• Organic Net Sales Growth: 3.1% for Q4 2024.
• Gross Margin: 44.7% for Q4 2024.
• Adjusted EBITDA: SEK653 million for Q4 2024, a 6.5% increase from the previous year.
• Adjusted EBIT: Improved by almost 10% for Q4 2024.
• Operating Cash Flow: SEK479 million for Q4 2024, with a cash conversion of 82%.
• Full Year Organic Growth: 3.1% for 2024.
• Full Year Gross Margin: Improved from 43.1% in 2023 to 43.5% in 2024.
• Full Year Cash Conversion: 77% for 2024.
• Net Debt: Decreased to SEK4.2 billion in Q4 2024.
• Leverage: Improved to 2.0% net debt to adjusted EBITDA.
• Equity Ratio: 51.2% in Q4 2024.
• North America Organic Growth: Almost 8% for Q4 2024 and more than 5% for the full year.
• Western Europe Organic Growth: Flat at 0.3% for Q4 2024 and 1.9% for the full year.
• Rest of the World Organic Growth: Negative 3.7% for Q4 2024, but 4.1% for the full year.

• Warning! GuruFocus has detected 3 Warning Sign with FRA:A39.

Release Date: January 30, 2025

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

Positive Points

• Arjo AB (FRA:A39) reported a 3.1% organic net sales growth for Q4 2024, indicating a recovery from Q3.
• The company saw strong growth in North America, with the US market showing positive development due to internal restructuring and improved customer financial situations.
• Gross margin improved year-over-year from 43.1% to 43.5%, supported by lower material costs and price adjustments.
• Adjusted EBITDA increased by 6.5% to SEK653 million, and adjusted EBIT improved by almost 10%, reflecting underlying profitability improvement.
• The company launched a new product, the Symbliss bathing system, which has received positive customer feedback and is expected to strengthen market positions.

Negative Points

• Challenges persist in Western European markets, particularly in France and the Netherlands, due to uncertainties in healthcare funding.
• The rest of the world segment experienced a negative organic net sales growth of -3.7% in Q4, impacted by a tough comparison from the previous year.
• Higher than normal salary inflation continues to be a headwind, affecting gross margin improvements.
• Operating cash flow decreased to SEK479 million in Q4 2024 from SEK734 million in Q4 2023, due to working capital impacts.
• The company faces ongoing challenges in China, with a weak finish to the year and a need to change market strategies for growth in 2025.

Q & A Highlights

Q: Could you share more details on the strong order growth mentioned in the presentation? Should we expect a strong first half of 2025, possibly towards the upper end of your 3% to 5% growth range? A: The order intake growth in Q4 was larger than the net sales growth, which is positive. We are entering 2025 with a larger order book, particularly in North America. However, the order book is delivered over time, so the impact will be seen throughout 2025 rather than immediately.

Q: With the gross margin up by 40 basis points in 2024 and only down 30 basis points in Q4, can we expect gross margin expansion in Q1 year-over-year? A: We do not provide specific guidance on gross margin, but our plans support year-over-year improvement for 2025. Our ambition is to achieve quarterly year-over-year improvements as well.

Q: Regarding product mix and portfolio management, how significant will this be in 2025? Are we looking at a small impact in 2025 with more in 2026 and 2027? A: Portfolio and mix improvements are ongoing activities, with a focus on higher-margin categories and products. While strategic moves are more for 2026 and beyond, operational work on the portfolio and mix will be a focus for 2025.

Q: How important is the US market's momentum for gross margin improvements in 2025? A: Growing faster in the US than in other regions provides geo mix support, which is beneficial for gross margin improvements.

Q: With the UK showing double-digit growth, is this a fair level of growth to expect going forward? A: While double-digit growth is very positive, it's uncertain if this level will continue. We remain optimistic about the UK market, but the growth rate may vary.

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