Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net sales grew by 3.3% at constant exchange rates to CHF5.4 billion.
- Core EBIT increased by 8.2% to CHF163.6 million, marking the highest ever core EBIT in the first half of 2024.
- Free cash flow reached CHF160.8 million, with a cash conversion rate of 136%.
- DKSH Holding Ltd (DKSHF, Financial) achieved a Great Place to Work certification in nine markets and improved employee engagement.
- The company continues to expand its portfolio with new partnerships and acquisitions, including Medipharm and Elite Organic.
Negative Points
- Ongoing headwinds from different currencies impacted the external environment.
- Net sales were affected by a 6.5% FX impact due to the strengthening of the Swiss franc.
- Performance Materials faced a challenging macroeconomic environment with declining net sales.
- The Consumer Goods segment experienced top-line pressure despite achieving a mid-term core EBIT margin target.
- Interest charges and tax rates remain areas of concern, with a tax rate estimated to stay within 27% to 29%.
Q & A Highlights
Q: Can you give us an update on Performance Materials, including the development with FEMA and the housing market demand? Also, how did volume and price split in revenue development for the first half of the year?
A: We have seen an improvement in growth rates quarter by quarter, making us cautiously optimistic. The housing market in the US is slightly better, but far from good. We observed a small uptick in volume but slight decreases in pricing. (Stefan Butz, CEO)
Q: Have your own healthcare brands grown stronger than the overall segment, and are you still seeing an EBIT margin of over 20% in this subsegment?
A: Yes, our own healthcare brands continue to grow nicely, and we maintain an EBIT margin above 20%. (Stefan Butz, CEO)
Q: There was a significant improvement in net working capital. Was there also some FX tailwind, and can you quantify it?
A: Yes, we see the effect of FX easing versus last year. Our cash statement shows a positive impact of CHF3.5 million year-to-date. (Ido Wallach, CFO)
Q: Can you walk us through the drivers of the strong margin performance in Consumer Goods, despite top-line pressure?
A: We achieved our mid-term core EBIT margin target of 2.5% through SKU rationalizations, client portfolio rationalizations, and clearing non-operating assets. Despite market headwinds, we increased net pricing by 1% and saw volume effects impacting pricing. (Stefan Butz, CEO)
Q: Can you comment on the free cash flow figure and your thoughts for the full year?
A: We continue to operate with strong cash conversion and efficiency. Our conversion rate is still above our long-term target, and we don't expect significant improvement going forward. (Ido Wallach, CFO)
Q: What are your thoughts on the lower finance charges and taxes?
A: We receive higher returns on cash deposits and have decreased our debt, resulting in lower interest expenses. Our tax rate is now at 28.1%, within our guidance of 27% to 29% for the full year. (Ido Wallach, CFO)
Q: Do you think Performance Materials will go positive this year?
A: We have seen consistent improvement in organic growth rates and expect the second half of the year to be better than the second half of last year, both in top-line and bottom-line. (Stefan Butz, CEO)
Q: How have you managed to improve healthcare profitability to 3%, and where do you think it can go?
A: Success in our own brands and the expansion of our foodservice business are key drivers. We believe there is still room for improvement beyond the 3% margin. (Stefan Butz, CEO)
Q: How many distribution centers do you have, and what impact does digitalization have on productivity and profitability?
A: We have 11 fully digitalized distribution centers and aim to have 20 by the end of the year. This will bring us to almost 50% of cases fully digitalized, potentially improving our margin by 50 to 60 basis points. (Till Leisner, Head of Investor Relations)
Q: Can you elaborate on the M&A pipeline and what has held back your activity so far?
A: We have a strong pipeline and are optimistic about the second half of the year. M&A is hard to plan, but we are pushing hard to put the balance sheet to work while remaining conservative in terms of valuation. (Stefan Butz, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
