Release Date: May 21, 2025
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 that all key performance indicators have developed positively compared to the previous year, indicating an overall improvement in business stability.
- The UK market is showing signs of recovery with increased new build activity, leading to higher sales volumes and an optimistic mid-term trend.
- Poland remains a stable market with strong fundamentals, contributing positively to the group's results despite a slight decline in organic growth compared to the previous year.
- The company is shifting its focus from restructuring to profitable growth, emphasizing efficiency in plant networks and capacity to meet rising demand.
- H+H International AS maintains its financial guidance for 2025, expecting organic growth of 5% to 10% and EBIT before special items in the range of DKK120 million to DKK180 million.
Negative Points
- The German market remains challenging with low building activity and no immediate signs of recovery, impacting overall business efficiency.
- The ramp-up of capacity in the UK is causing inefficiencies and higher costs, affecting the gross margin negatively.
- Cash flow from operating activities was negative in Q1 2025, impacted by a negative development in working capital and payouts related to special items from 2024.
- The company faces challenges in maintaining optimal production and distribution patterns in the UK, leading to increased costs.
- There is uncertainty regarding the timing and impact of potential government initiatives in Germany to stimulate the housing market.
Q & A Highlights
Q: Can you explain the factors impacting the gross margin performance, which saw a decline of 360 basis points in the quarter?
A: Bjarne Pedersen, CFO, explained that the increase in absolute cost is largely due to passing on input cost increases. Additionally, in the UK, extra costs were incurred to optimize machinery and maintain high service levels, leading to sub-optimal distribution patterns and increased costs.
Q: What are your expectations for building activity in Germany, given the new government's positive signals?
A: Joerg Brinkmann, CEO, noted that while it's early days, the new government has allocated EUR500 billion for infrastructure and is focusing on reducing building costs and increasing social housing. Current capacity in Germany can meet initial demand increases without reopening mothballed plants.
Q: How much more volume can you extract from the existing network in Germany, and how long would it take to ramp up a mothballed factory?
A: Joerg Brinkmann stated that existing plants, which are running one or two shifts, have significant volume potential. A substantial recovery would be needed before considering reopening mothballed plants, as current facilities can handle increased demand.
Q: Can you provide guidance on gross margin development for the coming quarters in 2025?
A: Bjarne Pedersen indicated that while they expect a linear increase throughout the year, improvements might be more gradual. The full-year gross margin is expected to be higher than Q1, with significant gains anticipated in the second half as operations stabilize.
Q: What are your assumptions for Poland in terms of revenue growth to meet guidance?
A: Bjarne Pedersen expects Poland's market to maintain last year's volume levels with minor price increases. The focus will be on balancing price and volume to maintain price quality, with no significant capacity increases anticipated.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
