Ratos (RATO) Q2 2024 earnings summary

Executive summary

• Adjusted EBITA grew 2% year-over-year to SEK 1,101m, with margin improving to 12.1% despite a 9% drop in net sales, driven by strong order intake and operational improvements in most segments.

• Profit for the period increased 8% to SEK 735m, and diluted EPS was SEK 1.85, up from SEK 1.79.

• Cash flow and cash conversion were robust, with a 127% cash conversion rate and significant reductions in net working capital and inventory.

• Construction and services delivered a strong EBITDA/EBITA margin increase despite weak market conditions and lower sales.

• Consumer segment, particularly Plantasjen, underperformed due to adverse weather, but cost-saving measures are ongoing.

Financial highlights

• Net sales declined 9% year-over-year (10% organically) in Q2, with LTM net sales at SEK 32.9 billion.

• Adjusted EBITA grew 2% year-over-year, reaching SEK 2,302m LTM, and operating profit was SEK 1,070m (up 3%).

• Cash flow from operating activities was SEK 1,397m, with cash conversion at 127%.

• Net working capital reduced to 0.8% of LTM net sales, with significant inventory reductions in Plantasjen and Diab.

• Leverage decreased to 0.7x, with net debt at SEK 3,091m and down by SEK 650–700 million.

Outlook and guidance

• Construction and services expected to maintain strong margins due to improved processes and robust project portfolios.

• Cost-saving programs in Plantasjen will continue, with further effects anticipated in Q3 and Q4.

• Most new order intake will be delivered from 2025 onwards.

• Management expects continued improvement in earnings and profitability, with readiness for structural transactions as market conditions improve.

• On track to reach SEK 3bn EBITA target by 2025, with current LTM at SEK 2,302m.