Release Date: February 05, 2025

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

Positive Points

• Daetwyler Holding AG (XSWX:DAE) maintained stable operational margins despite weak market conditions, with an adjusted EBIT margin of 10.7% compared to 10.5% last year.
• The company successfully secured new business wins in the healthcare and automotive sectors, particularly in high-value categories.
• Daetwyler Holding AG (XSWX:DAE) reduced CO2 emissions by 30% across its global plant network and received the highest sustainability rating from Ecovadis.
• The company plans to start serial production of high-quality plungers for GLP-1 receptor agonists in Q1 2025, indicating growth in the healthcare segment.
• Daetwyler Holding AG (XSWX:DAE) has a strong free cash flow, providing financial flexibility for debt repayment and dividend distribution.

Negative Points

• The company's revenue for 2024 was CHF 1.18 million, a 3.8% decrease from 2023, primarily due to weak demand in four out of five end markets.
• Daetwyler Holding AG (XSWX:DAE) faced a significant impact from currency fluctuations, with over 60% of revenue decline attributed to unfavorable currency impacts.
• The healthcare segment experienced a 4.9% reduction in net revenues due to continued destocking and a less favorable profit mix.
• The oil and gas market was characterized by uncertainty and low activity, significantly impacting revenues in that segment.
• The company incurred CHF 37.9 million in one-time transformation costs, impacting the financial results for 2024.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with XSWX:DAE.

Q: Can you explain the extra costs of CHF 38 million for 2024 and how they will impact 2025? Also, how are these costs split between healthcare and industrial solutions? A: 61% of the CHF 37.9 million costs are attributed to industrial solutions, with the rest to healthcare. The benefits of these costs, expected to be CHF 52 million over three years, will gradually materialize, with more impact in 2026 and 2027. The costs are already in the 2024 financial statement, but the benefits will evolve over the three-year period.

Q: What adjustments are you making to your production footprint, and how will this affect your capacities? A: We are optimizing our production footprint by reallocating certain products to specific plants to create synergies and reduce fixed costs. This involves assessing which technologies are necessary at each plant and adjusting the management structure to align with a regional and global organization. We aim to replace commodity products with high-margin products, which will change the technology and plant footprint to accommodate new products.

Q: Can you provide more details on the adjusted margin expansion in industrial solutions? How much was due to lower raw material costs versus operational improvements? A: The margin expansion was driven by three key areas: managing incoming goods versus sales, reducing raw material waste, and optimizing production scheduling. These efforts have led to substantial progress in reducing costs and improving operational efficiency.

Q: What is your medium-term target for deleveraging, and what can we expect by the end of 2025? A: Our medium-term target is a net debt to EBITDA ratio of 1% to 1.5%. However, in 2025, our free cash flow will be impacted by cash outflows related to the transformation program, so deleveraging may not be as significant as in 2024.

Q: How will the GLP-1 serial production impact revenues in 2025? A: The GLP-1 ramp-up is planned to start at the end of Q1 2025, with volumes gradually increasing throughout the year. We expect to reach a two-digit million level in annual revenue within 18 months.

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