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 4% year-on-year to SEK82 million.
- CTT Systems AB (LTS:0GUO, Financial) has a strong financial position with net cash and an equity ratio of 70%.
- The company has seen significant progress in improving selection rates for its humidification systems, particularly for the A350 and 777X fleets.
- Aftermarket sales accounted for 80% of the turnover, indicating a strong recurring revenue stream.
- CTT Systems AB (LTS:0GUO) has entered into a promising MOU with Liebherr Aerospace to offer humidification systems for Bombardier's Global 7500/8000 jets.
Negative Points
- Net sales were slightly below the forecasted range due to delayed spares and repair deliveries.
- Operating profit (EBIT) decreased by SEK3 million year-on-year, with the EBIT margin dropping from 43% to 38%.
- Earnings per share decreased slightly to SEK1.96 from SEK1.98.
- The backlog decreased by SEK11 million to SEK38 million, indicating a lower level of future orders.
- Operating cash flow dropped significantly to SEK16 million from SEK62 million last year, driven by increased working capital and higher inventory levels.
Q & A Highlights
Highlights from CTT Systems AB (LTS:0GUO) Q2 2024 Earnings Call
Q: Can you shed light on the outlook for the second half of 2024 and whether adjustments will have more of a negative impact in Q3 compared to Q4?
A: We believe providing guidance for the second half of 2024 gives a better market perspective. The shift in Boeing's deliveries and the short-cycled nature of the aftermarket make it difficult to predict exact quarterly impacts. We expect a more balanced view by looking at the half-year as a whole. (Henrik Hojer, CEO)
Q: Could the discrepancy in deliveries versus build rates lead to a positive impact once the supply chain recovers?
A: Our aftermarket business will grow with the age of the installed base, requiring spare parts and repairs. The current supply chain issues are temporary, and we expect continuous growth in the future. The technical problem reported in Q1 has been resolved, and we are now up and running again. (Henrik Hojer, CEO)
Q: Is the Dreamliner dryer issue related to aftermarket deliveries?
A: Yes, the issue affects repairs and spare parts deliveries. (Markus Berg, CFO)
Q: Can you provide an update on the penetration across platforms, particularly the A350?
A: The A350 is seeing higher selection rates, especially among new operators. We are enthusiastic about the improved selection rates for flight deck and crew rest humidifiers, with three operators already flying with business class humidifiers. (Henrik Hojer, CEO)
Q: Any updates on the 777X program?
A: Three airlines have confirmed selecting all humidifiers for the 777X. Boeing has started flight testing with authorities on board, maintaining the '25 timeline for certification and deliveries. (Henrik Hojer, CEO)
Q: Can you explain the rationale behind the partnership with Liebherr Aerospace?
A: Teaming up with Liebherr, the supplier of the environmental control system for the Bombardier Global 7500/8000, strengthens our joint proposal. This partnership combines our resources and technology, making us stronger together. (Henrik Hojer, CEO)
Q: What is the scope of potential partnerships in H2 2024?
A: Using Bombardier Global 7500 as an example, they produce 35-45 aircraft per year. We aim for line fit and retrofit opportunities, targeting similar production rates with other OEMs like Gulfstream. (Markus Berg, CFO)
Q: What caused the working capital changes this quarter, and can we expect a reversal in the second half?
A: The working capital change was temporary and related to delayed deliveries. We expect it to normalize in the third and fourth quarters. (Markus Berg, CFO)
Q: Does Liebherr Aerospace have a portfolio of humidification systems, and how will the partnership work?
A: Liebherr has humidifiers for smaller private jets using different technology. For the Bombardier 7500/8000, we will use CTT's technology integrated into Liebherr's environmental control system. (Henrik Hojer, CEO)
Q: What are the expected annual aircraft volumes for the ACJ program and other potential partnerships?
A: Bombardier Global 7500 produces around 40 aircraft per year, with retrofit opportunities for nearly 200 delivered aircraft. We aim for similar production rates with other OEMs like Gulfstream. (Markus Berg, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
