Hexatronic Group AB (publ) Interim report January – June 2023
Hexatronic Group AB
(publ)Interim report
January – June 2023
Continued growth, improved profitability and cash
flow
Second quarter (April 1 – June 30, 2023)
- Net sales increased by 36 percent to MSEK 2,258 (1,662).
Organic growth amounted to 7 percent.
- EBITA increased by 45 percent to MSEK 405 (278), corresponding
to an EBITA margin of 17.9 percent (16.8).
- Operating profit (EBIT) increased by 43 percent to MSEK 377
(264), corresponding to an operating margin of 16.7 percent
(15.9).
- Net profit increased by 37 percent to MSEK 259 (189).
- Earnings per share after dilution amounted to SEK 1.27
(0.93).
- Cash flow from operating activities amounted to MSEK 348
(176).
Events during the quarter
- Hexatronic signs agreement with new network operator in the US
to a value of 20 MUSD.
- Hexatronic has signed an agreement to acquire Fibron, a leading
OEM manufacturer of electro-optical cables for harsh environments,
thereby strengthening the opportunities in the Harsh Environment
market.
- Hexatronic initiated and completed a repurchase program of its
own shares with support from the authorization from the annual
general meeting on May 9, 2023. Within the framework of the
program, all 1,200,000 ordinary shares were repurchased.
- Hexatronic initiates the share savings program (LTIP 2023)
decided by the Annual General Meeting on May 9, 2023.
Events since the end of the quarter
- No significant events occurred after
the end of the quarter.
Comments from the CEOContinued growth, improved
profitability and cash flow
Hexatronic continued to grow during the second quarter. Sales
increased by 36 percent, with 7 percent attributed to organic
growth, and the EBITA margin expanded to 17.9 percent, surpassing
our long-term targets of at least 20 percent sales growth and an
EBITA margin within the range of 15-17 percent. At the same time,
cash flow from operating activities developed positively due to
reducing our inventories, and increased to SEK 348 million in the
quarter.
North America continued to develop well and reached a sales
growth of 58 percent driven by duct sales in Blue Diamond
Industries and sales of our FTTH systems in the US and Canada. The
factory in Clinton, South Carolina is gradually increasing its
production and, as before, is expected to be fully operational in
the latter part of the third quarter. The investment in a fourth
duct factory in Ogden, Utah is proceeding according to plan and
production is expected to start at the beginning of the third
quarter of next year.
During the quarter, President Joe Biden announced the start of
the Broadband Equity, Access and Deployment (BEAD) program in the
United States, which is part of the Infrastructure Investment &
Jobs Act (IIJA) passed in November 2021. It is a USD 42.5 billion
federal investment to provide high-speed broadband access in areas
with no or poor broadband access. The assessment is that these
subsidies will begin to show effect in 2024. At the same time, we
believe that IIJA will have a positive effect on demand for duct in
the US over the next 7-8 years.
Europe, excluding Sweden, also developed well with growth of 47
percent, mainly driven by growth in the UK and Germany.
Sales in Sweden decreased by 28 percent as a natural consequence
of a couple of large submarine cable projects delivered in the
second quarter of last year and affecting the comparison. The
underlying market was stable.
Sales in APAC grew by 7 percent, mainly due to the acquisition
of KNET, which was consolidated from December 1, 2022.
Increased demand and the fact that the pandemic and the war in
Ukraine created major problems in the supply chains meant that many
customers secured their needs by placing orders with more forward
planning. In recent years, our order book has increased from about
two months of sales to about five months in 2022. Today, when
supply chains function normally, we see a change in customer
behavior. In the second quarter, we have an order book about three
months of sales and we expect it to decrease during the year to
about two months of sales, which was normal before the pandemic.
Above all, the normalized customer behavior, but also to some
extent a softer market, meant a negative organic growth of the
order book of 29 percent compared to the corresponding quarter last
year.
In line with our focus, cash flow improved during the quarter.
Improved profitability and active efforts to reduce our inventories
resulted in a positive cash flow from operating activities of SEK
348 million. We have continued focus on reducing our inventories
during the second half of the year.
During the quarter, we entered into a binding agreement to
acquire Fibron in the UK. Fibron, like Rochester Cable, produces
electro-optical cables for harsh environments and will be part of
our business area Harsh Environment (fiber optic solutions for
harsh environments), strengthening our position in Harsh
Environment and providing further diversification. We also see
several synergies with Rochester Cable through, among other things,
complementary production capabilities, improved utilization rates
and increased tendering capabilities.
During the quarter, we noted that growth in several of our
geographical markets where we operate has been affected by
increased interest rates and inflation, which means that customers
have been more cautious in their investment decisions. Therefore,
our assessment is that several of the markets will have lower or no
growth in the second half of the year. We believe the lower growth
rate is temporary as there is a significant structural need to
expand and strengthen communication networks in many countries.
Through our geographical spread, our diversification and the
acquisitions we have made, we are well-positioned to continue to
grow in the second half of the year, although at a lower rate than
in the first half of the year.
Welcome to join us on our growth journey.Henrik Larsson
LyonPresident and CEO Hexatronic Group AB (publ)
Please direct any questions
to:Henrik Larsson Lyon, CEO Hexatronic
Group, +46 706 50 34 00Pernilla Lindén, CFO Hexatronic Group,
+46 708 77 58 32
This information comprises disclosures that Hexatronic Group AB
(publ) must publish according to the Swedish Securities Market Act.
The information was submitted for publication under responsibility
of the contact persons set out above, at 07:00 CEST on August 15,
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®.
- Hexatronic Group - Interim report Q2 2023
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