Kendrion (KENDR) Q2 2024 earnings summary

Executive summary

• Revenue from continued operations declined 7% in Q2 and 8% in H1 2024, with Q2 revenue at €77.7m and H1 at €152.8m, mainly due to weak German and Chinese industrial markets; Automotive continued operations grew 4% in Q2 and 18% in H1, driven by new projects in China.

• Group revenue fell 6% in Q2 and 4% in H1 to €261.6m, while normalized EBITDA rose 1% to €30.0m, with margin up to 11.5% of revenue.

• Net profit for Q2 dropped 78% to €1.0m; H1 net profit from continuing operations fell to €5.2m from €9.9m year-over-year.

• Strategic divestment of European and US Automotive business to Solero Technologies is expected to close by end of Q3 2024, shifting focus to higher-margin industrial activities.

• Cost savings and margin improvements, including a 6% reduction in normalized operating costs in H1, partially offset revenue declines.

Financial highlights

• Q2 2024 normalized revenue was €128.6m, down 6% year-over-year; normalized EBITDA €13.9m, nearly flat.

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

• Net debt stood at €149.7m, €11.2m lower year-over-year, with a leverage ratio of 2.8, well below the covenant.

• Q2 normalized EBITDA margin for total operations improved to 10.8% from 10.2% year-over-year; H1 normalized EBITDA margin at 11.5%.

• Q2 net profit for total operations dropped 59% to €1.5m; H1 net profit before amortization €9.5m, down 5%.

Outlook and guidance

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

• Management anticipates substantial deleveraging and improved profitability post-divestment, with new financial targets to be announced at the September 2024 Capital Markets Day.

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