Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tessenderlo Group NV (XBRU:TESB, Financial) has a new executive committee with experienced leaders, including a new CFO and Chief Transformation Officer.
- The company is making significant investments, such as the EUR35 million expansion of ferric chloride production capacity in Loos, France.
- Construction of the Defiance plant, which will produce liquid sulfur-based fertilizers and sulfite chemicals, is progressing well and is expected to start operations in Q1 2025.
- The Geleen plant in the Netherlands is in its final construction stage and is expected to be operational by late Q3 2024.
- The company has a strong net cash position of EUR32.6 million, an improvement from the previous year, and has focused on reducing working capital and managing inventories effectively.
Negative Points
- Revenues for the first half of 2024 decreased by nearly 15% compared to the previous year, amounting to EUR1.389 billion.
- The adjusted EBITDA margin dropped to close to 11% from 12.6% last year, indicating a decline in profitability.
- The machine & technology segment, particularly Picanol weaving machines, is suffering from a downturn in the textile industry, resulting in an EBITDA margin below 6%.
- The industrial solutions segment, especially DYKA Group, has been negatively impacted by lower construction demand in Europe.
- The company is operating in a volatile environment with high energy costs and increased labor costs, particularly in Europe, which poses challenges for future profitability.
Q & A Highlights
Q: Could you share with us the rough split between renovation and newbuild construction exposure for your DYKA activities within your industrial segment?
A: We do not specifically differentiate between newbuilds and renovations but rather between construction and infrastructure work. Overall, DYKA's activities are balanced between these two areas. However, there are significant differences by country. For instance, France has more revenue from infrastructure, while the UK focuses more on construction.
Q: How does the order book for Picanol look like at present in comparison to the average of the last few years?
A: The order activity for Picanol, as well as the entire textile machinery sector, is currently lower for the second half of the year. We do not see a reinvestment into new capacities or new projects at this time.
Q: Can you provide more details on the share repurchase program?
A: We started our second share repurchase program in April 2024 for a maximum of 2.3 million shares. This follows our first program in March 2023, where we canceled about 1.1 million repurchased shares. The second program has been progressing well.
Q: What are the key financial highlights for the first half of 2024?
A: Our revenues were EUR1.389 billion, down nearly 15% from last year. Adjusted EBITDA was EUR150 million, with an EBITDA margin close to 11%. Adjusted EBIT was EUR51.5 million. Our cash flow from operations grew to EUR172 million, and our net cash position improved to EUR32.6 million.
Q: How did the different business segments perform in the first half of 2024?
A: The agro business saw a 36% increase in EBITDA. T-Power remained stable, while other segments experienced a decline. The industrial solutions segment had a 10.4% EBITDA margin, with DYKA being the most negatively impacted due to lower construction demand in Europe.
Q: What is the outlook for the second half of 2024?
A: We expect a challenging trading environment to continue. Our adjusted EBITDA guidance for 2024 is 5% to 10% lower than in 2023. CapEx guidance is between EUR150 million and EUR170 million.
Q: Can you elaborate on the impact of high labor costs in Belgium?
A: In Belgium, automatic indexation of labor costs has led to a 22% to 25% increase over the past 2.5 years. This is equivalent to paying for 600 extra people without additional production, making it challenging to offset these costs through automation or price increases.
Q: What are the key investments and projects currently underway?
A: Key projects include the expansion of ferric chloride production at Loos in France, the construction of the Defiance plant for liquid sulfur-based fertilizers, and the Thio-Sul plant in Geleen, Netherlands. These projects are progressing well and are expected to be operational in the coming years.
Q: How is the T-Power segment performing?
A: T-Power is performing as per its tolling contract with RWE, which lasts until June 2026. The segment has an adjusted EBITDA margin of nearly 75%, making it a reliable partner in the current energy mix.
Q: What are the main challenges and opportunities for Tessenderlo Group going forward?
A: The main challenges include high energy costs, increased labor costs, and a difficult trading environment, especially in Europe. However, we remain focused on contributing to food production, bio-valorization, and a greener future, which we see as significant opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
