• Revenue: EUR 181.6 million in Q3, a decrease of 16.9% compared to Q3 last year.
• EBIT: EUR 1.1 million for the quarter; year-to-date EBIT at EUR 17.6 million with an EBIT margin of 2.9%.
• Cost Savings: On track for overhead cost reductions of EUR 17 million in 2024, with additional savings of at least EUR 10 million expected by Q3 next year.
• Free Cash Flow: Negative EUR 5.2 million in Q3 after investments and financing.
• New Business Wins: Record EUR 1.23 billion year-to-date; rolling four quarters of new business wins at EUR 1.644 billion.
• Geographical Revenue Changes: 13.7% reduction in commercial vehicle revenues in Europe; 7.6% decrease in North America.
• China Revenue Growth: 5.9% growth in commercial vehicles, accounting for 9% of total revenues.
• Operational Structure: 32 locations globally, including 22 production plants.
• 2024 Revenue Guidance: Adjusted to EUR 760 million to EUR 790 million.
• 2024 EBIT Guidance: Updated to EUR 18 million to EUR 23 million.
• Book to Bill Ratio: 2.0, up from 0.91 a year ago.
• Net Income: Improved from a loss of EUR 33 million last year to a loss of EUR 5 million year-to-date.
• Liquidity: EUR 80 million in cash and cash equivalents; EUR 50 million undrawn revolving credit facility.
• Leverage Ratio: Increased from 1.7 in Q2 to 2.1 in Q3.

• Warning! GuruFocus has detected 4 Warning Signs with KGAUF.

Release Date: November 05, 2024

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

Positive Points

• Kongsberg Automotive Holdings ASA (KGAUF) achieved a significant improvement in EBIT margin, reaching 2.9% year-to-date, up from 0.1% in the same period last year.
• The company is on track for overhead cost reductions of EUR 17 million in 2024, with additional savings of at least EUR 10 million expected to take full effect from Q3 2025.
• New business wins are at a record EUR 1.23 billion year-to-date, indicating strong alignment with top Tier-1 customer needs.
• The company has a robust order book, with 85% of anticipated revenues for 2026 and 70% for 2028 already booked or awarded.
• Kongsberg Automotive Holdings ASA (KGAUF) is focusing on higher-margin products, with more than 40% of revenues in 2028 expected to come from air couplings, gear control units, and electric actuators.

Negative Points

• Revenues decreased by 16.9% in Q3 compared to the same period last year, reflecting lower demand in the automotive markets.
• The company experienced a 13.7% reduction in revenues within commercial vehicles in Europe and a 20% decrease in passenger vehicle sales year-to-date.
• Free cash flow was negative EUR 5.2 million in Q3, indicating challenges in cash generation despite positive cash flow from operations.
• The company faced higher than expected warranty costs, impacting EBIT by EUR 4 million due to issues with products manufactured between 2019 and 2022.
• The global automotive market remains weak, with significant declines in both commercial vehicle and passenger car production, affecting Kongsberg Automotive Holdings ASA (KGAUF)'s sales.

Q & A Highlights

Q: How does Kongsberg Automotive view its innovation potential in the rapidly changing automotive industry, and can we expect new product launches from 2025 onwards? A: Linda Nyquist-Evenrud, President and CEO, explained that Kongsberg Automotive has undergone two major waves of product portfolio restructuring in the last three years. The company has defined a growth path to reach EUR 1 billion by 2028, focusing on core products with competitive advantages, strong intellectual property, and competitive costs.

Q: What distinguishes Kongsberg Automotive's products such as the gear control unit and the clutch activator from the competition? A: Linda Nyquist-Evenrud highlighted that their gear control units offer high performance with a robust design, providing maximum comfort and low total cost of ownership. The unique selling points include a self-adjusting clutch actuator and a dog clutch actuator with fewer components and a compact design, enhancing driving efficiency.

Q: How does Kongsberg Automotive plan to strengthen its position in electric car components, and is there expected growth in revenue from this area? A: Linda Nyquist-Evenrud stated that Kongsberg Automotive is focusing on products designed for future electric, hybrid, or fuel cell vehicles. These products are expected to contribute significantly to the EUR 1 billion growth target by 2028, with more than 40% of revenues anticipated from this area.

Q: Does the company have contractual clauses to provide flexibility in the event of commodity price changes, and can costs be passed on to customers? A: Christian Johansson, CFO, confirmed that Kongsberg Automotive has such clauses and is actively working to secure more. The company has been successful in obtaining compensation for abnormal cost increases, although it has become more challenging in the current market.

Q: Is there a risk that Kongsberg Automotive will breach loan covenants if the weak market persists? A: Christian Johansson assured that several scenarios have been analyzed, and the company does not expect to breach covenants, maintaining sufficient headroom.

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