Hexatronic Group AB (publ) Interim report January – March 2024
Hexatronic Group AB (publ)Interim report
January – March 2024
Continued strong operating cash flow and contribution
from new focus areas
First quarter (January 1 – March 31, 2024)
- Net sales decreased by 16 percent to MSEK 1,782 (2,115). Sales
decreased organically by 27 percent.
- EBITA decreased by 54 percent to MSEK 168 (365), corresponding
to an EBITA margin of 9.4 percent (17.2).
- Operating profit (EBIT) decreased by 59 percent to MSEK 138
(340), corresponding to an operating margin of 7.7 percent
(16.1).
- Net profit decreased by 73 percent to MSEK 61 (224).
- Earnings per share after dilution amounted to SEK 0.31
(1.09).
- Leverage ratio (net debt/EBITDA (pro forma), R12) amounted to
2.0x compared to 1.7x as of December 31, 2023.
- Cash flow from operating activities amounted to MSEK 270
(28).
Significant events during the quarter
- The Board of Directors proposes to the Annual General Meeting
that no payment of dividend will be made for the financial year
2023.
- Hexatronic merges its two Swedish wholly-owned subsidiaries,
Hexatronic Cable & Interconnect Systems and Hexatronic
Fiberoptic, forming Hexatronic Sweden. The merger aligns with
Hexatronic’s strategy to have a strong local fiber-to-the-home
company in our selected markets.
- The Nomination Committee has informed the company that it
intends to propose Magnus Nicolin for election as Chairman of the
Board, at the Annual General Meeting on May 7, 2024.
Significant events since the end of the
quarter
- Hexatronic announces changes in the
company's executive management. Jakob Skov, Head of focus area
Harsh Environment, will join the company's executive management as
of April 2024 and in June 2024 Pernilla Grennfelt will join
Hexatronic as Head of Investor Relations and join the company's
executive management.
Comments from the CEOContinued strong operating cash
flow and contribution from new focus areas
During the first quarter we had a continued strong
operating cash flow of MSEK 270, compared to MSEK 28 in the
corresponding period last year, primarily driven by continued
inventory optimization according to the strategy. As previously
communicated, the market in Fiber Solutions is negatively affected
by high financing costs, cost inflation and high inventory levels
in some geographical markets. Combined with an very strong first
quarter last year, the Group experienced negative growth in the
first quarter of 16 percent compared to the corresponding period
last year and 4 percent compared to the previous quarter. Our new
focus areas Harsh Environment and Data Center, partly offset the
decline in Fiber Solutions and are beginning to constitute an
increasingly relevant part of the Group's total sales, with good
profitability. This is an important sign that our diversification
strategy is yielding positive results. Going forward, we will
clarify the roles of these areas within the Group.
Profitability in line with the previous
quarterProfitability has continued to be affected by lower
capacity utilization and price pressure in several markets. The
EBITA margin in the quarter was 9.4 percent, compared with 17.2
percent in the corresponding period last year and 9.1 percent
compared with the previous quarter.
New focus areas continue to represent a more significant
part of total sales Sales in Harsh Environment totaled
MSEK 259 in the first quarter, an increase from MSEK 52 in the
corresponding quarter last year. The growth is driven by the
acquisitions of Rochester Cable and Fibron Cable, active in dynamic
hybrid cables for applications mainly in energy and defense.
In Harsh Environment, not least with the current security
situation in the world, there is a generally strong demand in
defense and energy markets that we believe will remain for a long
time to come. We are currently seeing a substantial expansion of
existing sea-based infrastructure and great interest in renewable
sea-based energy production. This is driving investments in, for
example, Remotely Operating Vehicles (ROVs) that rely entirely on
dynamic hybrid cables for their operation.
Sales in Data Center amounted to MSEK 256 in the first quarter,
an increase from MSEK 182 in the corresponding period last year.
The majority of the growth is organic, and the remaining part is
attributable to the acquisition of the data center company USNet in
the US.
During the quarter, growth was strong in the product and service
business in both of our main geographical markets, the US and
Europe. The accelerating implementation of artificial intelligence
(AI), which requires significant processing power, is driving the
expansion of data centers globally.
North AmericaNorth America showed a negative
sales development of 8 percent in the quarter. The acquisitions of
Rochester Cable and USNet contributed positively but were offset by
lower sales for Blue Diamond Industries.
Sales of FTTH systems in the US and Canada were slightly weaker
than in the corresponding quarter last year, mainly due to project
delays.
The construction of the new duct factory in Ogden, Utah, is
proceeding according to plan and is expected to be ready for
production in the third quarter of 2024. The plant expands our
addressable market for duct to include the western United States,
which is a significant market.
EuropeIn the quarter, sales in Rest of Europe
decreased by 21 percent compared to the corresponding period last
year. The decrease is explained by the weaker development in Fiber
Solutions, particularly in Germany and the UK, combined with the
fact that the corresponding quarter last year was very strong. The
acquisition of Fibron Cable contributed positively and in line with
our expectations.
Sales in Sweden decreased by 8 percent, where we saw slightly
lower activity in the FTTH market.
APACIn APAC, sales decreased by 25 percent
compared to the corresponding period last year, mainly due to a
submarine cable project delivered to South Korea last year.
Although, sales during the quarter were in line with the previous
quarter.
Continued financial flexibility We continue to
have good financial flexibility for the creation of long-term
value. Interest-bearing net debt (i.e. excluding IFRS 16) was
largely in line with the previous quarter and amounted to MSEK
2,102 at the end of the quarter.
The interest-bearing net debt in relation to proforma EBITDA on
12-months basis, key ratio that reflects our existing bank
covenant, increased from 1.4x to 1.7x during the quarter. The
increase is due to lower profitability in the first quarter
compared to a very strong first quarter last year.
Outlook for 2024 and beyondIn Harsh Environment
and Data Center we expect market demand to remain strong during the
rest of the year and beyond, mainly driven by investments in
defense, energy and AI.
In Fiber Solutions we expect the market to remain weak in the
coming quarters and then a gradual increase in demand in the latter
part of the year. However, we see strong underlying structural
trends, supporting global build-out in the long term.
The Group’s order book at the end of the first quarter
corresponded to just over two months of sales, which is unchanged
compared to the end of 2023.
Welcome to join us on our growth journey.Henrik Larsson
LyonPresident and CEO Hexatronic Group AB (publ)
Please direct any questions to:Henrik Larsson
Lyon, CEO Hexatronic Group, +46 706 50 34 00Pernilla Lindén,
CFO Hexatronic Group, +46 708 77 58 32
This is information that Hexatronic Group AB (publ) is obliged
to make public pursuant to the EU Market Abuse Regulation. The
information was submitted for publication under responsibility of
the contact persons set out above, at 07:00 CEST on April 26, 2024.
This is a translation of the Swedish version of the year end
report. When in doubt, the Swedish wording prevails.
Hexatronic creates sustainable networks all over the world. We
partner with customers on four continents – from telecom operators
to network owners – and offer leading, high-quality fiber
technology for every conceivable application. Hexatronic Group
(publ.) was founded in Sweden in 1993 and the Group is listed on
Nasdaq OMX Stockholm. Our global brands include Viper, Stingray,
Raptor, InOne, and Wistom®.
- Hexatronic Group AB (publ) - Interim report Q1 2024
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