• Net Sales: Down 6% with a negative organic growth of 4% and a significant negative currency effect of SEK 281 million.
• Adjusted EBITA: Down 9%, with a positive organic growth contribution of SEK 15 million.
• Cash Flow from Operating Activities: SEK 783 million, with a cash conversion rate of approximately 170%.
• EBITA Margin: Industry segment close to 10%, with a 21% growth in EBITA.
• Leverage: 0.7 times, adjusted to 1.2 times after write-down adjustments.
• Return on Capital Employed (ROCE): 10.2%.
• Return on Invested Capital (ROIC): 7.3%.
• Order Backlog and Intake: Strong, particularly in construction.
• HL Display Revenue: Close to SEK 3 billion annually.
• HL Display EBITA CAGR: 34% average over seven years.

• Warning! GuruFocus has detected 7 Warning Signs with RTOBF.

Release Date: October 22, 2024

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

Positive Points

• Ratos AB (RTOBF) reported strong cash flows with a cash conversion rate of 167%, indicating efficient cash management.
• The merger of Knightec and Semcon is progressing well, expected to create a leading R&D partner for product and digital solutions.
• HL Display, a subsidiary, has shown impressive financial performance with a 34% average EBITA CAGR growth over seven years.
• The order backlog and order intake growth remain strong, suggesting a healthy pipeline for future projects.
• The company has successfully implemented inventory reduction programs, particularly in the consumer segment, leading to improved working capital management.

Negative Points

• Net sales were down by 6% with a negative organic growth of 4%, partly due to substantial currency effects.
• The construction segment faced a temporary downturn with net sales down 14%, attributed to project phasing issues.
• The technical consulting market is experiencing a weaker demand, impacting growth prospects.
• The plantation segment is undergoing reconstruction, resulting in store closures and a downsizing of operations.
• There were significant one-time costs related to restructuring efforts in various segments, affecting overall profitability.

Q & A Highlights

Q: Can you provide more details on the plantation reconstruction process? What has been done so far, and what remains? A: We have closed about 35 stores, with 10 in Finland and the rest in Norway and Sweden. However, we won't comment further on the ongoing process as it is crucial not to set expectations prematurely. The process is ongoing, and we will update once we have results.

Q: What prompted the merger of Knightec and Semcon now? A: The decision was driven by the successful collaboration between the companies, which reduced risks. This merger was planned from the beginning to create a leading R&D partner for product and digital solutions in Northern Europe. The process has started well, and we expect it to create significant value.

Q: The industry segment's margin improved year over year. What drove this increase? A: All companies in the industry segment grew their EBITA. Our business systems, implemented in 2018, have been very effective, and strong leadership within the companies has contributed significantly to this improvement.

Q: What is your view on the technical consulting market, and have you seen any signs of weakening demand? A: The market is slightly weaker, similar to other markets, due to high interest rates. However, we expect it to grow over time. Despite the weaker market, we achieved 8% organic growth in the quarter, which is a positive sign.

Q: With a strong order intake in construction, how much of this will be realized in Q4 and 2025? A: We expect a weaker market in the second half of this year, so high sales in Q4 are unlikely. However, the order book looks strong, and we anticipate gradual realization in 2025 and beyond.

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