• Revenue: SEK5 billion, down 9% compared to Q3 last year.
• EBIT: SEK800 million, with a margin of 16.1%.
• Organic Sales Decline: 7% decrease in the quarter.
• Operating Margin: 16.1% for the quarter.
• Equity Asset Ratio: 64%.
• Return on Capital: 18.4%.
• Cash Flow: SEK803 million.
• Net Debt: SEK2.4 billion, with a net debt ratio of 0.6.
• Hexpol Compounding Sales: SEK4.6 billion, down 10% from Q3 last year.
• Hexpol Engineered Products Sales: SEK365 million, stable compared to last year.
• Negative Currency Effect: SEK172 million impact in the quarter.

Release Date: October 25, 2024

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

Positive Points

• Hexpol AB (HXPLF) delivered a solid EBIT of SEK800 million with a strong margin of 16.1%.
• The company maintains a high equity asset ratio of 64% and a return on capital of 18.4%, indicating financial stability.
• Hexpol AB (HXPLF) continues to focus on sustainability, with high interest in recycled products, particularly in the automotive industry.
• The company is well-prepared for the EU's proposed end-of-life vehicle amendment, with facilities like Almaak in Germany using 90% recycled materials.
• Hexpol AB (HXPLF) has a strong business model with a decentralized structure, allowing flexibility and efficiency in operations.

Negative Points

• Sales were down 9% compared to the same period last year, primarily due to lower demand from the automotive sector.
• The company experienced negative currency effects, particularly related to the US dollar, impacting sales by SEK172 million.
• Organic sales decreased by 7%, driven by lower volumes and sales prices.
• The operating margin decreased compared to the same period last year, affected by lower volumes that couldn't be offset by cost reductions.
• There is ongoing uncertainty in the automotive sector, with potential risks of further demand weakening impacting future financials.

Q & A Highlights

Q: Could you elaborate on your plans for organic growth, given that it hasn't been Hexpol's strongest point historically? A: At this stage, I would like to come back to you on what that means. However, we feel there is room to improve organic growth, and it should always be in our DNA to improve that.

Q: How did demand change over the quarter, and were there any industries or geographies where you saw more of a change? A: Sequentially, the majority of the decrease is due to seasonal patterns, with customers going on vacation and closing production. Some closed more than usual, especially in the US. Apart from that, we saw somewhat lower demand, primarily in automotive.

Q: What has prevented you from closing any acquisitions so far this year, despite viewing the market positively? A: It has taken time for prices between buyers and sellers to balance. Additionally, most potential sellers are family-owned businesses, and those processes take more time than buying from a private equity center.

Q: Do you see any weakness from other markets beyond automotive, and how does it compare to Q2? A: It's primarily within automotive. There are normal movements back and forth in other markets, but it's mainly automotive where we see weakness.

Q: How are you protecting margins given the significant lower volumes, especially in automotive? A: In the short run, we focus on production planning to align with demand, impacting how we staff our shifts. In the medium to long term, we maintain strict cost control and review overall efficiency, including our footprint.

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