© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, a warm welcome also from my side. I'm happy to have with me today Dr. Mathias Hallmann, our group CEO, who will lead you through our presentation. The slide deck is also available under the Investor Relations section on -- of our website, www.r-stahl.com. Before we begin, allow me to point you to our safe harbor statement, which you will find at the beginning of the slide deck. And with this, let me hand the call over to Dr. Hallmann.
Good morning, ladies and gentlemen. Welcome to our Q3 conference call. Let us shift to Page 3. On Page 4, then. Actually, the quarter we have behind us has the strongest quarter for our company since the Q4 2017 and also the strongest quarter in 2019 so far. Did I say Q4 2017? Actually, it was 2014. So it has been the strongest quarter in the last 5 years. In detail, our sales sequentially improved from -- to EUR 71 million, 2% up year-on-year, which was driven by normalization, mainly of our operations in the Waldenburg side. Our EBITDA reached a level of EUR 10.4 million, 60% -- 63% up year-on-year, mainly benefiting from a stronger top-line, strongly improved product mix and further efficiency gains. So our EBITDA pre-margin in the first 9 months reached a double-digit level of 11.5%. They have the change to EFRS -- IFRS 16 contributed 260 basis points. We will further -- or we further increased our guidance. We now expect an EBITDA pre slightly above EUR 30 million for the year. Our earnings per share are up to EUR 0.40 in the first 9 months, EUR 0.40 per share. In comparison, we had minus EUR 0.36 in the first 9 months 2018, so a strong improvement in the bottom line. The only slightly negative aspect in the quarter has been that IFRS 16 and inflated pension provision lowered our equity ratio to 20.2%. Nevertheless, we could further reduce our net debt to EUR 2.5 million by the end of the quarter, which is also the lowest level of net debt in the last 5 years. Let's go into the financials and start with the sales side. I already reported a slight sales growth of 2.2% year-on-year. And I said it -- that reflects mainly the catch up from previous quarter. We reported in our last call that we had significant problem with the implementation of a new software in our automated warehouse in our main site in Lüneburg. We finally could solve these problems and catch up our sales mainly in July and early August of the third quarter. So that we are now back to normal operations, and this is definitely reflected in the results of the quarter. The decline in Germany is primarily driven by a high comparative figure from the previous year. This included a nonrecurring nature of project order. The central region benefited from successful sales in Africa as well as from a consistently high demand in Northern Europe. That's very much driven by the recovery of the oil and gas segment in Norway. Very good performance, again, in Americas. Our Americas operation now showed the sixth time in a row, a year-on-year improvement. So the reorganization we had to do in North America is paying off. We are focusing on a more systematic market approach, and we shortened our delivery times, and this is finally appreciated by our customers. And sales in Asia Pacific are also up due to a healthy demand for our maritime solution. If you -- or if we look into our order backlog, we see a normalization of our order backlog. The high levels in 2017 were mainly driven by a generation of orders at any cost and also often with no or very low profitability. So that was the fill the factory strategy in the oil and gas crisis. These orders all, in many cases, also came in without full order clarification. And therefore, this order backlog remained in our books for a long time. Nowadays, we see a very much normalized order backlog of about a quarterly volume of our sales, which we would consider healthy and normal to our business. On the margin side, this development that we mainly worked out these big projects order that we work them out of our books, you can see in our materials costs. We do have a strong improvement in our materials cost about 140 basis points year-on-year to material cost rate of 34.3% of our turnover. I can remember times when I started in this company, when we were up to 38%, 39%. So definitely a very big portion of the improvements in our results is driven by a much more healthy order portfolio we have in comparison to the past. Some other defects are decline in other operating income. Last year, other operating income was driven by property sales that contributed EUR 2 million in Q3. 2019, we slightly benefited from favorable development of exchange rate. Other operating expenses in Q3 are down primarily due to the impact of the new accounting rules of IFRS 16. Looking into our restructuring charges, they are still high. We had restructuring charges of EUR 1.5 million in the -- in Q3. Nevertheless, we do see that restructuring charges are coming down now, and it will be further coming down in the coming quarters. So that reflects the good progress we have in our efficiency program, and we are sure that we do have the peak in our restructuring charges behind us. What you see as other restructuring charges or restructuring income is actually the first time consolidation of our operations in Africa. You may know that we took over the majority of a company called ESACO, which we, in the meantime, renamed into R. STAHL South Africa. We had a 30% stake in that