• Revenue: SEK5.4 billion, up by 1% compared to the same period last year.
• Adjusted EBIT: SEK839 million with a margin of 15.6%.
• Cash Flow: SEK188 million, higher than last year's SEK112 million.
• Organic Sales: Down 3% in the quarter.
• Engineered Products Sales: Increased by 15% compared to last year.
• Operating Profit: SEK840 million, down 7% from last year.
• Equity Asset Ratio: Above 60%.
• Return on Capital Employed: Approximately 17%.
• Net Debt: SEK2.3 billion with a net debt/EBITDA ratio of 0.663.
• Hexpol Compounding Sales: SEK5 billion, in line with last year.
• Engineered Products Operating Profit: SEK80 million, 15% above last year, with a margin of 18.2%.

• Warning! GuruFocus has detected 2 Warning Sign with HXPLF.

Release Date: April 25, 2025

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

Positive Points

• Hexpol AB (HXPLF) reported a strong start to the year with stable sales in Europe and the US, and significant improvement in Asia driven by engineered products.
• The company achieved sales of close to SEK5.4 billion and an adjusted EBIT of SEK839 million with a margin of 15.6%.
• The acquisition of Capcom in Turkey was approved, strengthening Hexpol's position in the wire and cable segment, which is expected to grow.
• Hexpol is committed to sustainability, with a high interest in recycled products, particularly from the automotive industry.
• The company maintains a strong financial position with a high equity asset ratio above 60% and a return on capital employed of about 17%.

Negative Points

• Organic demand was slightly down compared to Q1 last year, mainly due to lower demand from the automotive sector.
• The EBIT margin decreased compared to the same period last year, primarily due to a less profitable product mix.
• There is uncertainty regarding the impact of US trade policies and tariffs, which could affect raw material prices and demand in North America.
• The company experienced a lower cash flow in the first quarter, although it was higher than the previous year.
• The market environment for mergers and acquisitions is currently quiet due to increased uncertainty, affecting potential growth opportunities.

Q & A Highlights

Q: Margins continue to be down compared to last year's levels. Should we expect this trend to continue? A: Peter Rosen, Deputy CEO and CFO, stated that they do not provide guidance on future margins. The mix is affected by demand and production locations, and future performance will depend on factors like US trade policy impacts.

Q: Are recycled products affecting profitability? A: Peter Rosen clarified that the negative impact on profitability is not related to recycled products but rather to shifts in customer demand and production locations.

Q: How are you managing raw material costs amid US trade policy changes? A: Peter Rosen explained that they are finding alternative suppliers, negotiating prices, and managing customer pricing to mitigate impacts, feeling confident in maintaining margins.

Q: Can you elaborate on the organizational changes and their goals? A: Klas Dahlberg, CEO, explained that combining thermoplastics and thermoplastic elastomers into one unit aims to achieve critical mass and leverage production similarities for growth.

Q: What is the impact of tariffs on US demand and competition? A: Klas Dahlberg noted that while tariffs are expected to affect raw material prices, they believe the impact will be equal across competitors, and Hexpol is well-positioned to manage these changes.

Q: How is the construction demand cycle progressing? A: Peter Rosen mentioned that construction demand, particularly in infrastructure, has been increasing for three quarters, but it's difficult to predict when housing construction will rebound.

Q: What percentage of sales does the cable segment represent with the Capcom acquisition? A: Peter Rosen indicated that the cable segment, including Capcom, is likely to reach double figures in terms of total group sales.

Q: Can you maintain working capital below 10% of sales? A: Peter Rosen stated that while they aim to manage working capital efficiently, achieving below 10% is challenging due to changes in inventory strategies post-COVID and the need for higher raw material stocks.

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