Bossard Holding AG
SIX:BOSN
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
191
238
|
Price Target |
|
We'll email you a reminder when the closing price reaches CHF.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
C
|
C3.ai Inc
NYSE:AI
|
US |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Q2-2024 Analysis
Bossard Holding AG
In the first half of 2024, Bossard Group faced significant challenges, reflected in a total sales decline of 11.7% year-over-year, leading to sales of CHF 509 million. This decline was impacted by both organic sales dropping by 9.3% and adverse currency effects accounting for 2.4% of losses. The persistent weak economic environment has forced customers across various sectors to adjust their purchasing behavior, a trend stemming from the normalization following the pandemic. However, despite these obstacles, signs of stabilization emerged during the latter part of the reporting period, suggesting potential recovery.
Interestingly, Bossard managed to maintain a solid gross profit margin of 33.3%, up from 32% in the previous year, thanks to effective pricing strategies and cost-savings initiatives. However, operating profit (EBIT) declined 16.6%, down to CHF 58.1 million, resulting in an EBIT margin of 11.4%, compared to 12.1% the prior year. The drop in EBIT reflects the adverse impact of reduced sales volumes exacerbated by a challenging market environment.
Sales and administrative expenses were successfully reduced by 2.9%, down to CHF 111.4 million, despite a modest increase in full-time equivalents from 2,869 to 2,886. Bossard achieved a nearly 5% decrease in costs compared to last year, facilitated by stringent operational cost measures. These efforts positioned the company to navigate economic challenges while continuing to deliver essential services and explore new business opportunities.
A noteworthy highlight was the acquisition of Dejond Fastening, which enhances Bossard's capabilities in innovative fastening technologies and expands its market footprint in the Benelux region. This strategic move, expected to yield EUR 15 million in annual sales, aligns with the broader Strategy 200 initiative aimed at optimizing growth through acquisitions, proposing a target of achieving one-third of total annual growth via this strategy.
Despite the sales downturn, Bossard's balance sheet remains resilient. Total assets fell from CHF 901 million to CHF 835 million due to reduced customer receivables and lower inventories attributed to normalized procurement times. However, the equity ratio saw a positive increase from 41.3% to 47.4%, indicating a strengthened capital structure and a healthier financial foundation going forward.
The company reported a positive cash flow from operations amounting to CHF 64.3 million, compared to CHF 50.4 million the previous year. This strength is attributed to solid profitability coupled with reduced inventory levels. Furthermore, capital expenditures are projected to be between CHF 34 million to CHF 36 million for the full year, indicating a cautious but strategic investment approach aimed at sustaining future growth.
Looking ahead, Bossard aims to achieve organic sales growth exceeding 5% over the midterm, alongside an operating profit margin target of 12% to 15%. The management remains cautious given the volatile economic landscape, focusing on efficiency in operations and leveraging new digital platforms for productivity gains. Bossard’s commitment to digital solutions, including spending approximately CHF 70 million on new systems by 2026, showcases their strategy to remain competitive and profitable.
Ladies and gentlemen, welcome to the presentation of Bossard's Semi Annual Results 2024 conference call. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Dr Daniel Bossard. Please go ahead.
Thank you, and welcome to Bossard at the presentation of our semiannual results 2024. For today, we have 4 points on the agenda. First, I'd like to provide you some highlights of the first half year 2024. Then Stephan Zehnder, our CFO, will guide you through the financial review. I will then provide some progress report on our Strategy 200 before I will try to close with a focus on outlook 2024.
So to the highlights for the first half of 2024. We started with a satisfactory result in a very challenging environment. Particularly, the first quarter was still coming out of a recession year 2023, very demanding. Whereas, the second quarter showed some light signs of recovery, yet not true signs of recovery, keeping in mind that PMIs, that you're probably all are aware of, so still in a recessive phase. So we're happy with the satisfactory H1 result.
We have seen new opportunities and customers, particularly in the electronics, semicon and aerospace industry. So we see some light at the end of the tunnel there. Particularly, in the semiconductor industry, we see markets like India with their Make in India approach are showing nice signs of growth.
Then our gross profit margins were on a satisfactory level, actually higher than last year. And we also benefited from a lower cost base, which we initiated the end of last year to help us supporting our profitability.
