Interim report January-June 2024: Investments for growth in a continued cautious market

Second quarter

• Order intake decreased to 483 MSEK (698).
• Net sales amounted to 588 MSEK (638).
• EBIT was 60.1 MSEK (85.8).
• EBIT margin was 10.2% (13.4).
• Profit after tax amounted to 39.8 MSEK (57.9).
• Earnings per share reached 1.37 SEK (2.00).
• Free cash flow doubled to 60.1 MSEK (30.3).
• The Westermo business entity took a first large train order for the Indian market.
• The business entity Westermo acquired a minority stake in Blu Wireless Technology and gets access to unique technology for connected trains.
     

First half-year

• Order intake amounted to 1,010 MSEK (1,315).
• Net sales were 1,187 MSEK (1,262).
• EBIT amounted to 134.6 MSEK (171.0).
• EBIT margin was 11.3% (13.6).
• The profit after tax was 91.0 MSEK (113.7).
• Earnings per share reached 3.14 SEK (3.94).
• Free cash flow increased to 51.8 MSEK (-9.1).
     

COMMENTS FROM CEO JENNY SJÖDAHL

“The second quarter of the year settled in line with our expectations, where the Group’s development continued to be affected by the weaker demand that we have seen during the last twelve-month period. It is the persistently high interest rates and the uncertainty in the world economy that continue to affect our customers’ investment pace. It is my assessment that the decline we are now experiencing is of a temporary nature linked to a weaker economy and that our market shares remain unchanged. We have clear growth strategies in place for both business entities with the aim of significantly advancing the positions within our focus areas in the next few years. While the Group is of course focused on cost savings to counter lower volumes, we choose to continue with forward-looking investments such as the establishment in India, the development of the product offering and investments in new technology.

Ependion’s order intake decreased to 483 MSEK compared to the record-breaking second quarter last year. Sequentially, however, the order intake remained stable at the 500 million SEK level. For Westermo, order intake decreased to 294 MSEK. Most of the decline is explained by the fact that the business entity during the comparison period was strongly positively affected by an extension of the order horizon for the Group’s largest customer. During the period, the business entity took a first significant order in the large and strongly growing Indian train market, underscoring the value of the ongoing establishment in India. Also, for Beijer Electronics, order intake fell slightly to 190 MSEK. It was primarily the manufacturing industry segment that accounted for the decline, while the marine segment and solutions for demanding environments developed stably.

The Group’s sales amounted to 588 MSEK for the period, a decline that is a consequence of the lower order intake in recent quarters. Both business entities reported reduced invoicing. Beijer Electronics has now adapted the sales organization to the business entity’s new strategy, which means focusing on three segments: marine applications, machine builders in the manufacturing industry and solutions for demanding environments. This strengthens the conditions for increasing growth and, in the long term, achieving the financial goals.

Although both business entities have implemented several cost-saving measures in the quarter, these cannot fully compensate for the lower volume. EBIT for the period therefore decreased to 60 MSEK with an EBIT margin of 10.2%. Westermo’s EBIT decreased to 44 MSEK with an EBIT margin of 13.2% and Beijer Electronics’ EBIT decreased to 30 MSEK with an EBIT margin of 11.7%. For Beijer Electronics, deliveries within Display Solutions—volumes to be phased out in 2024—contributed to a lower profitability mix for the period. It is gratifying that free cash flow for the Group doubled to 60 MSEK and that inventory levels continued to be reduced.

Ependion’s significant investment in organic growth meant that expenditure on product development amounted to 13.8% of the Group’s sales during the period. For Westermo, it is mainly about further development of the offer in train, trackside and energy, where a significant part of the projects is linked to concrete business opportunities, not least regarding cyber security. Beijer Electronics is in the final stages of development of the next generation of HMIs where the first products of the new X3 family will be launched before year-end.

In May, Westermo acquired a minority stake in the British company Blu Wireless Technology. In connection with the deal, a strategic partnership agreement was also signed. The agreement gives access to patented new technology for connecting trains with significantly higher bandwidth than current technologies allow and complements Westermo’s portfolio in train-to-track communication. The solution has the potential to significantly improve the passenger experience through a reliable and fast internet connection on board, but also the train operator’s ability to transmit moving images in real time to control centers for increased safety and higher efficiency.

In the area of sustainability, the implementation of EU’s Corporate Sustainability Reporting Directive, CSRD, continued. During the quarter, the organization engaged in the completion of a double materiality analysis. Based on the results of this, a review of the Group’s policies and processes for collecting data is now being carried out. During the period, a new energy survey was carried out at Beijer Electronics with the aim of reducing climate impact, while Westermo deepened its knowledge of products’ environmental impact from a life cycle perspective.

In summary, our view on 2024 remains: the external factors are uncertain, and we see a dampening of demand because of a weaker macro-economic development. In the short term, this affects the Group’s business conditions negatively and we see a relatively weak order book for the third quarter as well. In the medium and long term, however, the prospects for profitable growth are very good given the structural growth within our focus segments, combined with our clear positioning to meet customers’ needs. The demand for our products and solutions is fundamentally driven by strong global trends such as digitization and the green transition. In parallel with the business entities working to offset the effects of the short-term downturn, work continues with the future-oriented investments in modern technology, new products and new markets. We look to the future with confidence.”
  

INVITATION TO PRESENTATION OF THE REPORT

Today a conference call will be held for press and analysts, where President and CEO Jenny Sjödahl and CFO Joakim Laurén present the company and comment on the report.

Time: Monday, July 15, 13:30 CET

To participate in the conference please dial:

From SE: +46(0) 0200 899 189
From UK: +44(0) 800 652 2435
  

To access the presentation please use this link: http://momentum.adobeconnect.com/ependionq22024report/
 

The report and the presentation will be available at the company’s website www.ependion.com. A recording of the conference call will also be available here after the event.

Welcome to join!

This disclosure contains information that Ependion AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 15-07-2024 13:00 CET.

For more information please contact:

President and CEO, Jenny Sjödahl, tel +46 (0)725 89 60 80
EVP and CFO Joakim Laurén, tel +46 (0)703 35 84 96

Ependion AB is an expansive global technology group delivering digital solutions for secure control, management, visualization and data communication for industrial applications in environments where reliability and high quality are critical factors. The Group’s customers include some of the world’s leading companies. Ependion consists of independent business entities with sales of  some SEK 2.5 billion in 2023 and more than a thousand employees. The company is listed on Nasdaq Stockholm Main Market’s Mid Cap-list under the ticker EPEN. ependion.com