Morgan Advanced Materials PLC (MCRUF) (FY 2024) Earnings Call Highlights: Strong Financial ...

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Sat, Mar 1, 2025, 12:03 AM 4 min read

Revenue: GBP1.1 billion, with organic revenue growth of 3.7%.
Faster Growing Markets Revenue Growth: 7.6%.
Adjusted Operating Profit: GBP128.4 million, an improvement of GBP18.2 million or 16.5% on an organic constant currency basis.
Operating Margin: 11.7%, up 90 basis points.
Cash Generated from Operations: GBP162.9 million, up 29%.
Free Cash Flow: Inflow of GBP15 million.
Net Debt to EBITDA: 1.4 times.
Gross Capital Expenditure: GBP90 million.
Adjusted EPS: 25.5p per share.
Dividend: Increased from 12p to 12.2p.
Restructuring Savings: GBP8 million in 2024, with expected annualized savings of GBP27 million by 2026.
Site Closures: Manufacturing sites reduced from 85 to 60 over the last 10 years.
CO2 Emissions Reduction: Scope 1 and 2 emissions reduced by 3% in 2024.
Share Buyback Program: Second tranche of GBP10 million to commence.

Warning! GuruFocus has detected 6 Warning Signs with FRA:ENCA.

Release Date: February 28, 2025

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

Positive Points

Morgan Advanced Materials PLC (MCRUF) reported a revenue of GBP1.1 billion for 2024, with an organic revenue growth of 3.7% and 7.6% growth in faster-growing markets.
The company achieved an operating margin of 11.7%, up 90 basis points, and adjusted operating profit increased by GBP18.2 million or 16.5% on an organic constant currency basis.
Cash generated from operations increased by 29%, reflecting effective working capital management.
The restructuring program is expected to deliver GBP27 million in annual savings by 2026, with GBP8 million already realized in 2024.
Morgan Advanced Materials PLC (MCRUF) reduced scope 1 and 2 CO2 emissions by 3% in 2024, continuing its commitment to sustainability.

Negative Points

The company experienced a volume decline of around 6% in the second half of 2024, particularly impacting the semiconductor market.
Revenue from the semiconductor sector declined by 10% in the second half of 2024 due to slower growth in battery electric vehicle sales.
FX had a negative impact of GBP10.1 million on adjusted operating profit due to currency fluctuations.
The company scaled back its investment in semiconductor capacity, reducing expected spending from GBP100 million to GBP60 million over 2024-2026.
Morgan Advanced Materials PLC (MCRUF) expects revenues to be down mid-single digits in 2025 due to weak industrial and semiconductor markets.

Q & A Highlights

Q: Can you provide details on your clean energy exposure in the US, particularly in the wind segment? A: Pete Raby, CEO: Just over half of our clean energy exposure is in the US, with about a third of that in the wind segment.

Q: Regarding the new semiconductor capacity, how much is currently sold out, and are there options for customers to defer? A: Pete Raby, CEO: We have forward contracts covering about 20% of the volume for 2027. We are renegotiating with customers due to the slowdown, and we expect coverage to increase as volumes improve.

Q: Can you explain the phasing of the GBP16 million cost savings expected in 2025? A: Richard Armitage, CFO: The savings are fairly evenly phased, with approximately GBP7 million in the first half and GBP9 million in the second half.

Q: What is the expected margin range for the thermal business, and what factors are affecting it? A: Pete Raby, CEO: The expected margin range is 10% to 12%. The primary impact on margins is demand, particularly due to deindustrialization in Europe and slow market conditions in China.

Q: If market conditions worsen, would the share buyback program be affected? A: Richard Armitage, CFO: We are cautious about cash flow in weak market conditions. The second tranche of the buyback will progress at a slower pace, with about 50% of the GBP40 million program expected to be completed by year-end.

Q: Can you elaborate on the pricing pressure in the silicon carbide (SiC) market and its impact on your investment returns? A: Pete Raby, CEO: We are not seeing significant pricing pressure. Our products improve customer yields, reducing their cost per device. As SiC device prices decrease, new applications are opening up, supporting our investment returns.

Q: What caused the significant drop in conventional transportation performance in the second half of the year? A: Pete Raby, CEO: The biggest impact was in the space segment, which is lumpy due to customer buying patterns. There was also some weakness in conventional automotive and rail due to slowing industrial economies.

Q: Are there further cost-saving measures planned if market conditions deteriorate further? A: Pete Raby, CEO: We have accelerated cost-saving measures and will continue to monitor market conditions. If necessary, we will consider additional actions.

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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