Q1 from Hexatronic Group - A very strong start to the year!
"The year got off to a very strong start with sales growth of 119 percent compared with the same quarter last year, of which 73 percent was organic growth. Profitability (EBITA) increased 189 percent, equating to a margin of 13,3 percent, which exceeds our adjusted target of 12 percent by a good margin. The increase in profitability is primarily a result of strong development in the USA and the UK, as well as scale effects with most of our factories operating at high capacity,” says Henrik Larsson Lyon, CEO Hexatronic Group.
The profitability target was adjusted to at least 12 percent EBITA-margin over a business cycle. The previously set profitability target was at least 10 percent EBITA-margin on a rolling 12-month basis.
The growth target was adjusted to annual growth rate of at least 20%, over a business cycle. The previously set growth target was to grow more than its market organically and with an annual growth rate of at least 20 percent.
The board of Directors will propose a dividend of SEK 0.50 (0.50) per share for the financial year 2021 to the Annual General Meeting.
Events since the end of the period
No significant events after the end of the quarter.
Hexatronic CEO Henrik Larsson Lyon in interview about Q1, 2022
Comments from CEO
A very strong start to the year! The year got off to a very strong start with sales growth of 119 percent compared with the same quarter last year, of which 73 percent was organic growth. Profitability (EBITA) increased 189 percent, equating to a margin of 13,3 percent, which exceeds our adjusted target of 12 percent by a good margin. The increase in profitability is primarily a result of strong development in the USA and the UK, as well as scale effects with most of our factories operating at high capacity.
The cost of raw materials and transport continues to increase, not least due to the unjust war in Ukraine. Work to pass on increased costs of raw materials to the customer is ongoing and the gross margin is still adversely affected by 1-2 percentage points in the quarter. We believe the negative effect will at least continue for the second quarter. We do not have any customers or suppliers in Russia or Ukraine.
Sales in Europe excluding Sweden continue to develop strongly, primarily driven by strong development in the UK and Germany. Sales in the region increased by 127 percent compared with the corresponding quarter last year. During the quarter we signed a new three-year agreement with CityFibre, whereby we will continue to be their biggest supplier. In Germany, the acquisition of REHAU’s telecom business contributed strongly to the increase in sales.
Sales in our largest market, the USA, grew by 184 percent during the quarter, mainly within ducts and fiber optic systems. We do not expect the major federal funding of investment in both telecom infrastructure (USD 65 billion) and general infrastructure (USD 100 billion) to begin being distributed until the end of this year or early 2023.
The start-up of our factory in South Carolina is proceeding to plan, but with a two-month delay. The factory is expected to make a positive contribution from the fourth quarter of this year. Since the high demand in the American market is expected to remain, we will invest an additional MSEK 150 in more lines in the factory in South Carolina.
Sales in Sweden were strong and increased by 22 percent compared with the corresponding quarter last year. The FTTH and transport network markets both developed positively during the quarter.
The order book has continued to develop very positively. We ended the quarter with an order book that was 173 percent higher organically than at the same time in the previous year. The high order intake is well distributed across most of our companies, with those in the USA accounting for the largest increase. With the strong order book and a continued highly positive view of the market’s development, we will continue to invest in increased production capacity and market presence. Welcome to join us on our growth journey.
Henrik Larsson Lyon President and CEO Hexatronic Group AB (publ)
Publication This information comprises disclosures that Hexatronic Group AB (publ) must publish according to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted for publication, under responsibility of the contact persons named below, on 29 April 2022 at 07:00 CET.