We successfully introduced our new ERP system, Boost, in France and South Africa in April. As you are probably aware, this is our new digital platform with the 2 new rollouts. So we made another milestone, we reached another milestone successfully.
Finally, last but not least, we acquired the company Dejond Fastening in Belgium. And a bit more on this acquisition. Dejond Fastening in Belgium is a manufacturer of so-called blind rivet nuts -- if you want to Google it -- used in the sheet metal application, and they are also a distributor for fasteners in the Benelux.
They employ approximately 70 employees, with a EUR 15 million annual sales. And the customer base is very well matching our customer base, which is namely in the EV automotive battery, solar panel, railway and aerospace sectors. So a perfect match in that sense as well. And it is strengthening our market presence in Europe, particularly in the Benelux and in Belgium, where we did have a white spot in the past.
With that, I'd like to hand over to Stephan to provide you a financial review, before I will catch up again with the Strategy 200 progress. Stephan, may I ask you?
Yes. Thank you, Daniel. Good afternoon, ladies and gentlemen. As Daniel already mentioned, the weak economic demand remained the challenge in the first half of the year. And whereas some customers we have seen still suffering from its normalization effects after the pandemic and some saturated markets, the weaker demand is also in line with the economic environment and the indicators as we're still seeing.
In this volatile market conditions, the Bossard Group achieved sales of CHF 509 million in the first half of 2024. This is a decrease of 11.7% compared to the prior year. Whereby, the currency impacted the sales development negatively by 2.4%. Due to the softening of the Swiss franc in the last few months, its impact was continuously leveling off.
Organically, sales dropped by 9.3% compared to the prior year. Despite this demanding economic and the geopolitical situation, Bossard benefited again from having a broad and global customer base and being less independent (sic) [ dependent ] on a single industry.
The Bossard Group grew well in the growth industry railway, which is expanding, and identified additional opportunities and acquired new customers in the electronics, semiconductor and aerospace industry that will help us to grow in the future. There was more demand for digitalized and automated C-parts management systems, which, with smart factory solutions, Bossard and its customers are able to make a valuable contribution to increase their productivity and profitability, especially in times when labor cost increases and greater resource management is becoming more challenging.
On the downside, the group was still encountering lower demand due to the normalization of orders from segments which benefited from the pandemic but as well from the current economic environment. However, signs of stabilization did begin to appear toward the end of the reporting period, which gives hope that we slowly could reach the bottom.
The softening of the demand also impacted our financial performance. Despite the market environment, the gross profit margin of 33.3% was well above last year's 32%. This being a combination of well-maintained pricing, regional and product mix, along with cost savings.
Sales and administrative expenses fell compared to last year's CHF 114.8 million by 2.9% to CHF 111.4 million. In the same period, the number of full-time equivalents increased slightly from 2,869 to 2,886, not accounting for the acquisition of Dejond Fastening at the end of June. The number of full-time equivalents decreased year-on-year by some 50 people to 2,881.
Therefore, the lower cost resulted from fewer employees as well as lower wage inflation compared to last year. In addition, cost reduction measures with focus on operational costs had its impact too. Overall, we managed to lower our cost level by nearly 5% in comparison to the prior year, and this despite keeping the same number of FTEs since the beginning of the year to ensure our service -- high level of service to our customers globally and to pursue new business opportunities at the same time.
On the other hand, investment activities within the framework of our Strategy 200, especially in the area of digitalization, continued to be pursued in a targeted fashion. Lower sales in the first half of the year, therefore, led to a lower operating profit. EBIT decreased by 16.6% from CHF 69.6 million to CHF 58.1 million. The EBIT margin amounted to 11.4% in comparison to 12.1% in the prior year, still underscoring the group's continued solid profitability.
The financial result of CHF 3.1 million was noticeably lower compared to the CHF 5.6 million in the same period last year. On the one hand, interest expenses were lower due to the decline in net debt, and on the other hand, the weakening of the Swiss franc led to positive currency effects.
As an outcome, compared to prior year, net income decreased from CHF 49.9 million to CHF 42.4 million. The return on sales amounted to 8.3% in comparison to 8.6% in the prior year. As we will see, currency had still a negative impact on sales performance in all 3 market regions, though to a lesser extent compared to the prior year.
