Kendrion (KENDR) Q2 2024 earnings summary

Executive summary

• Revenue from continued operations declined 7% in Q2 and 8% in H1 2024, mainly due to weak German and Chinese industrial markets, partially offset by Automotive growth in China; Q2 revenue from continued operations was €77.7m, HY1 €152.8m.

• Net profit for Q2 fell 78% to €1.0m; HY1 net profit down 47% to €5.2m, with cost savings and margin improvements partially mitigating revenue declines.

• Group revenue fell 6% in Q2 and 4% in H1 to €261.6m, but normalized EBITDA remained stable year-over-year, with margin improvement driven by cost reductions and better added value margins.

• Strategic focus is shifting to a pure-play industrial company, with the divestment of most Automotive activities to Solero Technologies expected to close by end of Q3 2024.

• Automotive segment showed resilience with 4% Q2 revenue growth and 18% HY1 growth in continued operations, offsetting industrial segment declines.

Financial highlights

• Q2 2024 total operations revenue down 6% year-over-year to €128.6m; HY1 revenue down 4% to €261.6m.

• Q2 normalized EBITDA nearly flat at €13.9m; HY1 normalized EBITDA up 1% to €30.0m, with margin up to 11.5% of revenue.

• Free cash flow was breakeven in H1, a significant improvement from negative €12.5m last year.

• Net debt at €149.7m, down €11.2m year-over-year; leverage ratio at 2.8, below covenant of 3.25.

• Q2 net profit for total operations dropped 59% to €1.5m; HY1 net profit down 51% to €4.2m.

Outlook and guidance

• Trading conditions from Q2 2023 are expected to persist through H2 2024, with stable U.S. economy, slow Europe, and moderate growth in China.

• China anticipated to approach 5% GDP growth, though activity remains below historical levels.

• Management expects continued focus on cash flow and working capital, with substantial deleveraging upon closing the Solero transaction.

• Medium- and long-term financial targets and growth opportunities to be detailed at Capital Markets Day in September 2024.

• Long-term confidence in organic growth as a pure-play industrial company, leveraging global trends toward cleaner energy.