Strong acquisition growth and profitability in line with targets
Hexatronic Group AB (publ)
Interim report January – September 2023
Strong acquisition growth and profitability in line with targets
Second quarter (July 1 – September 30, 2023)
- Net sales increased by 11 percent to MSEK 1,917 (1,729). Sales decreased organically by -13 percent.
- EBITA decreased by 7 percent to MSEK 296 (317), corresponding to an EBITA margin of 15.4 percent (18.3).
- Operating profit (EBIT) decreased by 12 percent to MSEK 266 (302), corresponding to an operating margin of 13.9 percent (17.5).
- Net profit decreased by 35 percent to MSEK 172 (266).
- Earnings per share after dilution amounted to SEK 0.85 (1.30).
- Cash flow from operating activities amounted to MSEK 107 (255).
Events during the quarter
- Hexatronic completed the previously announced acquisition of Fibron BX, a leading OEM manufacturer of electro-optic cables for harsh environments and strengthens the company's position in the Harsh Environment market.
- Hexatronic acquires ATG Technology Group Limited, a strategic acquisition of a distributor within fiber optic solutions in the New Zealand market.
- Hexatronic provides an update due to softer market conditions primarily in the US and Germany, and foresees a negative organic sales growth during the second half of 2023. The EBITA margin is expected to be in line with the financial target of 15-17 percent during the second half of 2023.
Events since the end of the quarter
- Hexatronic acquires USNet and strengthens its position in the US data center market with a broader range of services and cross-selling opportunities.
Comments from the CEO
Strong acquisition growth and profitability in line with targets
During the third quarter, sales continued to increase with a growth of 11 percent compared to the corresponding period last year, driven by acquisitions. As previously communicated, we noted softer market conditions in the US and Germany, which resulted in an organic decline in sales of 13 percent during the quarter. Despite a softer market, we delivered an EBITA margin of 15.4 percent. This is a decrease from 18.3 percent in the same period last year, which was a record quarter, and reflects the softer market conditions resulting in lower capacity utilization as well as price pressure in some markets.
North America showed a sales growth of 4 percent in the quarter, driven by growing sales in Canada and the acquisition of Rochester Cable. This development compensated for a lower demand of duct as well as some postponed project deliveries of Fiber to the Home (FTTH) systems.
In the US, there is still a strong focus on growing our FTTH business and securing our local offering in order to capitalize on the effects of the BEAD program, which we expect to start to take effect in the second half of 2024. As planned, all production lines in our factory in Clinton, South Carolina, have been installed and commissioned since the end of the quarter. At the same time, we continue to establish the new plant in Ogden, Utah, which will expand our addressable market for duct to include the western United States, which is a significant market. As previously communicated, we expect the plant to be ready for production in the third quarter of 2024.
Sales in Sweden decreased by 15 percent, where we saw lower activity in fiber deployment as well as lower activity in sales to mobile operators during the quarter.
The Rest of Europe showed strong sales despite softer market conditions in UK and Germany. Sales growth amounted to 19 percent, primarily explained by positive sales development in our acquisitions IDS, Rochester Cable and Fibron, combined with positive sales growth in Finland and Austria. High cost of capital and inflation has resulted in lower return on investments, hence postponed projects in the UK and German market. In Germany, the structure of governmental subsidies for fiber network expansion in rural areas was also changed, which created a delay of projects. For Hexatronic's part, we managed to counteract the softer market in the UK through good growth, primarily with a major existing customer.
APAC showed a positive sales growth of 34 percent. This is attributed to the acquisition of South Korean KNET in combination with several project deliveries in Australia. During the quarter we acquired ATG, a distributor of fiber optic solutions based in New Zealand. We see several synergies between ATG and OSA in Australia while strengthening our regional presence.
New growth areas
Expansion within Harsh Environment, Data Center and Wireless continues to be a priority to ensure long-term growth and diversification. Today, the first two areas represent approximately 18 percent of the Group's pro forma sales.
In Harsh Environment, we saw sales growth, primarily driven by the acquisition of Rochester Cable earlier in the year. During the quarter, we also completed the acquisition of Fibron, which strengthens our offering in electro-optical cables for harsh environments, while we see good potential to realize synergies with Rochester Cable. Today, Harsh Environment represents just over 12 percent of the Group's sales on a pro forma basis.