Sales in America fell by 20.4% to over 18.3% in local currency to CHF 128.6 million. After record in sales -- after record sales during the past 2 years, normalizing demand was observed in various industries such as agriculture, electromobility and electronics.
Opportunities in Mexico developed favorably, with Bossard benefiting from near shoring trends in the electronics industry. In Europe, the group posted an 8.5% drop in sales in the first half of the year to CHF 293.8 million, whereas in local currency, sales fell by 6.8%. The decline was a result of the cyclical downturn in demand, which increasingly stabilized at the lower level over the course of the second quarter.
With the acquisition of the Belgium company Dejond Fastening at the end of June, the Bossard Group is strengthening its market position in innovative fastening technologies and broadening its market presence in the Benelux countries, as Daniel already mentioned.
In Asia, Bossard recorded a drop in sales of 7.6% in Swiss franc and 1.8% in local currency to CHF 87 million. In the second quarter, sales stabilized in local currencies, marking the first time in 6 quarters that slight growth was achieved compared to both the same quarter of the prior year and the previous quarter.
Bossard benefited in India from the Make in India initiative and in Malaysia from nearshoring trends that became evident, especially in the semiconductor and electronics industries.
Now looking at the balance sheet. Total assets have continued to decrease due to the normalization of the supply chain and lower demand momentum. Compared to prior year, total assets decreased from CHF 901 million to CHF 835 million. The decline is mainly attributable to lower customer receivables as a result of reduced sales and to lower inventories caused by the normalization of procurement times, and thus, higher availability of products. As a result, inventories were reduced disproportionately compared to the decline in sales.
In comparison, the equity ratio increased from 41.3% in the prior year to 47.4%. We expect that the equity ratio will further increase towards the end of the year. Compared to last year, the operating net working capital decreased by 12.8%, whereas in relation to sales, the capital intensity remained at prior year's level of 47.9%. The reason, therefore, is that sales fell proportionately in the same magnitude on a year-on-year basis despite the reduction of operating net working capital.
As far as the net debt is concerned, this resulted in a decline from CHF 323 million to CHF 239 million. The decrease was mainly driven by the lower operating net working capital, the lower dividend payout in comparison to 2023, as well as by the continued solid profitability.
The gearing, net debt measured against equity, declined from 0.9 to 0.6, whereas net debt in relation to EBITDA decreased slightly from 2 to 1.9x. Thereby, Bossard continues to have solid balance sheet ratios, which are within the range of the long-term balance sheet funding targets of a gearing of less than 1.3x and net debt-to-EBITDA ratio of less than 2.
In the first half of 2024, we invested totally CHF 15.4 million. Thereof, CHF 1.5 million relates mainly to the general maintenance of office buildings and warehouses, including the environment. CHF 5.2 million was spent for replacement investments in ongoing operations and CHF 1.7 million was invested into smart bins and electronic labels as part of our Smart Factory Solutions offerings.
This year, we invested so far CHF 7 million in digitalization. The biggest share of this investment was dedicated again to our new -- the global digital platform. As Daniel mentioned, in April, we have successfully completed the rollouts in France and South Africa.
What the cash flow of the group concerns, we have seen an overall solid development in the first half of the year. Cash flow from operating activities totaled CHF 64.3 million in comparison to CHF 50.4 million in the prior year.
Despite the contribution from a solid profitability, the lower inventory did support this positive development. Cash flow from investing activities increased from CHF 14.8 million in 2023 to CHF 33.4 million in 2024, mainly due to the acquisition of Dejond Fastening. Overall, the first half of 2024 closed with a positive free cash flow of CHF 39.9 million in comparison to CHF 39.6 million.
In a nutshell, the first half of the year can be summarized from a financial perspective as follows. Despite the negative sales growth, Bossard was able to report a satisfactory result, secured by higher gross profit margin and cost measures implemented. The balance sheet was strengthened by the positive cash flow. Therefore, Bossard continues to have solid balance sheet ratios, which maintains the ability for further investments.
With this last remark, I hand over again to Daniel. He will give you now an update on the progress of the implementation of the Strategy 200 and what business environment to expect in the second half of this year. Daniel, please.
