Duerr AG (DUERF) Q2 2024 Earnings Call Highlights: Record Order Intake and Improved EBIT Margin ...

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Wed, Oct 9, 2024, 3:40 PM 4 min read

Order Intake: EUR1.3 billion in Q2; record H1 order intake of almost EUR2.8 billion.
Revenue: Up 6% year-on-year to approximately EUR1.2 billion in Q2.
EBIT Margin: Improved from 4.9% in Q1 to 5.2% in Q2 before extraordinary effects.
Net Income: Declined by one-third due to higher PPA effects and interest costs.
Free Cash Flow: EUR44 million after six months.
Net Financial Debt: Increased to EUR533 million, mainly due to dividend payment.
Sales Revenue: EUR2.3 billion in H1, including consolidation effects of EUR167 million.
Geographical Distribution: Growth in Germany; stable in Americas and Europe.
EBIT Before Extraordinary Effects: Improved by 9% year-over-year.
Net Working Capital: Declined to EUR480 million at the end of Q2.
Divisional Performance: Strong performance in Application Technology and Clean Technology Systems.
HOMAG Sales Decline: About 14% decline, compensated by growth in other divisions.
Guidance for 2024: Confirmed, with potential to reach the upper end of the order intake guidance corridor of EUR5 billion.

Warning! GuruFocus has detected 6 Warning Signs with DUERF.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Duerr AG (DUERF) achieved a record order intake of EUR 2.8 billion in the first half of 2024, driven by strong performance in the automotive sector.
The company's EBIT margin before extraordinary effects improved from 4.9% in Q1 to 5.2% in Q2, indicating operational efficiency.
Free cash flow was solid in Q2, supported by strong order intake and disciplined net working capital management.
Duerr AG (DUERF) confirmed its 2024 outlook, with a good chance to reach the upper end of the guidance corridor for order intake at EUR 5 billion.
The company has made significant progress in sustainability, reducing CO2 emissions by 51% since 2019 and receiving high ESG ratings, including a prime rating at ISS ESG and a platinum medal from Ecovadis.

Negative Points

Net income declined by one-third due to higher PPA effects following the PBS Automation acquisition and increased interest costs.
The HOMAG division experienced a sales decline of about 14%, impacting overall performance despite growth in other divisions.
Extraordinary effects in Q2 were higher than in Q1, including one-time expenses for the divestment of Agramkow and capacity adjustments.
Order intake in the Industrial Automation Systems division was slow due to delays in demand from e-mobility customers.
The geographical distribution of sales showed a decline in China's share, partially offset by growth in Europe and the rest of Asia.

Q & A Highlights

Q: Can you elaborate on which segments are driving the expectation to reach the upper end of the order intake guidance? Also, why do you expect H2 margins to be better than H1? A: The automotive segment is the primary driver for reaching the upper end of the order intake guidance. We have a strong pipeline, particularly in paint and final assembly systems. For H2 margins, the improvement is expected due to increased sales volume, which will enhance absorption and overall EBIT performance.

Q: Regarding the paint and final assembly systems order backlog, there seems to be a discrepancy in the expected figures. Can you explain this? A: We have not debooked any orders. The calculation discrepancy needs to be checked, but there have been no cancellations or reallocations between divisions that we are aware of.

Q: With the restructuring at HOMAG, have you noticed any negative impact on employee motivation or efficiency? A: It's challenging to assess individual sentiments, but now that the restructuring program is complete and targets have been met, there seems to be an improvement in sentiment as employees have clarity on the situation.

Q: In industrial automation, if the market remains muted, can you maintain a value-before-volume approach? A: The value-before-volume strategy mainly applies to our automotive activities. In industrial automation, margins are typically good, and the issue is more about project delays rather than fierce competition. We are also seeing growth in life sciences and expect e-mobility orders to come through.

Q: Why not adjust the divisional order intake guidance for APT, given the strong H1 performance? A: We prefer to remain conservative with our guidance. While the pipeline remains solid, the timing of order bookings, especially in automotive, can vary significantly, so we are cautious about making changes at this point.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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