Elanders AB (STU:EA5B) Q3 2024 Earnings Call Highlights: Navigating Growth Amidst Market Challenges

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Sat, Oct 19, 2024, 1:01 AM 4 min read

Organic Growth: 3.9% for the group.
Adjusted EBITA Growth: 12% higher than the previous year.
One-off Items Impact: SEK139 million positively impacted non-adjusted results.
Cash Conversion Rate: Decreased to 86% year-to-date.
Supply Chain Solutions Organic Growth: 5.2% in the third quarter.
Adjusted EBITA Margin for Supply Chain Solutions: Increased to 7.2% from 6.7% the previous year.
Print and Packaging Solutions Growth: Negative growth of 2% in the third quarter.
Adjusted EBITA Margin for Print and Packaging Solutions: 4.9% compared to 6.5% the previous year.
Fashion Segment Organic Growth in Europe: 15% in the third quarter.
Fashion Segment Organic Growth in North America: Negative 19% in the third quarter.
Electronics Segment Organic Growth: 5% in the third quarter.
Automotive Segment Organic Growth for Print and Packaging: Negative 18% in the third quarter.
Automotive Segment Organic Growth for Supply Chain: Negative 3% in the third quarter.
Industrial Segment Organic Growth: 2% in the third quarter.
Healthcare Segment Organic Growth: 16% in the third quarter.

Warning! GuruFocus has detected 6 Warning Signs with STU:EA5B.

Release Date: October 18, 2024

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

Positive Points

Elanders AB (STU:EA5B) reported an organic growth of 3.9% for the group, driven by improvements in Europe and Asia.
The company's adjusted EBITA result improved by 12% compared to the previous year, with supply chain solutions being a significant contributor.
Elanders AB (STU:EA5B) achieved a 5.2% organic growth in supply chain solutions, primarily from activities in Europe and Asia.
The adjusted EBITA margin increased to 7.2% from 6.7% the previous year, reflecting the company's strategy to focus on higher-margin services.
The electronics segment showed positive growth with an organic increase of around 5%, driven by demand for laptops, servers, and life cycle management services.

Negative Points

North America remains weak, particularly in the fashion segment, with a negative organic growth of 19%.
The print and packaging solutions segment faced a challenging quarter with a negative growth of 2% and a decrease in adjusted EBITA margin to 4.9% from 6.5% the previous year.
The automotive segment experienced a negative organic growth of 18% in print and packaging, impacting overall performance.
The company's cash flow and cash conversion development decreased to 86% due to increased working capital from organic growth.
Leverage remains high at 3.7 times, slightly above the anticipated development for the year.

Q & A Highlights

Q: Can you provide more details on the North American market, particularly regarding the demand among existing customers and new client signings? A: Magnus Nilsson, CEO: We have a large number of small and medium-sized customers in North America, and it's encouraging to see that they are becoming more stable and optimistic. While demand is still lower than usual, there is a positive trend. Importantly, our conversion rate for new prospects has improved, which is promising for the future.

Q: Regarding the UK market, which segments are showing positive trends? A: Magnus Nilsson, CEO: The improvement in the UK is mainly related to Kammac, which deals with overflow, and Bishopsgate, which focuses on life cycle management. We are also seeing increased activity and requests for new business, indicating signs of recovery in the UK market.

Q: Can you elaborate on the performance of the Industrial segment, particularly which products are doing better or worse? A: Magnus Nilsson, CEO: In the Industrial sector, we are seeing improvements in thermal technology and power tools, which are used by both consumers and small construction companies. The market is stabilizing, and we have new projects and customers, especially in Germany. However, demand for print-related heavy equipment like trucks is softer.

Q: With leverage at 3.7 times, is this in line with your expectations, and what do you foresee going forward? A: Magnus Nilsson, CEO: We anticipated leverage to be around 3.5 to 3.6 times, but strong organic growth led to increased working capital, temporarily raising leverage. We expect this to decrease starting in Q4 as working capital normalizes.

Q: In the fashion segment in Europe, are you seeing growth beyond the two larger customers? A: Magnus Nilsson, CEO: Yes, even excluding the two new large customers, demand is strong, particularly from retail customers. E-commerce remains softer, but the retail sector in Germany is stable and growing, with a good mix of retail and e-commerce channels.

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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