Thank you, Stephan. As you all know, the Strategy 200 is a long-term strategy which we follow by 2031 when Bossard turns 200 years old. That's why it's called Strategy 200. We're aiming at an accelerated profitable and sustainable growth based on our proven business model organically and through acquisition.
As you have seen now, we have had another acquisition recently. And this is our ongoing strategy for the next years, to grow about 1/3 of our annual growth through acquisitions. Achieving relevant market shares in the key markets through 7 strategic initiatives. Three of those I would like to briefly highlight. The first one being our "Together We Create" initiative. The second, our sales engine. And the third, our operations engine.
On "Together We Create", we are emphasizing our internal and external collaboration in order to be more efficient in delivering results. For that, we have developed guiding principles, which we have presented earlier and also are outlined in our Investors handbook in more detail.
We started initiatives on talent and leadership management to retain and develop talent in a scarce global market. As you know, it's not easy to find talent these days. So it's important to keep people and to attract new young talent in a better way.
On the sales engine side, we continue to focus on growth verticals. These are changing also because we see now that, for example, there's industries like the HVAC, the heating, ventilation and cooling industries, which are suddenly growing because of AI-related data processing systems, which produce a lot of heat and therefore need to be cooled down. So suddenly, other sunrise industries are coming up. So we're following those and benefit as much as possible.
There is a strong shift towards digital lead generation and higher conversion rate. And with that, with less people, we can have a higher focus on profitable opportunities, and we also track that.
And we haven't lost key accounts during the recession. I think that's very important to mention. In contrary, we are winning new opportunities, but imagine the overall sales, or if you want to compare it to a water level, came down. And it's hard to -- by winning new opportunities to refill some of the loss through the recession and the normalization.
But what we do count is, "Do we keep our existing customers and how many new customers are we winning?" And we're on the positive side. So that really makes us positive that we're on the right track despite the recessive overall trend.
Last but not least, I'd like to talk about the operations engine. On the operations engine side, we have introduced Microsoft Dynamics 365 already in several markets. You can see it under the first bullet. Next rollouts are coming in Korea, Taiwan, Australia, USA, Canada and Mexico and Italy this year. So you can see that we're pretty busy with rollouts. And also, as we have already mentioned several times, we are spending overall approximately CHF 70 million until 2026 for the systems. But it's needed, it's important, and it creates more transparency and efficiency after all.
So with that, I'd like to talk a little bit about our focus for this year and the outlook. Starting with this year already, we showed some profitable development in the first half year. As mentioned, we reduced our cost base end of last year. And it's important to win new business at a profitable margin. And all that in an uncertain and unsettled economic environment moving forward. So we don't see signs of really recovery. If you look at the PMIs, most PMIs across the globe are still pretty depressed. And we see a few sunrise industries which are doing better than the PMIs, but most of them are still in a recession.
Therefore, we are cautiously optimistic based on our project pipeline, which I just mentioned. We're winning new opportunities. We see the opportunities we have in the pipeline and we're also [Audio Gap] will only come next year and the years to come. And we continue to focus on efficiency and productivity.
What we can say is we watch very carefully the economic development. And accordingly, we also say we're not hiring people, we're not replacing people. We're very cautious on the overall cost side. And well, people cost are the biggest cost in the P&L, so we need to be careful in building up new people. Instead, we focus on -- well, as mentioned, on sunrise industries and smart factory solutions to make our customers more profitable using digital solutions. And also we use artificial intelligence internally to improve our services and to make us more efficient, particularly through the Microsoft Copilot, for example.
And last not least, we follow our 7 key strategic initiatives, which will mean also further investments over the next years. But we're confident and sure that this is the right way to go moving forward.
So with that, we already communicated our midterm financial targets. And so on the sales side, on the midterm, we're still aiming at organic sales growth of bigger than 5%, which we have delivered over the last 3 years; operating profit margin between 12% and 15%, which was down 2023, which we believe is a reasonable range to be in mid to long term; and the balance sheet equity ratio above 40%, with the dividend payout ratio constantly at 40% of net income.
So with that, I would like to thank you for your attention. And I think we can open up for questions. Thank you very much.
[Operator Instructions] The first question is from Sebastian Vogel with UBS.
