Release Date: July 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HMS Networks AB (FRA:4H3A, Financial) reported an adjusted EBIT margin of 21.4%, showing improvement from the previous year.
- The company achieved a strong cash flow of SEK201 million for the quarter, indicating effective management of inventory and cash flow items.
- The I&T division showed positive development with a 15% organic increase in order intake, driven by recovery in Europe and strong performance in APAC, particularly China.
- The company maintained a book-to-bill ratio of over 1, indicating a healthy balance between orders received and sales.
- HMS Networks AB (FRA:4H3A) is investing in production facilities in York and Pennsylvania, aiming for improved margins and operational efficiency in the future.
Negative Points
- Net sales were flat compared to the previous year, impacted by currency effects and market uncertainties.
- The IDS division experienced a 14% decline in reported sales, partly due to internal delays and market conditions.
- Tariffs have created uncertainty, affecting larger projects and contributing to a cautious market environment.
- The New Industries division faced challenges with a hesitant market in building automation and headwinds in vehicle communication.
- Gross margins were slightly lower than expected, impacted by tariffs and currency fluctuations.
Q & A Highlights
Q: Could you elaborate on the impact of tariffs and geopolitics on your customers, and how do you foresee the rest of the year playing out?
A: We are cautiously optimistic about the full year, expecting a slight improvement in Q3 and more in Q4. The uncertainty around tariffs is causing hesitation, particularly for larger projects. However, once there's clarity on tariffs, we anticipate a positive impact on decision-making. (Joakim Nideborn, Deputy CEO & CFO)
Q: Can you quantify the impact of tariffs on the gross margin?
A: The tariffs have impacted the gross margin by about a percentage point. We expect the effects of price increases to balance out in Q3, potentially improving margins. (Joakim Nideborn, Deputy CEO & CFO)
Q: How has the order intake trended from April to June, and what are your expectations for OpEx if demand changes?
A: The order intake has been stable throughout the quarter. We have seen a small organic decline in OpEx, and while we plan to increase costs as demand returns, we are prepared to maintain or reduce costs if necessary. (Joakim Nideborn, Deputy CEO & CFO)
Q: How have customer communications changed since Liberation Day, and what is the status of price increases?
A: The uncertainty has persisted since Liberation Day, affecting larger projects. Most price increases should be reflected in Q3, with only minor mismatches expected. (Staffan Dahlstroem, CEO)
Q: Can you provide more details on the investments in production facilities in York and Pennsylvania and their impact on margins?
A: Some investments are in place, and we expect improvements in gross margins from Q1 next year. We haven't specified the exact margin improvement yet, as we are still assessing the full impact. (Joakim Nideborn, Deputy CEO & CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
