Stable end to the year and strong cash flow
Fourth quarter October 1 - December 31, 2024
- Net sales decreased by 2 percent to SEK 1,824 million (1,861). Sales decreased organically by 4 percent.
- EBITA increased by 7 percent to SEK 182 million (170), corresponding to an EBITA margin of 10.0 percent (9.1).
- Operating profit (EBIT) increased by 9 percent to SEK 151 million (138), corresponding to an operating margin of 8.3 percent (7.4).
- Profit for the period decreased by 55 percent to SEK 87 million (191). Revaluation of the additional purchase price and acquisition option is included with SEK 1 million (151).
- Earnings per share after dilution amounted to SEK 0.42 (0.94).
- Net sales in Fiber Solutions increased by 2 percent.
- Net debt / EBITDA (proforma), R12 amounted to 2.2x compared to 1.7x as of December 31, 2023.
- Cash flow from operating activities amounted to SEK 286 million (462).
Significant events during the quarter
- Hexatronic has completed the acquisition of parts of Icelandic Endor under the letter of intent signed in July. The acquisition adds leading data center expertise and a customer base in Iceland, Sweden, and Germany to Hexatronic.
- Production at Hexatronic's new US facility in Utah in USA, started during the quarter. The facility will manufacture HDPE pipes for telecom and power cables and primarily serve customers in the western United States.
Significant events since the end of the quarter
- Hexatronic Group's Board of Directors has appointed Rikard Fröberg as the new President and CEO, effective March 1, 2025. He succeeds Henrik Larsson Lyon who will leave the company on 8 February. The Board has appointed Deputy CEO Martin Åberg as acting CEO of Hexatronic Group until Rikard Fröberg assumes the lead.
- Hexatronic introduces new segment reporting as of the first quarter of 2025 and make changes to the Executive Management Team.
- The Board of Directors proposes to the Annual General Meeting that no dividend will be distributed for the financial year 2024.
COMMENTS FROM THE CEO
Stable end to the year and strong cash flow
Hexatronic had a solid end to 2024. The Group's sales decreased by 2 percent in the fourth quarter compared to the previous year. This is primarily a consequence of Harsh Environment having a record quarter in the fourth quarter of last year when a large delivery to the defense industry had a positive impact. Sales in Fiber Solutions increased by 2 percent compared to the previous year, which is pleasing. Although there is still weak demand and price pressure in most markets in Fiber Solutions, we have seen signs of some stabilization towards the end of the year. Data Center developed in line with the previous year.
Seasonally weaker quarter
Despite the continued weak markets and price pressure in Fiber Solutions, we report stable profitability for the Group. The EBITA margin amounted to 10.0 percent in the fourth quarter, compared to 9.1 percent in the previous year (the adjusted EBITA margin was 10.7 percent in the fourth quarter of 2023). Internal efficiency improvements and good cost control have offset higher freight costs, start-up costs related to the new factory in Utah, and increased depreciation.
Compared to the previous quarter, both sales and earnings decreased in the fourth quarter partly due to a return to seasonality in Fiber Solutions. This development is in line with the outlook we presented in the previous quarterly report.
Fiber Solutions shows growth again
Overall, Fiber Solutions' sales increased by 2 percent in the fourth quarter compared to the corresponding quarter last year, mainly driven by growth in Europe and APAC.
In Europe, we have a strong position in FTTH systems and have, during the quarter, been successful in securing new business in Germany, Austria, and the UK. Although most markets continue to be characterized by weak demand and price pressures, we have seen signs of stabilization towards the end of the year.
Sales in APAC developed strongly during the quarter, primarily due to higher sales in Australia and a larger order in Micronesia.
We continue to see good demand in the US market. There is growing interest in our cost-effective and flexible FTTH system among US customers. In duct sales, we see that the market has stabilized although there is continued price pressure, which is a trend we expect to persist in the coming quarters.
At the beginning of October, our new duct factory opened in Utah. Production started on a small scale in the fourth quarter as planned. The factory is our fourth duct factory in the US and complements our offer geographically through proximity to customers in the western US, which means that we are now well positioned as one of the few suppliers of a nationwide offering in the US. In December, we also received certification from the US agency NTIA, which means we are qualified as a duct supplier to customers seeking government funding under the BEAD program.
In Sweden, sales decreased by 12 percent compared with the previous year, which is explained by the fact that we delivered a major submarine cable project last year. Fiber Solutions in Sweden, excluding submarine cables, showed good growth.
