Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ferronordic AB (OSTO:FNMA PREF.PFD, Financial) reported a 62% revenue growth, primarily driven by the addition of US operations.
- The US operations showed strong performance with a revenue of over SEK700 million and an operating margin of 7.3%.
- The company gained market share in the US by delivering more machines despite a 27% market decline in larger construction equipment.
- Aftermarket business in Germany remained stable, with a 19-percentage-point increase in revenue share to 43%.
- Ferronordic AB is optimistic about the US market due to extensive federal and state infrastructure programs, which are expected to drive construction equipment demand.
Negative Points
- Net profit decreased to minus SEK81 million, mainly due to exchange rate losses.
- The German market faced challenges with a 44% revenue decline, partly due to not responding to price competition.
- Kazakhstan's market for construction equipment declined, leading to slow sales and high inventory levels.
- The cost reduction program in Germany took longer and cost more than initially anticipated.
- Ferronordic AB's net debt increased slightly to SEK1,671 million, influenced by the acquisition and consolidation of US operations.
Q & A Highlights
Q: Could you provide details on the timing of order cancellations in the German market?
A: Lars Corneliusson, CEO, explained that the cancellations were not specific to the quarter but were a result of market normalization and oversupply from previous quarters. The company chose not to engage in aggressive price competition, which led to some cancellations but also built long-term customer credibility.
Q: How are competitors in Germany supporting sales, and what is Ferronordic's strategy to regain market share?
A: Lars Corneliusson, CEO, stated that Ferronordic focuses on deals with long-term aftermarket potential, particularly in rigid trucks, rather than competing on price in the tractor market. This strategy aims to create a sustainable future without risking customer relationships for short-term market share gains.
Q: With high leverage following the Rudd acquisition, is Ferronordic focusing on reducing debt before further US expansion?
A: Erik Danemar, CFO, mentioned that while expansion is a core strategy, the focus is currently on integrating Rudd and improving performance in Germany and Kazakhstan. Any potential acquisitions would depend on their cash flow contributions and alignment with strategic goals.
Q: Are there political risks to US federal infrastructure programs given upcoming elections?
A: Lars Corneliusson, CEO, believes that both political parties intend to continue infrastructure investments, which are necessary for the country. There is no significant long-term risk perceived from the elections affecting these programs.
Q: Can you quantify the impact of the savings program in Germany during Q2?
A: Erik Danemar, CFO, indicated that while it's difficult to quantify precisely, the SEK60 million savings target was achieved by the end of Q2. The impact can be approximated by considering a gradual implementation from late last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
