Hexatronic Group (HTRO) Q2 2024 earnings summary

Executive summary

• Q2 net sales were SEK 2,024 million, down 10% year-over-year but up 14% sequentially, driven by modest recovery in Fiber Solutions and strong growth in Harsh Environment and Data Center segments.

• EBITA was SEK 222 million (11% margin), down from SEK 405 million (17.9%) in Q2 last year, but improved from 9.4% in Q1.

• Cash flow from operating activities was SEK 221 million, with a cash conversion of 115%.

• Interest-bearing net debt reduced by SEK 100 million sequentially, ending at SEK 2 billion; leverage ratio increased to 1.9 due to lower profitability.

• New executive management and board appointments, including a new Chairman; strategic partnership with Novos Fiber in the US expected to generate SEK 400 million over three years.

Financial highlights

• Year-over-year revenue declined 10% (SEK 234 million), with organic decline of 18% mainly in Fiber Solutions in Germany, UK, and US.

• Harsh Environment and Data Center segments grew 95% and 31% respectively, offsetting some Fiber Solutions weakness.

• Gross margin was 42%, up 1.5 points sequentially but down 2.1 points year-over-year due to lower manufacturing utilization and price pressure.

• Operating expenses were 27.6% of sales, stable year-over-year.

• CapEx in Q2 was SEK 95 million (4.7% of sales), mainly for US capacity and the new Utah facility.

Outlook and guidance

• Harsh Environment and Data Center markets expected to remain strong, driven by defense, energy, and AI investments.

• Fiber Solutions market expected to remain weak in Q3, with gradual recovery later in the year as inventory levels normalize and US BEAD program funding impacts demand.

• Seasonal variations anticipated, with lower activity in Q4 and Q1, returning to pre-pandemic seasonality patterns.

• Market recovery in Fiber Solutions dependent on normalization of inventory and government subsidy programs.