Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Order intake grew by 22% and by 10% organically relative to last year's Q2.
- E-commerce profitability more than doubled, showing strong growth in topline.
- Western Europe, particularly the Irish entity Carlson, booked Inwido's largest order to date.
- Inwido's sustainability efforts received external recognition, including being listed as one of Europe's top 500 Climate Leaders by the Financial Times.
- The company is on track to achieve its goal of doubling in size by 2030, with a strong value proposition and proven performance track record.
Negative Points
- Net sales declined organically by 5% quarter on quarter.
- Operating EBITDA margin declined from 11.6% to 11.3%, partly due to restructuring costs.
- Eastern Europe, especially Finland, faced significant challenges with a 22% decline in sales and a drop in operating EBITDA margin from 13% to 5.5%.
- Net debt in relation to operating EBITDA increased from 0.7 times last year to 1.4 times.
- The new build market remains soft, particularly in Sweden and Finland, impacting overall performance.
Q & A Highlights
Q: Regarding the gross margin, which seems to be increasing across three of the four business areas. How should we think about the gross margin looking ahead?
A: (Peter Welin, CFO) We have been able to maintain our sales prices and reduce costs despite lower volumes. The order intake is positive, and we have seen a favorable material impact in Q2. However, material prices are expected to stabilize or slightly increase, leading to a flat development in the near term.
Q: Within e-commerce, can you comment on the margin there? Is it just Denmark that's going well, or are other countries picking up too?
A: (Peter Welin, CFO) Pre-pandemic, e-commerce margins were between 10% and 12%. During the pandemic, margins increased to 15%-17% due to rapid market growth and price increases. Post-pandemic, competition has intensified, and margins have decreased. We aim to return to 10%-plus EBIT margins over the next few years. Growth is positive in all markets, not just Denmark.
Q: Can you provide an overall comment on the M&A market and the likelihood of closing acquisitions during 2024?
A: (Fredrik Meuller, CEO) M&A is crucial for our growth strategy, aiming for a 10%-15% CAGR to double the company size by 2030. We have seen an uptick in M&A activity and have a healthy acquisition funnel. While we are not in a rush, we are actively pursuing discussions and building relationships. It is promising, but I cannot confirm a deal closure within the next six months.
Q: Could you give the split between the restructuring-related part and the inventory losses in the non-recurring items recognized during the quarter?
A: (Peter Welin, CFO) The main part is inventory write-downs due to old inventory and platform changes. The rest is related to restructuring costs. Most of these costs have been accounted for, with minor additional costs expected in Q3.
Q: Can you comment on consumer behavior in regions other than Denmark?
A: (Fredrik Meuller, CEO) Denmark has been ahead in terms of lower inflation and interest rates. Sweden is starting to see similar trends, while Finland and Norway are lagging. Positive weather and lower inflation in Sweden are boosting consumer sentiment. England remains softer, but Ireland shows strong momentum due to market share gains and large orders.
Q: Do you have any specific action plans for improving margins in Eastern Europe?
A: (Fredrik Meuller, CEO) We acknowledge the significant top-line decline and have aligned our cost base without hampering future growth. We are monitoring the situation closely and will adjust further if needed. We are confident in our ability to bounce back in Eastern Europe.
Q: How do you view the competitive landscape in different geographical regions?
A: (Peter Welin, CFO) In Scandinavia, competition remains stable with no major financial stress among companies. In the UK, several competitors have gone bankrupt, allowing us to gain new customers. In Eastern Europe, there is price pressure, and we have had to reduce prices somewhat.
Q: Do you witness any positive signs in newbuild activity in Finland given the order intake increase in Q2?
A: (Peter Welin, CFO) The newbuild market in Finland remains tough, but we have gained market share. We do not expect a significant improvement in EBITDA margin in the near term due to strong comparables from last year. We have reduced costs but need to balance this with maintaining capacity for future growth.
Q: What is the reason for the strong momentum in Ireland, and do you expect it to continue?
A: (Peter Welin, CFO) The Irish market has been positive, and we have gained large orders and market share. We expect the market to remain stable with continued positive development.
Q: How should we interpret the order backlog being down year-over-year in several business areas?
A: (Peter Welin, CFO) The decline in order backlog is mainly in e-commerce, which has a short order cycle. In Eastern Europe, we had a high backlog last year, which we have worked through. Scandinavia and Western Europe have positive order backlogs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
