Release Date: March 26, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WashTec AG (WBO:WSU, Financial) improved its EBIT margin for the third consecutive year, reaching 9.5% in 2024.
- The company achieved a significant reduction in carbon emissions, surpassing its 2025 target by achieving a 34% reduction compared to the 2019 base year.
- WashTec AG (WBO:WSU) reported a strong free cash flow, maintaining a high level despite economic challenges.
- The company successfully increased its service revenue, which was significantly higher than the prior year, contributing to overall profitability.
- WashTec AG (WBO:WSU) is focusing on digital innovations and sustainable technologies, which are expected to drive future growth and customer retention.
Negative Points
- Revenue for WashTec AG (WBO:WSU) decreased by 2.6% in 2024 compared to the previous year, primarily due to lower equipment sales.
- The North American market experienced a significant decline in revenue, falling from EUR103 million to EUR85 million.
- The company faced challenges in the chemicals segment, with revenue slightly down due to initial purchases by a new customer in the prior year.
- WashTec AG (WBO:WSU) is undergoing a costly workforce relocation from Augsburg to the Czech Republic, which may impact short-term financials.
- Despite improvements, the EBIT margin in North America remained low at 4%, indicating room for further efficiency gains.
Q & A Highlights
Q: Could you provide insights on the demand picture in North America and the Circle K tender?
A: Michael Drolshagen, CFO, explained that the Circle K tender is a significant driver in the US, alongside a focus on short tunnels and chemicals. They have launched a new brand in the US and are hiring salespeople to boost revenue, aiming for each salesperson to generate over EUR1 million.
Q: When should we expect revenue from the chemical business in the US?
A: Michael Drolshagen stated that it takes three to six months to train new hires, so revenue is expected to increase in the second half of the year.
Q: Can you differentiate the impact of efficiency measures versus price measures on the gross margin?
A: Andreas Pabst, CFO, noted that maintaining production costs while increasing production volume significantly impacted earnings. Additionally, price increases from previous years are now fully reflected in the order backlog and deliveries.
Q: What is the timeline for transferring workforce from Augsburg to the Czech Republic, and when will we see cost improvements?
A: Michael Drolshagen mentioned that negotiations with the Workers' Council are concluding, and they aim to start the transfer soon. Initial effects are expected in Q3, with full implementation taking about 1.5 years, leading to significant logistics cost reductions.
Q: How do you expect the equipment and service business to grow in 2025?
A: Andreas Pabst emphasized expanding both service and equipment revenues, particularly in North America, where they aim to recover from a previous decrease in equipment sales.
Q: Can you elaborate on the impact of digitalization and connected equipment on service revenue?
A: Michael Drolshagen highlighted that digitalization supports subscription models and reduces service costs by optimizing technician visits. They are also hiring their own technicians in regions like Italy to improve service margins.
Q: What are the expectations for EBIT margins in North America as revenue levels recover?
A: Andreas Pabst expects EBIT margins to increase proportionately as revenue levels return, supported by efficiency improvements and a focus on services and chemicals.
Q: How does WashTec's digital strategy compare to competitors?
A: Michael Drolshagen noted that while some US-linked competitors are developing digital solutions, WashTec believes it is ahead in digitalization, particularly in Europe, and is focusing on service to protect its business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