in the past, now we have a 70% stake in the company and that contributed to this extraordinary income. Our cash flow is very much driven by improved profitability and some positive impact again from IFRS 16. Working capital improvement, yes, the comparison looks negative if we look into Q3 2018, but we have to understand that last year, we've dramatically focused on working capital reduction in order to bring our net debt down. This year, priority is more on delivery performance. And as you all know, you cannot reduce working capital every year at the same amount. Otherwise, we would run in -- we would be running out of materials and product.So actually, I don't see that as a negative trend, it's stabilizing our good working capital nevertheless, as I said, the focus now is on improved customer service and delivery reliability. We see higher cash flows from investing activities. This reflects the payments we did for our increased stake in ESACO, I just talked about that. And we also have to see that in prior year that cash included a collection of EUR 4.1 million from a property sale. That was a property sale in Ettlingen.Finally, we see -- and I said at the lowest level of net debt, the level is at EUR 2.5 million now, and that's the lowest level since 5 years. Summarizing all that, we continue to be well on track. You all know that we slightly updated our outlook in August, after the numbers for the first 6 months, where we increased our EBITDA outlook to a range of EUR 28 million to EUR 30 million. Given the results of the third quarter and the solid outlook for Q4, we now expect an EBITDA pre-level slightly above EUR 30 million. And on the sales side, we will -- we would expect to land at the lower range of the former range, which was EUR 275 million to EUR 280 million. We would expect now to see us around EUR 275 million by the end of the year. So I'm at the end of my presentation, and we will be open for questions. Operator?
The first question received is from Igor Kim from Bankhaus Lampe.
Yes. I've got a couple of questions. First, on your revenue in terms of regional development. Could you give a bit of a color that part of the sales that was shifted from the second quarter to the third quarter due to the bottleneck? How was it, let's say, allocated amongst the regions? So that they have a clear picture, what part of the central region sales was driven by the organic growth and also for Americas? Because in these 2 regions, the growth was the most pronounced. So this is the first question. The second question is on gross margin has improved in the third quarter. Should we expect the same gross margin for the last quarter, for the fourth quarter? And the third question is on exceptionals. Do you expect the trend in the last quarter to be at a similar level that we've seen in the first 3 quarters?
So thank you for the questions. First question, allocation of this, let's say, additional sales from the recovery environment work. I would almost say they could -- can be allocated to all regions because it was direct sales into Germany, it was sales via the other companies in the central region, but also Americas and Asia/Pacific. So I would not see that this recovery would strongly change the message we gave on Slide 5. Second question, expectation on gross margins. I would expect that gross margins remain strong in Q4. It's simply driven by the pipeline and -- or the order backlog we have. It's not strongly influenced by big projects. We probably see slightly lower gross margins next year, but that will be heavily depending on the orders we allow ourselves to book. But for Q4, I definitely expect stable gross margin. On the exceptional side, what we expect for Q4, but also for the future is that costs for external consultants and legal advice will dramatically go down. We might see some cost for HR restructuring in Q4. But overall, I would expect that extraordinary cost will go down in Q4 in comparison to the first 2 quarters.
And just one follow-up. In terms of outlook for 2019, you left -- you still expect revenues at the lower end of the guidance of EUR 275 million but slightly increased pretax earnings to above EUR 30 million, which means you expect now better margin. Is that due to the lower exceptionals in the fourth quarter that you're now expecting? Or do you expect an improvement in terms of margin in other cost items? Could you give a bit of a color, what was the main reason for the outlook upgrade in terms of EBIT?
Look. I mean, if I -- if we remain on the strong margin level, if we remain with our cost focus on -- in the rest of the organization and if we expect lower exceptional, then this is the result. So you cannot allocate it to one specific item. The main drivers in our business is the top-line and the margin structure. And we do expect a stable top-line, a stable margin. So there will be strong effects on that, but also the cost focus and lower exceptionals will contribute.
As there are no further questions, I will hand the call back to Dr. Kornek for some closing remarks.
Ladies and gentlemen, thank you for joining our today's conference call. We look very much forward to staying in touch with you. And as a reminder, our next event will be the Eigenkapitalforum in Frankfurt, which we'll attend from Monday the 25th until Wednesday, 27th of November. And if you're interested in seeing us there, please feel free to get in touch with the organizer team of the Eigenkapitalforum. Have a great day, and goodbye.