In This Article:
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Sales: SEK809 million, down 22% year-over-year.
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Operating Profit (OP): 8%, with underlying OP at 8.3% compared to 9% last year.
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Cash Flow: SEK157 million in the quarter, almost SEK400 million year-to-date.
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Free Cash Flow: SEK340 million, excluding investments and acquisitions.
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Inventory Reduction: Expected reduction of SEK50 million to SEK75 million in coming quarters.
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Western Europe Sales Decline: 1.1%, less affected compared to other regions.
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China Sales Decline: Down 35% year-to-date.
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Equity Ratio: 49%.
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Return on Operating Capital: 23%.
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Q4 Sales Guidance: Around SEK1 billion, indicating an 8% decline from last year.
Release Date: October 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Despite lower sales, Note AB (FRA:NQA) achieved better-than-expected profitability, indicating effective cost management.
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The company reported strong cash flow, with SEK157 million in the quarter and nearly SEK400 million year-to-date.
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Note AB (FRA:NQA) is actively reducing inventory and supplier debt, which is expected to positively impact future cash flow.
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The company is investing in new facilities and automation, preparing for anticipated demand growth in 2025.
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Western Europe operations are less affected by the sales decline, maintaining relatively stable performance.
Negative Points
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Sales fell short of expectations, with a 22% decline in Q3, and the company had to revise its guidance.
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The Chinese market remains extremely weak, with a 35% decline, and no quick recovery is anticipated.
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The communication segment underperformed due to a significant gap between forecasted and actual orders.
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The company faces challenges in converting customer forecasts into actual orders, impacting sales.
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There is a risk of customers in the Greentech and Communication segments going out of business due to market conditions.
Q & A Highlights
Q: Do you believe that the expected sales in Q4 is primarily due to timing factors, seasonal patterns, or an increase in end consumer demand? A: Our guidance is fairly flat to our run rate if you look at the month. We don't expect a recovery and anticipate Q4 to have similar market conditions as Q2 and Q3, excluding July, which is lower. We expect destocking to decrease gradually.
Q: Besides lower interest rates, what other factors would encourage customers to shift from a defensive approach to a more active one? A: The general economic climate is a limiting factor. Many private individuals and companies are not investing much currently. If the economy bounces back, especially the construction industry, it would positively impact our business.