Cognor Holding (COG) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue declined 28% YoY to PLN 550.9m; H1 2024 revenue was PLN 1,237.1m, down 25% YoY, driven by weak steel demand and lower prices, especially in construction steel.

• Net profit for Q2 2024 was PLN 3.0m (down 91% YoY); H1 2024 net profit was PLN 8.4m, sharply lower than H1 2023, with margins pressured by downtime and non-repetitive production at Krakow.

• Capacity utilization dropped to 55.3% in Q2 2024, with crude steel production down 15.8% YoY and 28.8% QoQ due to lower billet sales and slow progress at the Cracow mill.

• Major modernization projects and investments continued at Krakow, Gliwice, and Siemianowice Śląskie, impacting current profitability but aimed at long-term growth.

• Operating profit before financing costs for H1 2024 was PLN 29.1m, compared to PLN 130.0m in H1 2023.

Financial highlights

• Q2 2024 EBITDA was PLN 26.6m (down 51% YoY); EBIT fell 65% to PLN 14.4m; H1 2024 operating profit before financing costs was PLN 29.1m.

• Net debt increased to PLN 562.6m, with net debt/LTM EBITDA at 2.3x; net debt/EBITDA covenant maintained below 3.5x.

• Cash balance at Q2-end was PLN 245.8m, up from PLN 144.3m in Q1 2024; net increase in cash and cash equivalents of PLN 339.7m in H1 2024.

• Working capital improved by PLN 295m, mainly from inventory and receivables reductions.

• Basic EPS for H1 2024: PLN 0.05 (H1 2023: PLN 1.12); diluted EPS: PLN 0.04 (H1 2023: PLN 1.04).

Outlook and guidance

• Q3 2024 expects stable prices and spreads QoQ, with the rebar market remaining in crisis but some improvement possible.

• Cracow mill to reach full-scale production in Q4 2024; EBITDA expected stable QoQ but weaker than Q3 2023.

• Management expects continued volatility due to cyclical industry trends and macroeconomic headwinds, especially in construction.

• No need to increase financing scale or change its structure anticipated in 2024; current funding is adequate.

• Ongoing monitoring of financial covenants, with no current breaches but uncertainty remains for future periods.