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Revenue: SEK53.6 million, an increase from the previous year’s second quarter.
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Gross Margin: 46%, up from 43% a year ago.
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EBITDA: SEK2.62 million, the highest in company history.
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Cash Flow from Operations: SEK4.47 million, indicating positive cash generation.
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Credit Facility: SEK20 million, unutilized.
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Sales Growth: All segments are growing, with significant orders in high temperature and recycling fields.
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Cost Savings Program: Fully implemented and in effect.
Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Nexam Chemical Holding AB (STU:NC4) achieved the highest EBITDA level in its history during the second quarter of 2024.
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The company has successfully implemented a cost savings program, resulting in a positive cash flow from operations.
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Sales have increased to SEK53.6 million, showing growth across all segments compared to the previous year.
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Nexam Chemical has a growing portfolio of patented clean tech solutions driven by global megatrends, such as renewable energy and recycling.
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The company has the capacity to double its business without significant additional investments, indicating strong potential for future growth.
Negative Points
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The PET foam market, a significant segment for Nexam Chemical, is currently weak, impacting sales in this area.
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Despite achieving a high EBITDA, the company has not yet reached profitability at the EBIT level.
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The wind energy market, a key area for Nexam’s additives, is experiencing a downturn, affecting demand.
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The recycling segment, although growing, still represents a small portion of overall sales.
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Nexam Chemical faces challenges in rapidly scaling up new customer contracts and projects, which can have long development timelines.
Q & A Highlights
Q: What is needed to bring Nexam Chemical to real profitability now that the cost savings program is complete? A: Ronnie Tornqvist, CEO, explained that increasing sales volumes while maintaining a lean cost structure is key. The company is focused on sales initiatives and being an innovative partner to customers. With the current cost structure, a few more million SEK per quarter would bring them to breakeven on the EBIT level, with aspirations to go beyond that.
Q: Over the next 12 months, will new customer contracts or market improvements drive sales growth? A: Ronnie Tornqvist, CEO, stated that the company is counting on new business, products, and projects as the main drivers. While there are positive signs in the Masterbatch segment, they are not relying on general market recovery.
Q: Will growth come from new customers or expanding business with current customers? A: Ronnie Tornqvist, CEO, indicated that growth will come from both existing and new customers. Current customers are looking to use more recycled materials, and Nexam can assist with that. The recycling field, in particular, is attracting new customers.
Q: Can you comment on the potential of the new high-temperature customer within wire coating? A: Ronnie Tornqvist, CEO, noted that this automotive-related application has significant potential, with production starting next year. The business potential is substantial, with several tens of tonnes annually. The trend towards higher temperatures in electronics is driving interest in high-temperature solutions.
Q: How do development timelines typically look for new projects? A: Ronnie Tornqvist, CEO, explained that timelines vary greatly. Some projects, like the Sumitomo collaboration, can take over a decade, while others can be resolved in weeks if they address existing industrial process issues. The wire enamel project was developed quickly due to pre-existing work.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.