VBG Group AB (FRA:KU4) Q4 2024 Earnings Call Highlights: Navigating Challenges with Strategic ...

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Thu, Feb 20, 2025, 12:07 AM 5 min read

Revenue: SEK5.579 billion for the full year 2024.
EBITDA: SEK843 million for the full year 2024.
Cash Flow from Operating Activities: Record-breaking SEK800 million for the full year 2024; SEK294 million for Q4 2024.
Earnings Per Share (EPS): Increased by 3% to SEK23.52.
Dividend Proposal: SEK7.25 per share, 30.8% of profit after tax.
Q4 Revenue Change: Decreased by 12% compared to Q4 2023.
EBITA Margin: 15.2% for Q4 2024.
Adjusted EBITDA Margin: 14.7% for Q4 2024, excluding one-offs.
Truck and Trailer Equipment Sales: Decreased by 11% in Q4 2024.
Mobile Thermal Solutions Sales: Decreased by 20% in Q4 2024.
Ringfeder Power Transmission Sales: Increased by 13% in Q4 2024.
Net Cash Position: SEK88 million after adjusting for pension liabilities and leasing commitments.
Return on Capital (ROC): Decreased to 38.1%.

Warning! GuruFocus has detected 1 Warning Sign with FRA:KU4.

Release Date: February 19, 2025

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

Positive Points

VBG Group AB (FRA:KU4) achieved the second-best revenue and operating profit on an annual basis, with revenues reaching SEK5.579 billion and an EBITDA of SEK843 million.
The company reported a record-breaking cash flow from operating activities of almost SEK800 million for the full year.
Earnings per share increased by 3% to a record level of SEK23.52, leading to a proposed dividend increase to SEK7.25.
The acquisition of Italytec in Brazil strengthens VBG Group AB's position in South America and expands its customer base into new segments such as agriculture and construction.
Despite weaker demand, gross margins continued to strengthen due to efficient cost management and positive product mix changes, achieving an EBITA margin of 15.2%.

Negative Points

Q4 2024 saw a revenue reduction of 12% compared to Q4 2023, primarily due to declines in the Mobile Thermal Solutions off-road business in North America, a bus customer phasing out production in the US, and the semitrailer business in Europe.
Sales for the Truck and Trailer Equipment division decreased by 11% compared to the same quarter last year, driven by a declining European semitrailer market.
Mobile Thermal Solutions experienced a 20% sales decrease in the quarter, mainly due to inventory adjustments and a customer phasing out operations in the US.
The company's ROC decreased from slightly above 40% to 38.1%, primarily due to the acquisition of land in Toronto.
Global factors such as geopolitical uncertainty and generally weakened demand pose continued concerns for future developments.

Q & A Highlights

Q: The Truck and Trailer Equipment division saw an 11% organic decline year over year. Despite this, the margin is close to 20%. Is this driven by the project mix or cost savings? A: The main reason is the product mix, although proactive cost-saving measures have also contributed. The product mix has the biggest impact on the EBITDA margin. (Anders Erken, CEO)

Q: Should we expect a gradual pickup in cost savings going forward? A: We will continue to see cost savings, but they will flatten out during the year. We expect significant savings on material costs this year. (Anders Erken, CEO)

Q: Are there any signs of improvement in the trailer market, or is it the same as previously observed? A: The situation is largely the same, but the decline is gradually shrinking. We believe this is the bottom, and a gradual increase is expected by the end of Q2, without a catch-up effect. (Anders Erken, CEO)

Q: Regarding Mobile Thermal Solutions, are you seeing any shifts in demand, excluding Nova and the off-road segment? A: We are increasing our customer base in North America, with a stable position in other business areas. The decline is mainly in the compact segment and Nova's exit from the US. (Anders Erken, CEO)

Q: How willing are customers to accept further price increases if tariffs are imposed? A: We are prepared to pass on tariff increases, as we did in 2018 with steel and aluminum tariffs. Our main flow from Canada to the US is sold Ex Works, so customers handle tariffs. (Anders Erken, CEO)

Q: What is driving the strong 8% organic growth in Ringfeder Power Transmissions, and will it continue? A: Growth is driven by project-based initiatives and the introduction of Rati products from India. We expect continued growth in 2025, supported by a favorable product mix. (Anders Erken, CEO)

Q: Can you break down the strong gross margin for the group? A: The positive product mix and efficiency gains, including headcount reduction and smooth production flows, have contributed to excellent gross margins. (Anders Erken, CEO)

Q: Did you see a clear pickup in order intake during the quarter, and has this momentum continued? A: Yes, there was a pickup at the end of Q4, and the trend continues into the new year, expected to impact Q2 positively. (Anders Erken, CEO)

Q: How far has inventory destocking in Mobile Thermal Solutions progressed, and when will it be complete? A: Destocking has been ongoing for over six months and should conclude by the end of Q1. About 15% has been destocked, impacting factory demand significantly. (Anders Erken, CEO)

Q: What is the M&A pipeline like, and which markets are you interested in? A: We seek complementary acquisitions across all divisions, focusing on global growth. The pipeline is growing with potential acquisition candidates. (Anders Erken, CEO)

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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