Release Date: April 29, 2025

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

Positive Points

• Arjo AB (STU:A39) reported a 3.4% organic net sales growth in Q1 2025, indicating a solid start to the year.
• The company experienced strong momentum in its rent and service business, supported by growth in capital sales.
• North America, particularly the US and Canada, showed more than 6% organic growth, driven by the long-term care business.
• Arjo AB (STU:A39) launched two new products in 2025, including the Maximum 5 floor lift, enhancing its product offerings.
• The company is seeing improved market conditions in several European countries, with double-digit sales growth in Benelux.

Negative Points

• Adjusted EBITDA for Q1 2025 was 486 million SEK, down from 502 million SEK in Q1 2024, primarily due to currency headwinds.
• Operational cash flow decreased to 184 million SEK, leading to a cash conversion rate of 41%, below the company's target.
• The company faced higher salary costs and currency headwinds, which partially offset improvements from lower material costs.
• Arjo AB (STU:A39) reported a negative organic net sales growth of 5.7% in the rest of the world, attributed to tough comparisons from the previous year.
• Restructuring costs were higher than usual, mainly due to changes in the executive team and market approach in China.

Q & A Highlights

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

Q: Can you elaborate on the impact of tariffs on your gross margin and how you plan to mitigate these effects? A: We are actively working to mitigate the impact of tariffs through price adjustments with our US customers and optimizing our global manufacturing footprint. While we don't provide specific guidance on gross margin impacts, our focus remains on minimizing these effects through strategic measures. (Respondent: Unidentified_1)

Q: Could you provide insights into the current hospital capital expenditure environment in key markets? A: We see positive momentum in North America and Europe, with stronger order intake and deliveries for capital products. Markets like France and the Netherlands are showing improvement, and we have a strong order book in Canada and the US. Overall, we are optimistic about the capital expenditure outlook. (Respondent: Unidentified_1)

Q: What are the plans for cost reduction initiatives, and which areas will you target for cost containment? A: We have solid plans to improve indirect spending, IT harmonization, and organizational restructuring. While I'm not satisfied with the short-term development, we will push these projects further and be more cautious with hiring and activity levels to achieve better leverage on operating expenses. (Respondent: Unidentified_1)

Q: With the current tariff and FX situation, is it reasonable to expect a decline in adjusted EBIT for the full year? A: Our ambition is to mitigate all headwinds, including currency impacts, although Q1 was significantly affected by currency. We are focusing on mitigating these effects throughout the year, but it is too early to draw conclusions for the full year. (Respondent: Unidentified_1)

Q: Can you provide an estimate on the impact of currency on EBIT margin for the full year? A: We don't have a specific number, but the significant negative impact in Q1 was due to the revaluation of accounts payable and receivable. If currency levels remain stable, this was a one-time hit and should not repeat. (Respondent: Unidentified_1)

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