Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Detection Technology PLC (OHEL:DETEC, Financial) reported a slight increase in sales, reaching EUR31.6 million in the fourth quarter, marking a 1% increase from the previous year.
- The company achieved a notable improvement in EBITA, reaching EUR5.2 million, which is a clear increase from the previous year, with an EBITA margin of 16.3%.
- Security sales increased by 5%, driven by computed tomography outside of China and growth in cargo-related sales.
- The company reported a strong cash flow of EUR6.9 million in the fourth quarter and EUR20.1 million for the full year.
- Detection Technology PLC (OHEL:DETEC) plans to ramp up production at its new India factory, targeting production in the first half of the year, which could enhance its manufacturing capabilities.
Negative Points
- Medical sales declined by 5% due to challenges in the China market, including healthcare reform and anti-corruption campaigns.
- The Americas region experienced a significant sales decline, down close to 60%, attributed to one-time reasons such as customer inventory adjustments.
- The company faces intense price competition in China, particularly in the industrial segment, impacting sales and profitability.
- The first quarter of the upcoming year is expected to be flat, with security sales anticipated to decline due to inventory adjustments and market conditions.
- Tariff uncertainties, particularly potential new tariffs on European goods, pose a risk to the company's operations and profitability.
Q & A Highlights
Q: When it comes to the medical segment, do you think that in Q2, you would be in a normal medical demand situation in China also with the Western players?
A: Hannu Martola, CEO: We are seeing some recovery in the medical segment, but it's not back to normal due to new policies and processes. The market is under-invested, and recovery will be slow. However, we are seeing an increase in forecasts and orders.
Q: Do you see more intense price pressure in the medical market as a result of competition with Chinese players?
A: Hannu Martola, CEO: There is significant price pressure in China, which is the most competitive market globally. This competition is leading to declining sales and profits for many companies. However, it also provides an opportunity to improve productivity and competitiveness.
Q: Are the new medical TFT products already in the regulatory approval phases of your customers?
A: Hannu Martola, CEO: Yes, some approvals are ongoing. We have a good position with our new set of 60 flat panel products to win markets. The TFT sales for the fourth quarter declined slightly due to the industrial market in China.
Q: What is the biggest driver for the improved EBITA margin last year?
A: Hannu Martola, CEO: The improvement is due to higher volume, better productivity, and a favorable sales mix. Prices did not increase; they went down. We compensated for price decreases with improved productivity.
Q: Can you explain the dynamics behind the expected decline in security sales in Q1 and the return to growth in Q2?
A: Hannu Martola, CEO: The security business is influenced by airport installations and customer stock levels. The first quarter is typically the smallest due to the Chinese New Year. We expect a stock correction and a pick-up in the second quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
