Year-end report January –
Strong operating cash flow and continued growth in new areas
Fourth quarter (
- Net sales increased by 4 percent to MSEK 1,861 (1,795). Sales decreased organically by -23 percent.
- EBITA decreased by 45 percent to MSEK 170 (310), corresponding to an EBITA margin of 9.1 percent (17.3).
- Adjusted EBITA margin of 10.7 percent (adjusted for restructuring costs of MSEK 29).
- Operating profit (EBIT) decreased by 52 percent to MSEK 138 (291), corresponding to an operating margin of 7.4 percent (16.2).
- Net profit decreased by 12 percent to MSEK 191 (218).
- Earnings per share after dilution amounted to
SEK 0.94 (1.06). - Leverage ratio (net debt/EBITDA (pro forma), R12) amounted to 1.7x (1.3x).
- Cash flow from operating activities amounted to MSEK 462 (292).
Significant events during the quarter
Hexatronic acquires USNet and strengthens its position in the US data center market with a broader service offering and cross-selling opportunities.Hexatronic enters into a new senior term loan facility agreement of MSEK 500 with its existing lenders.Hexatronic downgrades short-term outlook and expects that the EBITA margin, excluding restructuring costs, will amount to 12-14 percent for the second half of the 2023. Furthermore, the company is initiating a cost savings program that is expected to result in annual savings of approximately MSEK 90.
Significant events since the end of the quarter
- The Board of Directors proposes to the Annual General Meeting that no payment of dividend will be made for the financial year 2023.
Comments from the CEO
Strong operating cash flow and continued growth in new areas
During the quarter, we improved operating cash flow and delivered sales growth, mainly driven by our expansion in
Profitability in line with previous communication
Adjusted for restructuring costs of MSEK 29 related to the cost savings program, EBITA margin for the second half of 2023 was 13.1 percent (17.8). This is in line with the 12-14 percent previously communicated. The EBITA margin for the fourth quarter amounted to 10.7 percent excluding restructuring costs (17.3) and 9.1 percent including restructuring costs. Lower capacity utilization in Fiber Solutions and price pressure in some markets explain the decrease compared with the corresponding period last year.
Continued growth in
Fourth quarter showed a total sales growth of 4 percent compared to the corresponding period last year, which can mainly be attributed to completed acquisitions in
Harsh Environment grew sales during the quarter primarily driven by the acquisitions of Rochester Cable and Fibron. Rochester Cable developed very well both operationally and in terms of profitability, and had a continued strong order intake. Fibron has developed well and in line with our expectations.
Data Center also developed strongly during the quarter. As previously communicated, USNet was acquired during the quarter. USNet is active in project management, decommissioning and relocation services of data centers in the US. USNet complements our existing company DCS well in the US market.
Expansion in
As we communicated on
The completion of the new production plant in
Fourth quarter sales in
Sales in
APAC
APAC showed a sales growth of 12 percent. This is mainly due to the acquisitions of Fibron, Rochester Cable and KNET which showed positive sales development in these regions.
Strong operating cash flow
Cash flow from operating activities amounted to MSEK 462 in the fourth quarter, compared with MSEK 292 in the corresponding period last year. In line with our plan, inventory levels and accounts receivables continued to decrease during the quarter, partly offset by decrease in accounts payable. We continue to focus on optimizing our inventory levels in 2024.
Continued financial flexibility
We continue to have good financial flexibility for creating long-term value, even though we, during 2023, made historically extensive acquisition- and capacity investments, totalling approximately MSEK 1,500.
During the quarter, interest-bearing net debt (i.e. excluding IFRS 16) decreased by MSEK 383 and amounted to MSEK 2,111 at the end of the quarter. The decrease is mainly attributable to a strong operating cash flow. Interest-bearing net debt in relation to pro forma EBITDA on a rolling 12-month basis, key ratio that reflects our existing bank covenant, decreased from 1.5x to 1.4x during the quarter. Including IFRS 16, it corresponds to a decrease from 1.8x to 1.7x in the quarter.
To strengthen our financial flexibility, we entered into a new senior term loan facility agreement of MSEK 500 with existing lenders under the existing agreement and subject to the same credit documentation and covenants.
Lower expected investments and acquisitions in 2024
We have completed two years with a high investment level. In 2022 and 2023, we invested in two new duct factories in the US, of which one is completed. In addition, we significantly expanded our production capacity in several of our production units within Fiber Solutions. After completing the investment program with mainly the completion of the duct factory in
On the acquisition side, we have continued to identify and build relationships with profitable companies that have a strong market position, primarily in
For 2024, we expect significantly lower investment levels in acquisitions compared to 2023.
Cost savings program proceeding according to plan
On
Expected gradual increase in market demand during the second half of 2024 in Fiber Solutions
Our view of the market remains, and we expect continued weak market demand in Fiber Solutions in the coming quarters and then a gradual increase in market demand in the second half of 2024. In the second half of the year, we expect to see the initial effects of the BEAD program in the US, while inventory levels are expected to have normalized. With our expanded capacity, we are well positioned for an expected increase in demand, even if this means lower capacity utilization in the short term.
In
As communicated in the third quarter of 2023, our order book is back to pre-pandemic levels. At the end of 2023, we had an order book corresponding to just over 2 months of sales, compared with about 5 months of sales at the end of 2022. Before the pandemic, we typically had an order book corresponding to about 2 months of sales.
Fiber optic networks are critical infrastructure and the degree of penetration remains low in many countries, such as the US,
Welcome to join us on our growth journey.
President and CEO
Please direct any questions to:
Pernilla Lindén,
This is information that
This is a translation of the Swedish version of the year end report. When in doubt, the Swedish wording prevails.
Attachment
Hexatronic Group AB (publ) - Year-End report 2023
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