New focus areas in line with the previous quarter
Sales in Data Center increased by 1 percent compared to the previous year, driven by acquisitions, while sales in Harsh Environment decreased by 20 percent. Harsh Environment had a record quarter last year with a large defense order in North America that positively impacted sales, explaining the year-on-year decline.
Sales in Harsh Environment are sequentially in line with the third quarter's development. The market for subsea cable is characterized by long customer relationships and a high degree of customer-specific products.
In Data Center, sales are sequentially in line with the previous quarter. In early October, the acquisition of parts of Icelandic Endor was completed. Although it is a smaller business, it adds important expertise and an attractive customer base to our existing data center offering. We are also strengthening our presence in Iceland, Sweden, and Germany.
Together, the new focus areas account for 28 percent of the Group's sales in the fourth quarter.
Our acquisition agenda for the coming years primarily focuses on strengthening our offering and presence in Harsh Environment and Data Center. We currently have an interesting pipeline of potential acquisition candidates.
Strong operating cash flow and lower debt
We continue to have good financial flexibility for long-term value creation. During the fourth quarter, our interest-bearing net debt (i.e. excluding IFRS 16) continued to decrease and amounted to SEK 1,880 million at the end of December 2024, compared to SEK 1,922 million at the end of September. We reported a strong operating cash flow during the quarter, with a cash conversion of 150 percent.
Interest-bearing net debt to EBITDA on a rolling twelve-month basis, reflecting our bank covenants, decreased from 2.0 to 1.9 times during the quarter. Including IFRS 16, this corresponds to a decrease from 2.3 to 2.2 times EBITDA during the quarter.
Segment reporting and management changes
By taking the next step and introducing new segment reporting according to three distinct business areas - Fiber Solutions, Harsh Environment, and Data Center - we will have further power to drive our strategic growth plan and strengthen our market presence. It also contributes to increased transparency, which together with the management changes being implemented increases focus and clarity in the organization based on our prioritized growth areas.
Outlook for the first quarter and beyond
In Fiber Solutions, we have seen a return to the seasonal variations that prevailed before the pandemic, i.e., lower activity in the first and fourth quarters due to winter conditions. Looking ahead, we note cautious signs of increased market activity, although the price pressure that characterized last year is likely to remain. Overall, we are cautiously optimistic about 2025 and see signs of increased demand in several countries, although there is some uncertainty due to geopolitical factors.
In the long term, we see strong underlying structural trends that support the continued expansion of fiber optic systems globally. The positive drivers that are expected to contribute to a gradually better market situation are primarily lower interest rates, but also the increased digitization, which requires large investments in fiber optic infrastructure.
The government investment program in the US, BEAD, is expected to be an essential driver for primarily our US duct business for many years to come. The program continues to make progress and is expected to start reaching the market in the second half of this year and become more significant in 2026.
If the US administration implements tariffs on import on telecom materials, our exposure is very limited. Nearly all of our products sold in the US market are produced in the US.
For our new focus areas, Harsh Environment and Data Center, we believe that the market will remain strong for a long time to come, mainly driven by investments in defense, energy, and AI.
The order book at the end of the fourth quarter corresponded to approximately 2.5 months of sales, where we estimate a normalized order book to be 2 to 3 months.
Finally, I would like to take the opportunity to extend a warm thank you to all of you who follow Hexatronic, both old and new shareholders. Hexatronic is today a significantly larger, stronger, and more diversified company than before the pandemic and well-positioned to take the next step on the growth journey. For me personally, after ten years, it feels like a good time to step down as CEO. I am delighted to hand over to Rikard Fröberg, who, as of March 1, will be the new CEO of Hexatronic and lead the future growth journey.
Henrik Larsson Lyon
President and CEO
Hexatronic Group AB (publ)
Presentation of the year-end report
Hexatronic will present the year-end report at a webcast conference call today, February 7, 2025, at 10:00 CEST. CEO Henrik Larsson Lyon, CFO Pernilla Lindén and Deputy CEO Martin Åberg will participate.
Link to the webcast:
https://hexatronic-group.events.inderes.com/q4-report-2024
Please direct any questions to:
Henrik Larsson Lyon, President and CEO,
+ 46 (0) 70-650 34 00
Pernilla Lindén, CFO
+ 46 (0) 70-877 58 32
Pernilla Grennfelt, Head of Investor Relations
+46 (0) 70 290 99 55
For further information, visit https://www.hexatronic.com/en/investors
.
About Us
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 AB (publ.) was founded in Sweden in 1993 and the Group is listed on Nasdaq Stockholm. Our global brands include Viper, Stingray, Raptor, InOne, and Wistom®.
This information 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, through the agency of the contact persons set out above, at 2025-02-07 07:00 CET.
