Consistent strategy execution and improved resilience over time
Q1 2024 highlights
-- Order intake for the rolling 12-month period decreased by 10% to
-- Revenues decreased by 12% to
-- Adjusted operating profit (EBIT) totaled
-- Operating profit (EBIT) amounted to
-- Adjusted earnings per share, diluted, was
-- Earnings per share, diluted, was
-- Free operating cash flow amounted to
CEO's comment
Market conditions
Market conditions were mixed at the beginning of the year. Some positive signals were noted in a few of the segments where demand had previously been subdued. The stabilization we began to see at the end of 2023 continued in parts of the short-cycle business, especially in the Strip division's Consumer segment. At the same time, the Chemical and Petrochemical, and Industrial segments in
Temporary delivery challenges during the quarter
Revenues in the quarter decreased organically by 2%, impacted primarily by our more low-refined business as well as challenges in deliveries related to the ongoing implementation of a new ERP system in our Tube and Strip divisions. Kanthal continued to strengthen its EBIT margin in pace with the ongoing improvement of the product mix. All together, the adjusted EBIT margin for the quarter totaled 9.6% (10.5). The decrease is attributable to several factors such as lower invoicing, impacted by the aforementioned temporary challenges in deliveries, and under-absorption in production as a result of lower volumes.
Solid margin resilience
With the challenges we faced in the quarter, and given lower production volumes, our adjusted EBIT margin has demonstrated good resilience. The rolling 12-month margin was 10.1%, which is a historically high number. Our diversified exposure to customer segments in various stages of the business cycle, and a clear strategy to grow in more profitable and less cyclical niches are important contributors to this. We have also been swift to adapt to changing market conditions, and adjusting capacity and cost where needed. Another important aspect of the improved resilience is that we have stood firm on our price leadership strategy, declining to lower prices in order to win volumes. This has impacted cost coverage in parts of production over the short term, but when the market turns around and volumes begin to increase again, I see good opportunities for continued profitable growth over time.
Strategic initiatives
Our growth investments are proceeding as planned. For example, we are currently scaling up the capacity in our newly inaugurated production line for heat exchanger tubing in Mehsana,
Sustainability drives innovation and business
In February, we were proud to launch the next generation of umbilical tubes for the Oil and Gas industry, with the new SAF(TM) 3007 alloy. This new alloy is even stronger and more durable, which enabling thinner and lighter tubes. With its lower weight and with less materials consumed, it yields obvious advantages for both our customers and the environment. Our materials technology makes a difference by yielding a smaller climate footprint, and we expect that SAF(TM) 3007 will be a vital addition to our existing offering. During the quarter, we received yet another order in carbon capture and storage (CCS) and, moreover, we are continuing to grow our business for tubes for the production of polysilicon, which is used in the production of solar panels. Additionally, the Kanthal division received an interesting order for heating modules, which will be used in a manufacturing process for green steel.
Continued value creation
Even though the beginning of 2024 was somewhat challenging, I take a positive view of the coming year. We are well positioned to continue strengthening our product mix, we are executing on our strategic priorities and our balance sheet is stronger than ever.
Göran Björkman, President and CEO
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Phone: +46 (0) 72 145 23 42
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https://news.cision.com/alleima/r/alleima-interim-report-q1-2024,c3965832
https://mb.cision.com/Main/21386/3965832/2751325.pdf
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