Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Azelis Group NV (AZLGF, Financial) achieved a revenue of EUR2.1 billion in H1 2024, a slight improvement compared to H1 2023 on a constant currency basis.
- Gross profit in H1 2024 was EUR526 million, a 3% year-on-year improvement on a constant currency basis.
- Adjusted EBITDA came in at EUR254 million, with an EBITDA margin of 11.8%, stable from Q1.
- The company maintained a strong conversion margin of 48.2%, demonstrating effective cost control.
- Azelis Group NV (AZLGF) closed four acquisitions and announced two further acquisitions in H1 2024, continuing its M&A strategy.
Negative Points
- The market remains challenging with price pressure in some end markets, particularly in EMEA.
- Organic revenue declined by 4.4% in H1 2024, with improving trends in the Americas offset by softness in EMEA and APAC.
- Net profit for H1 2024 was EUR100 million, an 8.3% decrease compared to the prior year.
- Free cash flow decreased by 44.3% compared to the prior year, driven by lower EBITDA and higher investments in working capital.
- The company faces ongoing volatility and limited visibility in the markets, making it difficult to provide a quantitative guidance.
Q & A Highlights
Q: Can you discuss the differences in recovery between the Americas and EMEA?
A: The Americas are ahead in recovery, with LATAM doing better and the US showing volume recovery in CASE, despite price issues. EMEA remains challenging with patchy performance and pressure in life sciences, though A&ES is showing positive signs. (Anna Bertona, CEO)
Q: What are the sequential trends in pricing and volume recovery?
A: We see improvements in pricing for F&F, but continued price pressure in food (especially in EMEA and APAC) and CASE. July looks positive, but volatility remains, making it difficult to predict September. (Anna Bertona, CEO; Thijs Bakker, CFO)
Q: How is China impacting margins in the APAC segment?
A: China, particularly in the industrial sector linked to construction, is facing challenges. However, we are improving margins through acquisitions like WWRC. Overall, China’s margins are about 4% lower than the APAC average. (Anna Bertona, CEO; Thijs Bakker, CFO)
Q: Can you elaborate on the challenges in the personal care business in EMEA?
A: Our personal care business in EMEA is affected by lower exports to China, particularly for high-end brands. However, our presence in China allows us to capture local growth in personal care. (Anna Bertona, CEO)
Q: What is the outlook for M&A and leverage in the second half of the year?
A: We plan to stay within our leverage target of 2.5 to 3 times and focus on small tuck-in acquisitions. We expect more M&A activity in the second half of the year. (Thijs Bakker, CFO)
Q: How are you managing costs and conversion margins in the current environment?
A: We have a strong track record in managing conversion margins, currently at 48.2%. We are monitoring the situation closely and have contingency plans in place. Our operational excellence programs and M&A activities also contribute to cost management. (Thijs Bakker, CFO)
Q: What are the drivers behind the volume recovery in the Americas CASE business?
A: The volume recovery in the Americas CASE business is driven by sub-segments other than building and construction. The trend is steady and less volatile compared to EMEA. (Anna Bertona, CEO)
Q: Can you provide more details on the working capital trends and their impact on cash flow?
A: The increase in working capital is driven by volume recovery and seasonality. Our working capital levels are stable, and we remain committed to strict controls to protect cash flows and manage debt levels. (Thijs Bakker, CFO)
Q: What is the medium-term outlook for Azelis, and are there plans for new guidance?
A: We will present our updated strategy and future ambitions in September, but this will not translate into new guidance. We remain focused on growth and leveraging our strengths and competencies. (Anna Bertona, CEO)
Q: How do you see the development of cost CASE given the volume recovery and market conditions?
A: We are confident in sustaining our conversion margins through cost management, operational excellence programs, and M&A activities. We are monitoring the situation closely and are prepared to take action if needed. (Thijs Bakker, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