I have 3 questions. I would ask them one by one. And the first one is on the top line. And if I look on like a revenue per day basis and if I would look into April, May and June and compare each of these months across the regions, is there any sort of acceleration, deceleration? Or is there some sort of stability in that regard that you can share? And a quick follow-up there. Is there any read into July numbers already possible? That would be my first question.
Well, maybe starting from the back, we cannot say anything about the July numbers yet. To your first question, we have seen some slight improvement in the Q2 compared to Q1. And that is basically we can say true for all the continents. In China, we see that, for example, more business is happening with local customers, not so much with international customers.
In Europe, we see the end of the normalization or a slow end of the normalization, destocking, and slow restart of buying. And in the U.S., it's true that it's a special situation with our major large accounts we have, which has flattened, I would say, in the second quarter. So in that sense, rather a little bit of an improvement overall in the second quarter of this year. I hope that should answer that question.
That helps. The second question would be on EBIT margin. In the past, if I'm not mistaken, the second half was usually around like 150 to 200 basis points lower than the first half, with your ongoing investment and so on these days as well. Is that sort of at least a good starting point to think about margins for the second half versus the first half? Or is there something, other, to keep in mind in that regard?
Stephan?
Yes. So that has been the pattern. Of course, it's going to be -- still the environment is going to be challenging. But if we assume that the sales are -- it's starting to come to the bottom. I mean, it's still not -- that's the outlook. It's still a bit away. But the ambition is clear on our side, and that's why we stay very cautious also on the cost side. The ambition is to stay double digit.
I mentioned in the past that CHF 10 million more sales, it's about CHF 3 million more to the bottom line. So you see also bit the leverage. So what we can influence is the cost. That's why we stay cautious. And if things start to bottom out and likely some restocking happening, I think it's a doable scenario. But let's see, let's see. But definitely, we have the ambition to stay in the double-digit area.
And the third question I have is staying with the cost side, what you just mentioned. And in your presentation you said that your COGS as a percentage of sales came down quite a bit. In that regard, is that now a bit of more of a run rate going forward? Or is it more like a thing that happened now and it won't be repeated going forward? Or how should we think about that?
Yes. On the cost side, of course, a part of the cost saving is the initiatives. I think part of the cost side -- also what I mentioned is that we have less FTEs, that has some impact from that perspective. But of course, there's always investments or the idea, which we are holding back from that perspective. And once we see a bit the light in the tunnel, there is activities, which we have been cautious in, which we will release.
I mean, the biggest impact on cost savings, as you have seen on one of the slides, I mean it's definitely personnel. But we were holding back very much on traveling, and not to customers. Here we talk more about the internal traveling costs, the meetings, holding back a bit on the fares, and also on consultancy. I mean, to a certain extent, this cost is coming back once we get into normal waters again.
[Operator Instructions] The next question is from Christian Bader with Zurcher Kantonalbank.
For completeness sake, I have 2 questions. First of all, can you maybe quantify what has been your interest result excluding FX effects? And my second question relates to your CapEx. It has been a bit -- overall CapEx has been a bit lower than I was modeling it. So is CapEx going to accelerate in the second half? Or shall we expect a similar number?
Okay. So the -- concerning the interest expense or financial results, the positive impact on currency compared to last year was about CHF 1.8 million. And about CHF 800,000 as a sum up is coming from higher interest rate income, but also lower interest paid, as also net debt came down. But the impact from currency was about CHF 1.8 million.
To your second question concerning the CapEx, right now what is on our table, I always call it kind of the Christmas wish list. Now we're holding back also some of the CapEx, I would say, for the total year, somewhere between CHF 34 million to CHF 36 million in total. So that means we will see a bit higher CapEx between CHF 18 million and CHF 20 million for the second half from that perspective.
[Operator Instructions]
It looks like there's no more questions in the channel, Daniel.
Yes, I also can't see anything.
I guess then we come to an end.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dr. Daniel Bossard for any closing remarks.
Thank you very much. And thanks again for joining -- for following our results. And we're happy to come back soon with our next announced group results. Thank you very much, and happy holidays.
Ladies and gentlemen, the conference is now over. Thank you for your participation. You may now disconnect your lines. Goodbye.