AFRY AB Class B ((SE:AFRY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for AFRY AB Class B highlighted a mixed sentiment, reflecting both stable performance metrics and significant challenges. While the company reported improvements in EBITA margin, order backlog, and strategic agreements, it also faced a decline in net sales, challenging market conditions in the Industry segment, and negative currency impacts. Ongoing restructuring efforts and associated costs remain a concern for the company.
Improved EBITA Margin
The company successfully improved its EBITA margin to 6.4% in the third quarter, demonstrating resilience despite facing challenging market conditions. This improvement indicates effective cost management and operational efficiency.
Order Backlog Increase
AFRY reported a 3.6% increase in order backlog compared to the same period last year, which translates to a 5.3% increase when adjusted for currency effects. This growth in backlog is a positive indicator of future revenue streams.
Strategic Framework Agreement with Svenska Kraftnät
A significant development for AFRY was the signing of a strategic framework agreement with Svenska Kraftnät, Sweden’s national grid operator. This agreement covers technical consultancy and design planning services within transmission and distribution, potentially opening new avenues for growth.
Acquisition of Reta Engineering
The acquisition of Reta Engineering, a Brazilian firm specializing in project and construction management services, enhances AFRY’s Industry division, particularly in the mining and metals sectors. This strategic move is expected to bolster the company’s market position in these industries.
Key Project Wins
AFRY secured significant projects, including the Sakatti mining project in Finland and a contract in Denmark’s Road and Rail segment. These wins underscore the company’s competitive edge and ability to secure high-value contracts.
Cash Flow and Liquidity
The company reported stronger cash flow from operating activities compared to the previous year, with available liquidity at SEK 3.8 billion. This financial stability provides a cushion for ongoing investments and restructuring efforts.
Decline in Net Sales
AFRY experienced a decline in net sales, with a year-over-year growth of minus 5.1%, significantly impacted by currency effects. This decline poses a challenge for the company as it navigates through volatile market conditions.
Industry Segment Challenges
The Global Division Industry faced a challenging market environment, with global uncertainty affecting investment sentiment, particularly in the Pulp and Paper and Nordic industrial markets. This uncertainty continues to weigh on the division’s performance.
Negative Currency Impact
Currency effects had a significant negative impact on sales, amounting to minus SEK 118 million for the third quarter. This highlights the challenges posed by currency fluctuations on the company’s financial performance.
Restructuring Costs
AFRY reported SEK 31 million in restructuring costs, primarily related to redundancies, and anticipates ongoing costs in the range of SEK 200 million to SEK 300 million through the second quarter of 2026. These efforts are part of the company’s strategy to streamline operations and improve efficiency.
Forward-Looking Guidance
Looking ahead, AFRY maintains a focus on restructuring and improving operational efficiency. The company aims to enhance its utilization rate, currently at 72%, and continues to strengthen its cash flow and liquidity position. Despite the decline in net sales, the Energy division maintained profitability, and the Global Industry division improved its profitability through strategic acquisitions and capacity adjustments.
In conclusion, AFRY AB Class B’s earnings call presented a balanced view of the company’s current standing, with notable achievements in margin improvement and strategic agreements, countered by challenges in sales decline and market conditions. The company’s forward-looking strategies aim to address these challenges while capitalizing on growth opportunities.