Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net sales increased by 7%, with both services and equipment showing growth.
- Order intake grew by 10%, reaching an all-time high order backlog of EUR 7.6 billion.
- Comparable operating results increased by 63%, achieving a double-digit comparable operating margin.
- Strong cash flow continues, with EUR 216 million generated in Q2.
- Positive market sentiment in the marine segment, with increased demand for new ships and alternative fuels.
Negative Points
- Operating margin percentage is expected to be lower in the second half of the year due to a higher mix of equipment deliveries.
- Service net sales growth was slower on the energy side compared to the previous year.
- Order intake in the energy segment decreased by 6%, driven by lower orders in energy storage and optimization.
- Cash flow from operating activities was EUR 40 million lower than in Q1.
- Continued uncertainty in the market environment due to geopolitical factors and protectionist policies.
Q & A Highlights
Q: Should we expect the margin in the second half to be below that of the first half?
A: Yes, due to the faster growth of the equipment business, which typically has a lower margin compared to the service business. However, we are talking about margin percentage, not absolute margin. (Arjen Berends, CFO)
Q: Can you unpack the net sales growth in the service segment and whether Q2 growth was impeded by yard capacities or component availability?
A: On the marine side, growth continues well. On the energy side, Q2 was slower due to high levels in the same quarter last year. However, the underlying growth is positive, and our energy service order backlog is at an all-time high. (Hakan Agnevall, CEO)
Q: What should we think about as the normalized working capital profile given your comment on the negative not being repeatable?
A: We are currently running a negative working capital, which is extraordinary. While we can maintain this for some time, it will likely go up again in the future depending on order profiles and business activities. (Arjen Berends, CFO)
Q: Do you see anything structurally changed in the marine business environment to make margins higher than historically?
A: Shipyard capacity is growing steadily but not at the boom rates of the past. The decarbonization transformation and need for upgrades will drive demand. We are recovering from inflation impacts and positioning ourselves as a technology leader, which should provide pricing opportunities. (Hakan Agnevall, CEO)
Q: Does your demand outlook for marine and energy take into account potential US elections and tariffs?
A: Yes, we have accounted for geopolitical factors, including US elections and potential tariffs. For example, tariffs on batteries for energy storage will be implemented in 2026. (Hakan Agnevall, CEO)
Q: Can you talk about the potential of your data center cooperation?
A: With AI increasing storage needs, data centers will require more power. Traditionally, power has been taken from the grid with standby facilities. As power demand grows, data centers will need more reliable power solutions, presenting growth opportunities for us. (Hakan Agnevall, CEO)
Q: Are the improved margins in the storage segment sustainable given industry dynamics?
A: Yes, we expect to continuously improve margins through better operational execution. Decreasing battery prices are passed through to customers and do not affect our margins. (Hakan Agnevall, CEO)
Q: How should we think about your long-term EBIT margin target given the current performance?
A: We are on a solid path to reach our financial targets. It is premature to discuss revising targets; we aim to first achieve the current EBIT target. (Hakan Agnevall, CEO)
Q: Can you provide more granularity on the Q2 margin improvement despite a lower service share of revenues?
A: The difference in mix between new equipment sales and service sales is significant. The new build margin has recovered from last year’s cost inflation impacts, contributing to the margin improvement. (Arjen Berends, CFO)
Q: Are you still on track to divest portfolio businesses despite their improved performance?
A: Yes, we are still on track to divest. The positive performance is part of our turnaround efforts to stabilize these businesses before divestment. (Hakan Agnevall, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
