• Revenue: Decreased by 5% to CHF572.5 million; currency-adjusted decline of 2.4%.
• EBIT: Increased by 11.6% to CHF67.5 million; currency-adjusted increase of 15.3%.
• EBIT Margin: Improved by 180 basis points to 11.8%.
• Net Result: Increased by 20.2% to CHF38.6 million.
• Net Result per Share: Increased by CHF0.38 to CHF2.27.
• Healthcare Revenue: Decreased to CHF230.7 million; currency-adjusted decline of 6.4%.
• Industrial Solutions Revenue: Slight decline to CHF343.4 million; currency-adjusted growth of 0.2%.
• Free Cash Flow: Improved by approximately CHF5 million.
• Net Debt: CHF508.8 million, a small improvement of CHF8 million versus prior year.

• Warning! GuruFocus has detected 7 Warning Signs with XSWX:DAE.

Release Date: July 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Daetwyler Holding AG (XSWX:DAE) increased its EBIT by 11.6% to CHF67.5 million, with a currency-adjusted increase of 15.3%, improving the EBIT margin by 180 basis points to 11.8%.
• The company achieved a 20.2% increase in net result to CHF38.6 million, with net result per share rising by CHF0.38 to CHF2.27.
• Daetwyler's Industrial Solutions business area managed to increase its operating profit by CHF54.1 million to CHF31.9 million, with a currency-adjusted increase of 60.4%.
• The company received a platinum standard rating from EcoVadis for its sustainability performance, placing it among the top 1% of over 130,000 companies rated annually.
• Daetwyler is actively pursuing growth initiatives in healthcare and e-mobility, with a strong pipeline of new projects and strategic investments in advanced manufacturing sites.

Negative Points

• Revenues decreased by 5% to CHF572.5 million, with a currency-adjusted decline of 2.4% compared to the first half of 2023.
• The healthcare segment experienced a revenue decline of 6.4% after adjusting for currency effects, largely due to ongoing destocking post-COVID pandemic.
• The company faced underutilization at several production sites, impacting profitability despite cost optimizations.
• The strengthening of the Swiss franc negatively affected results due to translation effects, impacting reported figures.
• The connectors business unit experienced slower growth than anticipated, with challenges in the e-mobility market and recessionary trends affecting performance.

Q & A Highlights

Q: Will the first half of 2024 be the peak in terms of depreciation, given the continued increase despite CapEx retreating? A: The current high depreciation is due to peak investments in healthcare plants in India and the US. CapEx will not continue to dip in the long term as we need to maintain our facilities. The impact of depreciation on PPE is not immediately visible due to a CHF22 million CTA adjustment.

Q: Can you provide more details on the timeline for new products like electro-active polymers to generate meaningful revenues? A: We have business wins in battery applications and innovations in connectors. Electro-active polymers have potential in automotive interiors and other industries. These innovations are not expected to impact short-term P&L but are seen as midterm opportunities.

Q: What is your deleveraging speed for 2024, and where do you see net debt to EBITDA by year-end? A: We aim to continue deleveraging to increase financial flexibility. Our goal is to achieve an equity ratio of around 40% versus liabilities of 60%.

Q: Are you still committed to the midterm profitability guidance of 18% to 21%? A: Yes, the midterm guidance remains, but achieving it depends on the fruition of projects, particularly in the healthcare business, over a three to five-year period.

Q: How is the pricing developing in Healthcare Solutions amid underutilization and destocking? A: Volume decline is in the double-digit million range, while price increases are in the mid-single digit range. Prices are influenced by raw material and energy costs, as well as the value we bring to customers.

Q: What is the current thinking on the connectors business, given its slower-than-expected start? A: We are expanding regionally, particularly in Europe, leveraging synergies with our mobility business. Growth is expected as BEV market share increases, despite current slower-than-expected market growth.

Q: How confident are you in reaching an EBIT margin above 22% by 2028 in Healthcare Solutions? A: Confidence is based on a growing project funnel with high-value applications and filling overcapacities. The shift from low to high-value applications is expected to drive profitability.

Q: Is the weakness in the connectors business more related to destocking or recessionary trends? A: It's a combination of both. There's a slowdown in e-mobility ramp-up and recessionary trends, particularly in the US, affecting standard application plugs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.