Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Balco Group AB (OSTO:BALCO, Financial) reported a 26% increase in order intake to SEK380 million, driven by acquisitions made in the first quarter.
- The company achieved an 8% increase in net sales to SEK374 million, attributed to recent acquisitions.
- Strong cash flow was reported, improving to SEK64 million from a negative SEK10 million in the previous year.
- The newbuild segment showed significant growth, with net sales increasing to SEK123 million and order intake rising to SEK126 million.
- Balco Group AB (OSTO:BALCO) has a strong market position in the Nordics and is expanding its presence in the UK and Germany, with promising opportunities in the modular housing sector.
Negative Points
- Organic order intake decreased by 11%, and organic net sales fell by 23%, indicating challenges in core business growth.
- The renovation segment experienced a decline in net sales to SEK251 million, down from SEK322 million, impacting overall profitability.
- Profitability remains a concern, with an adjusted operating margin of only 5.0% and expectations of continued low profitability in 2024.
- The Swedish market has not yet seen a significant boost in order intake, with prolonged decision-making processes among key customers.
- High production capacity utilization is low, with the potential to handle double the current sales, indicating underutilization of resources.
Q & A Highlights
Q: Can you elaborate on the factors affecting profitability and what measures are being taken to improve it?
A: Michael Grindborn, CFO, explained that profitability is expected to remain at current levels throughout 2024, primarily due to low volumes in the renovation segment. Measures have been taken on the production side, and further improvements are being explored. Profitability is expected to improve when volumes return, likely in early 2025.
Q: What is the current production capacity utilization, and what is the potential capacity?
A: Michael Grindborn noted that the current production capacity could handle nearly double the current sales volume. Although production is not running at full speed, the company can increase volumes significantly with minimal additional resources.
Q: What needs to happen for a boost in order intake, particularly in Sweden?
A: CEO Camilla Ekdahl stated that a continued decrease in policy rates and overall cost reductions are necessary. As costs stabilize and customers adjust to new interest rate levels, order intake is expected to improve.
Q: How are the acquisitions in Finland performing, and is there an action plan to improve operations?
A: Camilla Ekdahl confirmed that operations in Finland are progressing as expected. The focus is on restructuring to handle more renovation projects and reducing manpower in new building projects. This transition is ongoing and aligns with initial expectations.
Q: What is the long-term profitability expectation for the Riikku acquisition?
A: Michael Grindborn expects Riikku to maintain profitability levels similar to the new build segment, with a long-term target of around 8% as they expand into renovation projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
