European market remains soft, with hesitancy in Germany and Continental Europe affecting sales performance.
- Tariffs pose a significant challenge, creating uncertainty and potential cost increases that may impact profitability.
- The company faces potential headwinds from currency fluctuations, particularly with the strengthening of the Swedish crown.
- There are ongoing challenges with the new organizational structure, particularly in smaller markets where team segmentation is difficult.
Q & A Highlights
Q: Can you provide insights into the linearity of new orders throughout the quarter and how April is tracking?
A: Joakim Nideborn, CFO, stated that the company maintained a solid pace throughout the quarter, with a particularly strong third week in March. April started similarly, with some distributors placing orders in anticipation of potential tariffs. However, there is a balance due to past high inventory levels.
Q: Are customers increasingly worried about the environment, and are there any industries showing incremental weakness?
A: CEO Staffan Dahlstroem noted that while automotive in Europe has been weak, there are mixed signals from Germany. The tariffs have caused concern, especially for companies with exposure to China, leading to delays in investment decisions.
Q: Regarding Red Lion's strong performance, are there any one-off orders, and is there a competitive advantage in manufacturing?
A: Joakim Nideborn explained that Red Lion saw more product orders with smaller average sizes, which is preferred. While no direct competitive advantage has been observed, there is a belief that "Buy American" sentiment could benefit them in the future.
Q: Can you elaborate on the potential price increases due to tariffs?
A: Joakim Nideborn mentioned that they are in the process of communicating with customers and aim to protect gross profits. Price increases will vary depending on the product flow, with some requiring more adjustment than others.
Q: What is the timeline for moving production to the US, and how much of the sales can be moved?
A: Staffan Dahlstroem indicated that they are focusing on high-revenue products with fewer part numbers for initial moves. The process involves upgrading the York facility and could start late this year, with more focus in 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
