Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- H+H International AS (FRA:J0H, Financial) reported double-digit revenue growth in the UK and Poland, with the UK seeing an 11% increase and Poland a remarkable 36% increase in Q2.
- The company is reinstating capacity in response to positive market trends, including reopening the Pollington plant in the UK and increasing shifts in Poland.
- The potential sale of the Warsaw plant is expected to improve liquidity and financial gearing, aligning with long-term financial targets.
- The company has successfully reduced stock levels to a more manageable 1.5 months, which is expected to stabilize gross margins in the second half of the year.
- H+H International AS (FRA:J0H) has achieved significant cost savings, reducing fixed costs by DKK50 million per quarter, which equates to DKK200 million annually.
Negative Points
- The German market is underperforming, with a 25% revenue loss in Q2 due to a decline in new build activity and high construction costs.
- Gross margins have been negatively impacted by unfavorable gas hedges and destocking, with a reported gross margin of 18% compared to 24% last year.
- Financial gearing has increased, although it remains within bank covenants, due to lower EBITDA over the last 12 months.
- The company anticipates further restructuring costs in the CWE region due to market deterioration.
- The guidance for organic growth and EBIT before special items has been narrowed to the lower end of the previous range, reflecting challenges in the German market and production disruptions.
Q & A Highlights
Q: Can you update on the underlying margin performance in Q2, adjusting for destocking and gas hedges?
A: The underlying impact is similar to Q1. Adjusting for destocking and gas hedges, the clean gross margin is in the 24%-25% range. (Bjarne Pedersen, CFO)
Q: Should we expect the gross margin to trend towards 30% or remain around 24%-25%?
A: Our aspiration is to be within the 25%-30% range over the cycle. The 30% margin is achievable during peak cycles, while 25% is our baseline target. (Bjarne Pedersen, CFO)
Q: Why did SG&A expenses increase despite restructuring efforts?
A: There are some one-off effects and phasing of marketing activities. We aim to keep costs under control, with further restructuring planned. (Joerg Brinkmann, CEO)
Q: What is the rationale behind reopening the Pollington factory in the UK?
A: We are running our most efficient plants 24/7. Reopening Pollington 1 allows us to meet demand efficiently, leveraging shared resources with Pollington 2. (Joerg Brinkmann, CEO)
Q: What are the assumptions behind the updated guidance, and how confident are you in achieving it?
A: The guidance reflects the impact of the Borough Green event and cautious expectations for Germany. We are confident in Poland's strength and UK production schedules. (Bjarne Pedersen, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