After the end of the quarter, we acquired USNet, which is active in project management, installation and rebuilding of data centers in the US. USNet complements our existing company DCS well and creates a stronger platform in the US data center market through a broader range of services with opportunities for cross-selling. Data centers today represent around 6 percent of the Group's annual sales on a pro forma basis.
We continue to focus on strategic acquisitions in these areas while pursuing initiatives to drive organic growth, including realizing synergies.
Cash flow from operating activities amounted to MSEK 107 in the third quarter, compared to MSEK 255 in the corresponding period last year. In line with our plan, we continued to reduce our inventories during the quarter, while accounts payable decreased. We continue to prioritize the reduction of our inventories for the remainder of 2023.
In the later part of September, we communicated an expected negative organic sales growth and an EBITA margin within our financial target of 15-17 percent for the second half of 2023. We maintain this view.
With supply chains back to normal and to some extent a softer market, we have during the year seen that the order book in relation to sales gradually decreased and is now basically back to normal levels. At the end of the quarter, we had an order book corresponding to just over 2 months of sales compared with just over 5 months of sales at the end of the corresponding quarter last year. Before the pandemic, we normally had an order book corresponding to about 2 months of sales.
We expect that the overall market for investments in fiber optic telecommunications infrastructure in the coming quarters will continue to be at the same level as in the third quarter. The main reasons are higher cost of capital and inventory build-up in some of the markets.
Fiber optic networks are a critical infrastructure, and the degree of build out is still low in many countries, such as the US, Germany and the UK. We therefore see strong underlying structural trends supporting global build out. Primarily privately financed projects but also projects financed by subsidies from several government investment programs such as the BEAD program in the US, Gigabit Strategy in Germany and Project Gigabit UK. Similar programs exist in most countries.
Governmental subsidies are expected to have an increased positive impact on the market going forward. In combination with normalizing inventory levels, we expect a gradual market recovery from H2 2024.
Welcome to join us on our growth journey.
Henrik Larsson Lyon
President and CEO Hexatronic Group AB (publ)
Please direct any questions to:
Henrik Larsson Lyon, CEO Hexatronic Group, +46 706 50 34 00
Pernilla Lindén, CFO Hexatronic Group, +46 708 77 58 32
This is information that Hexatronic Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication under responsibility of the contact persons set out above, at 07:00 CEST on October 27, 2023.
This is a translation of the Swedish version of the interim report. When in doubt, the Swedish wording prevails.
Hexatronic creates sustainable networks all over the world. We partner with customers on four continents – from telecom operators to network owners – and offer leading, high-quality fiber technology for every conceivable application. Hexatronic Group (publ.) was founded in Sweden in 1993 and the Group is listed on Nasdaq OMX Stockholm. Our global brands include Viper, Stingray, Raptor, InOne, and Wistom®.
AttachmentTo view this piece of content from www.globenewswire.com, please give your consent at the top of this page.
To view this piece of content from ml-eu.globenewswire.com, please give your consent at the top of this page.
About GlobeNewswire by notified
One Liberty Plaza - 165 Broadway
NY 10006 New York
GlobeNewswire by notified is one of the world's largest newswire distribution networks, specializing in the delivery of corporate press releases financial disclosures and multimedia content to the media, investment community, individual investors and the general public.
Subscribe to releases from GlobeNewswire by notified
Subscribe to all the latest releases from GlobeNewswire by notified by registering your e-mail address below. You can unsubscribe at any time.
