Hexatronic Group AB (publ) Interim Report January – June 2024
Hexatronic Group AB (publ)
Interim Report
January – June 2024
Continued strong cash flow and modest recovery in Fiber
Solutions
Second quarter (April 1 – June 30,
2024)
- Net sales decreased
by 10 percent to MSEK 2,024 (2,258). Sales decreased organically by
18 percent.
- EBITA decreased by
45 percent to MSEK 222 (405), corresponding to an EBITA margin of
11.0 percent (17.9).
- Operating profit
(EBIT) decreased by 49 percent to MSEK 192 (377), corresponding to
an operating margin of 9.5 percent (16.7).
- Net result decreased
by 66 percent to MSEK 89 (259).
- Earnings per share
after dilution amounted to SEK 0.44 (1.27).
- Our new focus areas,
Harsh Environment and Data Center, continued to improve with strong
organic and acquisition-driven growth in the second
quarter.
- Leverage ratio (net
debt/EBITDA (pro forma), R12) amounted to 2.2x compared to 1.7x as
of December 31, 2023.
- Cash flow from
operating activities amounted to MSEK 221 (348).
Significant events during the quarter
- Hexatronic announced
changes in the company's executive management. Jakob Skov, Head of
focus area Harsh Environment, joined the company's executive
management as of April 2024 and in June 2024 Pernilla Grennfelt
joined Hexatronic as Head of Investor Relations and the company's
executive management.
- The AGM resolved,
for the period until the next Annual General Meeting, to re-elect
Erik Selin, Helena Holmgren and Jaakko Kivinen and to elect Magnus
Nicolin, Diego Anderson, Linda Hernström and Åsa Sundberg as
members of the Board of Directors. Magnus Nicolin was elected as
Chairman of the Board of Directors.
- Hexatronic has been
selected by NOVOS FiBER as a strategic partner in the U.S. market
for Hexatronic's end-to-end fiber-to-the-home (FTTH) solution. The
agreement initially runs for a period of three years and is
expected to generate sales of approximately 400 MSEK.
Significant events since the end of the
quarter
- No significant
events occurred after the end of the quarter.
Comments from the CEO
Continued strong cash flow and modest recovery in Fiber
Solutions
The second quarter saw sequential sales growth for the
Group of 14 percent. This is primarily attributable to a modest
recovery in the market for Fiber Solutions, positive seasonal
effects, and continued good development in our new focus areas.
Despite ongoing price pressure, our profitability improved during
the quarter, rising to 11.0% from 9.4% in the previous quarter.
This improvement is due to higher capacity utilization and the cost
savings program announced in November. Additionally, our business
continued to generate strong operating cash flow, amounting to SEK
221 million in the quarter, which corresponds to a cash conversion
of 115 percent.
Sequentially improved profitability and
growth
The second quarter of 2023 was the company's
historically strongest quarter in terms of both sales and
profitability. Compared to last year, sales decreased by 10 percent
in the second quarter. The EBITA margin for the quarter was 11.0
percent compared to 17.9 percent in the corresponding quarter last
year. However, compared with the previous quarter, sales increased
by 14 percent and EBITA by 33 percent, improving profitability by
just over 1.6 percentage points. The quarter-over-quarter
improvement in profitability was partly driven by higher volumes in
several of our factories and by the previously communicated cost
reduction program, partly offset by continued price pressure during
the quarter.
Marginally improved demand with continued price pressure
in Fiber Solutions
In the US, we saw a slight increase
in demand for both Blue Diamond Industries' duct sales and our
fiber-to-the-home (FTTH) system sales. We signed a contract worth
approximately SEK 400 million over three years with Novus Fiber,
further proving the strength of our FTTH system offering. We saw
increased price pressure for duct sales, which we believe will
continue during the year. Work on the new duct factory in Utah is
currently in the completion phase according to the previously
communicated plan.
In Europe, we saw continued weak demand with price pressure in
most markets. The markets in the UK and Germany remained weak
during the quarter.
Sales in APAC developed favourably, mainly due to a couple of
major projects.
New focus areas continue to develop
strongly
Our new focus areas, Harsh
Environment and Data Center, develop very positively, with strong
organic and acquisition-driven growth in the second quarter.
Together they represent a significant part of the Group – around 27
percent of sales during the second quarter.
Sales in Harsh Environment amounted to SEK 297 million in the
second quarter, up from SEK 153 million in the corresponding
quarter last year. The increase is mainly attributable to the
acquisition of Fibron Cable, although organic growth was also
strong.
Sales in Data Center amounted to SEK 250 million in the second
quarter, compared to SEK 190 million in the corresponding period
last year. The increase is driven by both organic growth and the
acquisition of USNet. During the quarter, we merged USNet with DCS
to form a strong data center company in the US. After the end of
the quarter, a letter of intent was signed to acquire parts of
Icelandic Endor to further broaden our offering in hardware and
services for the data center market, as well as to strengthen our
customer base and presence in Iceland, Sweden and Germany.
As we have previously communicated, our acquisition agenda
primarily focuses on strengthening our offerings and presence in
Harsh Environment and Data Center.
Continued reduction in net debt and good financial
flexibility
We continue to have good financial
flexibility for long-term value creation. Interest-bearing net debt
(i.e. excluding IFRS 16) decreased during the quarter from SEK
2,102 million to SEK 1,996 million. Over the past three quarters,
we have reduced interest-bearing net debt by approximately SEK 500
million.
The ratio of interest-bearing net debt to pro forma EBITDA on a
rolling 12-month basis, which reflects our existing bank covenants,
increased from 1.7 times to 1.9 times during the quarter. Including
IFRS 16, this corresponds to an increase from 2.0 times to 2.2
times during the quarter. The increase is due to lower
profitability in the second quarter compared with the record-strong
second quarter of the previous year.
Outlook for the second half of the year and
beyond
We expect the Harsh Environment and Data
Center markets to remain strong for the rest of the year and for a
long time to come, mainly driven by investments in defense, energy
and AI.
In line with our previous assessment, we expect the market for
Fiber Solutions to remain weak in the third quarter, with a gradual
increase in demand from the latter part of 2024. However, we expect
a return to the pre-pandemic seasonal pattern of lower activity in
the fourth and first quarters.
We continue to see strong underlying structural trends
supporting the continued deployment of fiber optic systems
globally.
The order book as of the end of the second quarter corresponded
to approximately 2.5 months of sales, where we estimate a
normalized order book is 2 to 3 months.
Finally, I would like to welcome our new members to the Board,
who bring increased international weight and important industry
expertise.
Welcome to join us on our growth journey.
Henrik Larsson Lyon
President and CEO Hexatronic Group AB (publ)
Please direct any questions to:
Henrik Larsson Lyon, President and CEO, + 46 (0)70-650 34 00
Pernilla Lindén, CFO, + 46 (0)70-877 58 32
Pernilla Grennfelt, Head of Investor Relations, +46 (0)70 290 99
55
This is information that Hexatronic Group AB (publ) is obliged
to make public pursuant to the Market Abuse Regulation and the
Securities Markets Act. The information was submitted for
publication through the agency of the contact person set out above
on July 16, 2024 at 07.00 CEST.
Hexatronic Group AB (publ) enables non-stop connectivity for
communities worldwide. We partner with customers across four
continents – from telecom operators to network owners – offering
leading-edge fiber technology and solutions for any and all
conditions. Hexatronic Group AB (publ) was founded in 1993 in
Sweden and is listed on Nasdaq Stockholm. Our global product brands
include Viper, Stingray, Raptor, InOne, and Wistom®.
- Hexatronic Group AB (publ) - Interim report Q2, 2024
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