• Sales: SEK4,782 million, down 17.5% year-on-year.
• Gross Profit: SEK683 million, down SEK205 million or 24%.
• Gross Margin: 14.3%, down from 15.3% last year.
• Adjusted EBITA: SEK21 million, down from SEK192 million last year.
• EBITA Margin: 0.4%, down from 3.3% last year.
• EBIT: Negative SEK52 million, compared to SEK129 million last year.
• Cash Flow from Operating Activities: Negative SEK42 million, compared to SEK250 million last year.
• Leverage: 5.4%, up from 4.0% last year.
• SMB Segment Sales: SEK1.5 billion, down 1.2% year-on-year.
• SMB Segment Margin: 3.2%, compared to 3.6% last year.
• LCP Segment Sales: SEK3.2 billion, down 20.9% year-on-year.
• LCP Segment Margin: 0.3%, compared to 4.0% last year.
• Net Working Capital: SEK267 million, higher than last year's minus SEK261 million.
• CapEx: SEK73 million, with SEK45 million affecting cash flow.

• Warning! GuruFocus has detected 5 Warning Signs with FRA:9DG.

Release Date: January 08, 2025

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

Positive Points

• Dustin Group AB (FRA:9DG) has successfully launched a new IT platform in the Benelux, which is expected to improve efficiency and customer experience.
• The company is seeing strong growth in its circularity offering, with approximately 1.2 million units of take back annually, enhancing its sustainability credentials.
• Despite challenges, the gross margin in the SMB segment remained stable, supported by continued price discipline.
• Dustin Group AB (FRA:9DG) has implemented organizational changes and efficiency measures expected to reduce costs by SEK150 million to SEK200 million annually.
• The company is preparing for future market recovery by aligning its operations with anticipated demand for AI PCs and post-pandemic replacement cycles.

Negative Points

• Sales for the quarter were SEK4,782 million, down 17.5% from the previous year, impacted by a weak market and IT platform implementation issues.
• Gross profit decreased by SEK205 million, or 24%, with a gross margin decline from 15.3% to 14.3%, primarily due to a negative product mix in LCP.
• Adjusted EBITA dropped significantly from SEK192 million to SEK21 million, with an EBITA margin falling from 3.3% to 0.4%.
• Cash flow from operating activities was negative SEK42 million, compared to SEK250 million last year, due to low business results and higher working capital.
• Leverage increased to 5.4% from last year's 4.0%, driven by lower business results and high net working capital.

Q & A Highlights

Q: How will Microsoft's changes in the incentive program affect Dustin Group's software and services sales? A: Johan Karlsson, CEO, stated that the changes will not drag on margins. The company has been preparing for these changes and does not expect any significant impact on their ability to make margins.

Q: What is the outlook for inventory levels in the Netherlands, and how will it affect working capital? A: Julia Lagerqvist, CFO, mentioned that inventory levels are expected to return to a more normalized level in Q2. The current high levels were due to lower-than-expected sales.

Q: Can you explain the issues with the ERP implementation and its impact on sales? A: Johan Karlsson, CEO, explained that the ERP implementation in the Benelux was complex, leading to initial challenges mainly due to insufficient training. However, improvements have been made, and no significant operational impact is expected in Q2.

Q: How does Dustin Group plan to reduce its leverage, currently at 5.4 times net debt to EBITDA? A: Johan Karlsson, CEO, outlined plans to address working capital and reduce costs while preparing for market recovery. The target range of 2 to 3 times leverage is expected to be achieved in four to six quarters.

Q: What are the margins on refurbished online sales, and how is demand expected to develop? A: Johan Karlsson, CEO, stated that margins on refurbished products are higher in percentage terms compared to new PCs, but the overall earnings per unit are similar. Demand for refurbished PCs is strong, especially in public tenders.

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