Latest releases from GlobeNewswire by notified
Mandatory notification of trade and acceptance by primary insiders11.12.2023 17:12:12 CET | Press release
Reference is made to the stock exchange announcement on 7 December 2023 whereby BW Sirocco Holdings AS (the "Offeror") announced the completion and settlement of the Offer and the acquisition of the Offeror of 30,000,561 shares, representing approximately 95.21% of the total number of shares in BW Ideol AS. The Offeror, being a close associate of Marco Beenen, the chairperson of the board of directors of BW Ideol AS, attach the required notifications of trade to this announcement. Further, mandatory notifications from other primary insiders and their related parties are also attached to this announcement. For further information, please contact: BW Ideol AS Nicolas de Kerangal (Chief Financial & Partnerships Officer) +33 (0) 7 76 87 70 08 / email@example.com (mailto:firstname.lastname@example.org) BW Sirocco Holdings AS Anders S. Platou (Chief Strategy Officer BW Offshore Limited) +47 99 71 86 55 Attachment Project Sirocco - PDMR - Attachments
LambdaTest and Wipro Collaborate for Innovative Gen AI Solutions11.12.2023 17:00:00 CET | Press release
LambdaTest and Wipro forge a pioneering partnership, integrating Wipro’s Gen AI-powered QE capabilities with LambdaTest’s HyperExecute, to revolutionize software testing on the Cloud with advanced AI capabilities. San Francisco , Dec. 11, 2023 (GLOBE NEWSWIRE) -- LambdaTest, a leading cloud-based unified testing platform is partnering with Wipro Limited, a leading technology services and consulting company, to revolutionize software testing by integrating Wipro’s Gen AI powered QE platform IntelliAssure with HyperExecute - a continuous cloud test orchestration solution offered by Lambdatest. The partnership aims to provide organizations that are modernizing and migrating to the cloud with an easy-to-implement, plug-and-play solution for infusing analytics-driven intelligence across their testing lifecycle for improved productivity as well as hyper-accelerated release cycle times. LambdaTest and Wipro's collaborative integration promises cutting-edge capabilities with an aim to enrich t
Nokia unveils plans for new state-of-the-art research and development facility for Nokia Bell Labs in New Brunswick, New Jersey technology hub11.12.2023 16:30:00 CET | Press release
Press Release Nokia unveils plans for new state-of-the-art research and development facility for Nokia Bell Labs in New Brunswick, New Jersey technology hub Nokia Bell Labs is reaffirming its commitment to New Jersey, upholding its 80-year heritage of cutting-edge research and innovation in the state.Move will establish New Brunswick as Nokia’s new R&D hub on the East Coast and affirms Nokia’s commitment to this fast-growing innovation zone in the US. 11 December 2023 New Brunswick, New Jersey – Nokia today announced plans to relocate its campus in Murray Hill, NJ by 2028 to a new state-of-the-art research and development (R&D) facility in the burgeoning innovation and technology hub in New Brunswick, NJ. The new leading-edge R&D facility will propel Nokia Bell Labs to adapt and evolve to remain at the forefront of cutting-edge technology and continue contributing to a legacy of innovation in New Jersey. As the industrial research arm of Nokia, Nokia Bell Labs has always moved ahead of
Alm. Brand – Report on trading in Alm. Brand A/S shares by executives and their related parties11.12.2023 16:30:00 CET | Press release
Alm. Brand – Report on trading in Alm. Brand A/S shares by executives and their related parties Pursuant to article 19 of the EU Regulation 596/2014 and according to a power of attorney given by Anne Mette Toftegaard, Alm. Brand A/S is required to file information on trading in shares in Alm. Brand A/S or other securities related to these shares by executives and their related parties. Please see attached report. Contact Please direct any questions regarding this announcement to: Senior Investor Relations Officer Mikael Bo Larsen, Mobile no. +45 51 43 80 02 Attachment AS 26 2023 - Report on trading Anne Mette Toftegaard
Nokia launches new venture partnerships and venture studio to maximize commercial potential of Nokia Bell Labs’ innovations11.12.2023 16:30:00 CET | Press release
Press Release Nokia launches new venture partnerships and venture studio to maximize commercial potential of Nokia Bell Labs’ innovations Nokia Innovation Framework evolving with new venture studio and venture partnerships to unleash the full commercial potential of Nokia Bell Labs technologies outside of Nokia’s strategic perimeters. A new venture studio with America’s Frontier Fund and Roadrunner Venture Studios for commercializing the next generation of critical technology for the US will be situated in New Jersey, the iconic home of Bell Labs innovation for over 80 years.New venture partnership with Celesta Capital will invest in scaling ventures built with deep technologies from Nokia Bell Labs. 11 December 2023 Murray Hill, New Jersey – Nokia today announced an evolution to its Innovation Framework to unlock the full commercial potential of Nokia Bell Labs’ innovations across industries and expand efforts in external startup creation in the US with new partnerships and a new vent