“We see a strong development in our strategic growth markets and the need to expand the fiber-optic communication systems is great. In these times of work from home, video meetings and online teaching, the importance of fast and reliable connections is evident. The experience from Covid-19 we believe will, in the long term, have a positive impact on investments in communication networks”, says CEO Henrik Larsson Lyon.
Events during the quarter
Emtelle UK Ltd. and Hexatronic entered into a global settlement agreement, ending their patent litigation in the UK.
Emtelle licensed Hexatronic under its patents on air blown fiber bundles. Hexatronic can continue to make and sell its air blown fiber products in all markets worldwide.
Events since the end of the period
Based on the very uncertain situation in the world, the Board decided to withdraw the previously announced dividend proposal.
During the first quarter, Hexatronic had a minor negative impact as a result of Covid-19 and expects continued slightly lower activity in the second quarter.
Hexatronic won submarine cable orders totalling MSEK 40.
Comments from the CEO
Continued strong international growth Growth on our strategic growth markets remained strong during the first quarter. In North America we grew organically by 17 percent, which means that three years after establishing an operation there, sales are almost on a par with sales in Sweden. Growth on our other strategic growth markets, the UK and Germany, amounted to 16 percent.
Following a weak start, sales on the Swedish market recovered well in the latter part of the quarter. Our prediction remains that Sweden will be on a par with last year, providing the impact of Covid-19 does not increase from its present status.
Altogether, organic sales growth during the quarter totalled 4 percent, and growth in EBITA 5 percent. We judge that sales have dropped by approximately 5 percent as a result of Covid-19, primarily related to delivery problems from subcontractors in China.
The order book has developed strongly, and we entered the second quarter with an order book that is 35 percent higher organically than at the same point last year. In submarine cables, we have recently won several contracts worth MSEK 40 in total. Pleasingly, several of these projects are for new customers. On the German market, where we are still a small player, we have won several minor FTTH contracts, and have signed a five-year, MSEK 40 general agreement with a large regional operator.
In the latter part of the quarter, a slight negative effect from Covid-19 was apparent on several markets. Although our operation is categorised as critical on several markets, uncertainty remains high and there is a risk of greater adverse impact. Customers are reacting in different ways, from postponing new projects to continuing as before. With the information we have at present, we are planning for slightly lower activity during the second quarter. Another effect of Covid-19 is that our new duct factory in Texas has been delayed by just over a month and is now expected to be up and running in early May.
Under the uncertain circumstances, we have prioritised a strong balance sheet. This means for instance that the Board has withdrawn its dividend proposal for the year, and we have also decided to postpone certain investments to a later date. Our financial position is strong and has grown stronger during the quarter. We have higher margins both in terms of available funds and the covenants we have in place with our bank.
Looking beyond Covid-19 our anticipated outlook remains very positive, with strong developments on our strategic growth markets. There is a huge need to expand the fiber optic communication systems. The importance of fast, reliable internet connections is coming to the fore in these times of working from home, video meetings and online schooling. In the longer term, we believe that experiences from Covid-19 will have a positive impact on investment in communication networks.
Thank you for joining us on this journey.
Henrik Larsson Lyon President and CEO Hexatronic Group AB (publ)